IamA guy who bought a 22-building 'ghost town' over a year

24195

Hello reddit!

About a year ago, I did an AMA about a former mining town I purchased with a friend called Cerro Gordo. You can see some photos of the town here

I'm currently at the town filling in for our caretaker who has been home for past 3 weeks. I'm up here socially distancing and currently snowed in with at least 4 ft of snow on our 7 mile road back to civilization. Seemed like a great time to do an AMA!

We've done a number of renovations since buying and the last year or so has been filled with lots of adventures and people.

For more background on the property:

Cerro Gordo was originally established in 1865 and by 1869 they were pulling 340 tons of bullion out of the mountain for Los Angeles.

The silver from Cerro Gordo was responsible for building Los Angeles. The prosperity of Cerro Gordo demanded a larger port city and pushed LA to develop quickly.

The Los Angeles News once wrote:

“What Los Angeles is, is mainly due to it. It is the silver cord that binds our present existence. Should it be uncomfortably severed, we would inevitably collapse.”

In total, there has been over $17,000,000 of minerals pulled from Cerro Gordo. Adjusted for inflation, that number is close to $500,000,000.

Currently, there are about 22 buildings still standing over 380 acres. We've been in process of restoring them.

More background: https://www.nytimes.com/2018/07/18/us/cerro-gordo-ghost-town-california.html

The plan was to develop a hospitality destination where people would stay overnight. COVID-19 and other things are impacting that plan heavily.

PROOF: Here is a photo from today: https://imgur.com/a/uvmIqJp

EDIT: If you want to follow along in future, here is our Instagram: https://www.instagram.com/cerro.gordo.ca/

EDIT 2: I send updates about the town from time to time from email list. Can find that and contact me here: http://brentunderwood.com/

AMA!

Comments: 2419 • Responses: 112 • Date: 2020-04-08 20:48:26 UTCsource

resortdude3130 karma2020-04-08 23:10:10 UTC

I run a fairly substantial, remotely located resort in California and I think you definitely have some challenges in front of you, the largest of which are your utilities. It is easy to take for granted the easy access and no real regulations that city/county/municipal systems provide for but it is much more challenging to be fairly self sufficient.

In the use case you have right now, non-commercial, you can pretty much do whatever you want. But once you go commercial you definitely have some challenges you will need to work through.

Water - You know this is a big deal, but given your comment about the options you feel are available to you (water tower, run off, mine pumping, etc...) I feel like you may not appreciate how challenging this one is. If you are providing your own sourced water and are commercial, and as long as year round you have less than 25 people living there year round, you should research Transient Non-Community Water systems. And under any circumstances you do NOT want to be a Non-Transient, Non-Community Water system, the testing and regulations will crush you as a small operator. Here is a link:

https://www.epa.gov/dwreginfo/information-about-public-water-systems

Now the rules for water are largely defined by the EPA but you better bet that the California Water Resources Board has their own rules and regulations you will need to adhere to. I can tell you right up front that if you use surface water (run off for example) you will have a huge headache to prove the water is safe and will need a treatment system, if only for filtration and chlorination. The odds of them allowing you to pump out of the mine are slim to none. Really, well drilling is the only viable option. I oversee our water system and we have 7 active wells, each one over 1000' deep. They vary in production between 2 GPM and 20 GPM, our daily usage is 20k and I am a state certified D2 and T2 water operator. Each well cost, including associated infrastructure and testing, about $50k a piece.

Sewage - As a commercial entity you will need some kind of system. Not sure your county rules but you will probably need an engineered system and if it's big/complex enough you will need a Wastewater Operator to run it for you. Those guys are expensive! You better pray they allow you to use a traditional leach field system but in this day and age, I feel it's unlikely.

Propane - Can they deliver that up your road? Will you have tanks large enough for a winter supply? As a commercial enterprise there is no way they let you hook up and store 50 little propane tanks around your property. Would your tank be above ground or below ground?

Electricity - If you can get away with electric cooking and water heating, you will definitely need a reliable source of electricity. And if you have paying guests, you better have a back-up generator. I just bought a new, smaller diesel one. $50k all said and done with a 7 day fuel tank, concrete pad, delivery and crane placement, county permitting. And don't think you can just get away with a used generator someone sells you. Look up CARB, California Air Resource Board.

Fire Suppression - As a commercial Enterprise, you will likely need a fire suppression system, although this is typically a county level decision. But hope you don't need one, because the cost of installing and maintain one are terrible. You will need a sufficient water supply. So my water tank is 90k total but I have to keep 55k gallons in it at all times for fire suppression, so I really only have 40k of usable water at any given time, if my tank is full. Also, better hope your tank is high enough in elevation that you don't need a diesel pump for your fire suppression system or a variable speed booster pump for your domestic water system.

Employees - So this might be your biggest challenge. I have 120 employees total, 80 of whom live on site and i provide housing and 3 meals a day. And also deal with all the interpersonal bullshit that goes along with it.

So let's end with some numbers.... Learn these terms: ADR, RevPAR, & Occ%. Let's say you have 20 rooms to rent. Your Average Daily Rate (ADR) is $100/night and let's say you are open year round (a big IF given your snow) and your occupancy percentage is 50% (a pretty realistic goal given your circumstances). $100 * 20 * 365 *.5 = $365k in revenue. Now you need to start subtracting the fees that OTA (online travel agency) charge which in your case, as a small time operator, would be 20%-ish. And how much of your bookings come from OTA's? At the beginning you will live and die by bookings from Expedia and Booking.com because the public doesn't understand how terrible they are for them as a consumer. But your life's goal from day 1 is organic bookings and minimizing those OTA bookings. But remember, a room night is a perishable product, so you got to use them.

I think I have rambled on enough and will skip talking about your capital costs to get up and running (with wells and septic and power), skip talking about operating costs, skip talking about activities like guiding on your property and mine tours and the insurance costs, skip talking about restaurant and tavern for your guests and the licensing and building codes required... You get the idea.

Wish you the best of luck! The good news is that your location is actually incredibly beneficial to you, although you may not know why. And you have a unique product. So there is potential. But good lord do you need a lot of capital.

IamA guy who bought a 22-building 'ghost town' over a year ago with a friend. It was once California's largest silver producer and had a murder a week. I've been up here for past 3 weeks quarantining and currently snowed-in with no way out of the ...