Journey 1995:Non-Stop

Chapter 291 Buying a House
Yan Hui and Lao Guo have a life-or-death bond. They haven't seen each other for several years, but Lao Guo hasn't changed much. On the contrary, Yan Hui has changed a lot.

During this trip back to Fengtian, I heard that Lao Guo is about to find a partner and get married. Yan Hui understands that Lao Guo will probably settle down in Fengtian, while he himself will settle down in Jinan.

He's made up his mind: when he returns to Jinan this time, he'll look into buying a house for his parents to stay in when they come to visit next year. The location doesn't need to be great, just close to the timber processing plant.

Yan Hui and Lao Guo spent a few days drinking together. They didn't go to any fancy restaurants, just stayed at the guesthouse, where the two of them would slowly drink.
The four of us drank from dusk till the wee hours of the morning, and all four of us ended up in the hospital. I still vividly remember that scene.

"Have you considered getting into foreign trade? Will imported timber be cheaper in the future?" Yan Hui asked again while drinking beer.

“Foreign trade here was so-so in previous years, but it’s starting to pick up a bit this year. However, the port is controlled by others, and we have to pay storage and security fees to get the goods. So let’s just forget about it.” Old Guo has been here for so many years, he knows exactly what’s going on.

"As expected." Yan Hui nodded. "Let's wait for an opportunity."

The two chatted for several days, but Yan Hui kept receiving various phone calls and things kept piling up, so he had to say goodbye to Lao Guo and return to Jinan.

After leaving the house, Yan Hui took care of some things for a few days and then went to look at some houses.

He must have been able to buy a house at a lower price than outsiders because he was very familiar with the real estate projects in the area. Yan Hui had originally planned to buy a small villa, but there weren't any suitable ones nearby, and the renovation period would have been too long, so he ultimately decided to buy an apartment.

Buying a house is no small matter. Hearing that Yan Hui wanted to buy a house, Yan Hui's mother specially flew to Jinan to look at houses with her son.

Yan Hui readily agreed. Originally, he bought the house so his parents would have a place to stay when they visited. Therefore, after his mother arrived, he stopped worrying about her and arranged for a salesperson to accompany her around, with a budget of about 30 yuan.

After spending over 30 yuan on logs, Yan Hui gathered his funds and considered whether to take out a mortgage loan for the factory.

Since it was predicted that log prices would rise during this year's logging season, there was no reason not to stockpile timber. With this in mind, Yan Hui immediately contacted Zhou Ping to discuss the matter of mortgaging the factory and equipment.

“We can get a loan. Our factory is our own, it would be a shame not to use it as collateral. The loan interest rate is only about 5%, less than 6%. Our machinery and equipment are mostly from major brands. The band saw is imported from Germany, although it's second-hand. Anyway, I think it's easy to get a loan of 50 yuan.” Zhou Ping did a rough calculation.

"So, after taking out the loan, we can still use about 100 million to buy timber, right? We should have enough space to store it now, right?" Yan Hui looked around. "If not, let's rent a place temporarily."

“It’s definitely not enough. We need at least 1500 cubic meters of timber and a large warehouse. Leave this to me. I’ll rent it. How long will the rental last?” Zhou Ping asked.

“Let’s rent for three months first. I don’t have that many orders right now; this batch of timber is for a price war,” Yan Hui decided. “We’ll start working on the loan these next few days.” “Okay.” Zhou Ping noted down Yan Hui’s words. “Mr. Yan, there’s something I’d like to remind you of. If you need funds, you can also buy the house with a loan; there’s no need to pay in full. Our current rate of return far exceeds the loan interest rate.”

“You’re right, I’ll take out a loan to buy the house.” Yan Hui agreed without hesitation.

At this time, the market generally believes that timber prices will drop once the logging season begins. With this expectation, timber prices have already fallen, and at a reasonable price. However, once the logging season actually begins, everyone will find that this year's timber supply has become more difficult, while demand is rising, and timber prices will not fall.

In recent years, China's timber imports have increased significantly every year, doubling every two years, yet this still cannot meet the country's infrastructure needs. Timber is not like animal husbandry; it doesn't produce timber after just one or two years of planting. This cycle can last for at least a decade or more.

Currently, many places are planting poplar trees on a large scale. According to Yan Hui's estimate, it will not be until 2010 or even 2015 that the supply of timber may exceed the demand, at which time the logging of wild forests will be completely banned.

Everything was going according to plan, leaving Lao Guo completely stunned. The total amount of orders Yan Hui had placed with him had gradually reached 3000 cubic meters, which was roughly 50 freight cars – enough to charter an entire train.

Although Yan Hui doesn't have that much capital, the logs he buys will be quickly processed and exported, so the funds are liquid and sufficient to support 3000 cubic meters of logs before November.

A few days later, the first batch of 500 cubic meters of timber arrived at the train station one after another. Two trucks continuously delivered goods to Yan Hui's processing plant, and Yan Hui's products gradually began to be sold abroad. The first thing Yan Hui did upon the arrival of this batch of timber was to lower the price.

The cost of larch logs obtained from Lao Guo was 45 yuan per cubic meter lower than that from Geng Zhongxing. Yan Hui directly reduced the price of the boards by 30 yuan per cubic meter, and Wang Yongjun and others were overwhelmed with business.

It's not that a price reduction of 30% will quickly open up the market, but if one party can find a way to use that price difference to satisfy the buyer, then the deal will be much easier to negotiate. After all, if the product quality hasn't declined and the price is decreasing slightly, no buyer would be unhappy.

This is already a very good market and a very good procurement environment. Yan Hui has encountered many construction sites where inferior materials are used, and the profit margins are astonishing, but the project risks are also not to be underestimated. In some places, workers dare to use boards that have been used many times before for scaffolding. It is very normal for such boards to break after being exposed to the wind and sun for several years.

Therefore, what Yan Hui did not expect was that before Lao Guo's second batch of timber arrived, the 500 cubic meters of logs had already been processed and sold.

During this time, Yan Hui's mother was also overwhelmed by the sheer number of houses she looked at. The salesman who worked for him was naturally very eloquent and dedicated, taking Yan Hui's mother to see all the good properties in the area. It's fair to say that after ten days, his mother knew more about the local real estate market than Yan Hui did.

After listening to the salesperson's report, Yan Hui realized that the salesperson had spent ten days visiting real estate sales departments and had a deeper understanding of construction sites. So he replaced the salesperson with another one and continued to accompany his mother to look at houses, which could also be considered as training the salesperson.

(End of this chapter)