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All Forum Posts by: Brett Jurgens

Brett Jurgens has started 8 posts and replied 28 times.

I'm trying to get a better understanding of the unlevered IRR hurdles SFR / BTR investors have for value-add improvements.

By "value-add improvements" I’m referring to upgrades made to a property that increase rent or purchase value, often including kitchen remodels, bathroom updates, solar and other energy efficiency improvements, fresh paint, a new garage door, finishing a basement, adding a deck, and updating flooring, to name a few.

I’ve been hearing a lot of different reactions to this question the last few months. It seems like 20% is a pretty good average. The upgrades that HAVE to be made for rentability vs. those that will hopefully increase rental income can definitely influence the response.

What are people's expectations?

How much IRR do you expect certain improvements to generate?

Post: Best way to use built up equity?

Brett JurgensPosted
  • Denver
  • Posts 29
  • Votes 17

@Jay Hurst

Thanks for responding

3.75%, 30yr fixed

Post: Best way to use built up equity?

Brett JurgensPosted
  • Denver
  • Posts 29
  • Votes 17

I have a rental in Denver that I've owned since 2013. Quite a bit of equity built up. Good rent, good longer-term tenant. 

Should I 1031 or is there a better strategy to keep it and borrow against the equity for another rental?

Thanks!

@Colleen F. agree that employment availability, cost of living (and taxes) and where people have personal ties are the key factors today vs. climate change alone. The cost of living and cost of replacing are getting harder with more extreme events.

Cost of electricity and cost + availability of water will also start to play even larger roles than they do today, especially in hotter states.

Post: Recommending a great energy auditor in Kansas City

Brett JurgensPosted
  • Denver
  • Posts 29
  • Votes 17

Just had a great experience using Ben Meyer / https://www.mystarenergy.com/ for energy audits in the KC area. I have no affiliation with Ben or his company, just thought he did a great job. Happy to connect anyone who is looking to do an audit for their home or rentals. 

Quote from @Marcus Auerbach:

As an investor I consider myself lucky to be on the Great Lakes. My team works with a lot of relocation clients and we always ask: why are you moving to Milwaukee? About 50% of the answers have to do with family or job. The other half is related to personal experience with too much/not enough water, excessive heat or smoke from fires.

Migration trends seem to be generational and move/change at a glacial pace. A lot of young people move to FL, because their parents where always talking about that some day they would - and never did. 

Money is ultimately going to be the driver, foremost the cost of insurance. FL is now basically going socialist by offering state-sponsored tax-funded insurance to replace the private insurance carriers who don't want to loose money any more.

Home prices are also interesting: when the first row of houses gets washed out by a storm surge, you have for sale signs pop up in the second. But who is going to look at this and say, yeah I am going to make a full-price offer? And as soon as prices start to slip YoY and people start to expect that it becomes a self-fulfilling prophecy.

I had a client who moved from a new subdivision is AZ, because they ran out of water. For two years they were bringing in water with tanker trucks. Home values go pretty much to zero, if you don't have water.

It's like Earnest Hemingway said about how it happened: first gradually, then suddenly. I think we are still in "gradually", in 10 years things may look a little different. 

Trends are always hard to spot at the beginning. And for some reason as a society which is rapidly getting technologically more advanced some of us come to the conclusion that scientists can not be trusted.. make it make sense.


 Thanks Marcus, interesting stuff. I've heard of some developments in Vegas that don't have water rights. Crazy!

Would also be curious about the markets you're in too. I'm in Denver, good place to be, but pricey right now. 

Quote from @Dan H.:

I am not stating this because I am against it; I have mixed feelings.  I am stating it to provide something to ponder and an explanation why it may appear people are ignoring the data.

If owners of property impacted by climate events are heavily bailed out by FEMA and other sources, then what is the risk?

The latest that I am aware of occurred this past Monday, Rancho Palos Verdes. ~70 years ago a landslide took out over 100 homes in the area. The road is built on top of a previous landslide. Was it hard to predict future issues? FEMA & Ca provided a $42m buyout program for the worst impacted.
https://timesofsandiego.com/politics/2024/10/29/residents-of...

It seems the owners should have known the risk, but let’s assume they did know the risk but also knew the precedence of assistance for climate related impacts.  Is it unreasonable that they would expect aid for a climate related impact?

Same logic can be applied to anyone impacted by the recent hurricanes.

So what is the risk?

By the way I am looking at properties in a high fire risk area.  It will require Ca Fair Plan insurance which is not cheap but is likely cheaper than a free market would dictate.  What is my risk?  I know the state has CA fair plan insurance for high risk properties and I know its cost.  if it burns down, I will have insurance.  Even though climate risk (fire) is high, my risk does not seem high. 

So it appears I am one ignoring the data, but I believe I have a good grasp of the risk and a plan to mitigate the risk.  

Best wishes


 Sounds like you're not ignoring the data at all to me! You're informed, understand the cost of insurance, and have analyzed the risk / reward. 

Interesting point about bailouts and government support. Not sure how often that happens and to the extent it does, how much individuals are receiving.

Trying my best not to politicize this, but have to add that massive bailouts are going to continue to get harder to afford with the high federal debt we have today.

Quote from @Bruce Woodruff:

@Brett Jurgens No one (certainly not I) is bashing your concept here. It is important (and a huge advantage) to be able to anticipate interstate migration patterns before they happen :-)

I am just opposed to the 'sky is falling' approach....not even saying you were going there.....but lots of people do just that.

Other than that, interesting topic....

100% and appreciate that @Bruce Woodruff. Don't worry, I didn't feel bashed! All good points being made about being careful with, and critical of, data. Love the discourse here. 

I think tracking turn costs, vacancy rates, insurance costs, etc. in connection with a lot of this data could all be helpful iterations. I find myself and other real estate investors are often locally focused to the markets we all know. And often a smart strategy. This along with high home prices in some markets like mine in Denver are making me take a broader look.

I think it’s fantastic that Zillow is highlighting risks and opportunities of properties more broadly.

Data like this helps buyers ask better questions about potentially higher insurance costs (or insurability risk), higher maintenance costs, etc.

We all know AZ is hot. That’s not the point.

Not all of us know migration patterns. That’s why I thought the pairing of millions of people moving to some of the riskiest, and potentially more expensive future real estate markets, was interesting to explore.

@Costin I. how much have insurance costs increased in TX the last 3-4 years?

Adding insurance cost increases and insurability to this may be a good v2.