Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 54%
$32.50 /mo
$390 billed annualy
MONTHLY
$69 /mo
billed monthly
7 day free trial. Cancel anytime
×
Try Pro Features for Free
Start your 7 day free trial. Pick markets, find deals, analyze and manage properties.
All Forum Categories
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

All Forum Posts by: Craig Beebe

Craig Beebe has started 2 posts and replied 4 times.

Post: Lewes Office Building

Craig BeebePosted
  • Real Estate Agent
  • Lewes, DE
  • Posts 4
  • Votes 2

Investment Info:

Office Space commercial investment investment.

Purchase price: $565,000
Cash invested: $65,000

We bought this building for my own office space and long term appreciation, I am my own tenant on a NNN so I don't want to earn a lot of cashflow on this deal.

What made you interested in investing in this type of deal?

My wife and I were interested in securing an office building that met our requirements to serve as both an office and small residence to maximize the amount of cash we could invest into our business. This building met our requirements after looking for a year.

How did you find this deal and how did you negotiate it?

Originally my wife drove by and saw a for rent sign, she called and the owner was interested in selling.

How did you finance this deal?

Private note, 20 year amortization, 5 year balloon.

How did you add value to the deal?

I negotiated the financing, secured the permitting, worked through the regulatory process to get the conditional use permit, GC'd some repairs, and operate the company that is the tenant that pays the debt service, taxes, and maintenance.

What was the outcome?

Purchased, still own, have no intention of selling unless someone offers me a stupid number.

Lessons learned? Challenges?

The original financing was challenging because the building was zoned residential but had been used as a commercial building with a conditional use permit for over 30 years. Banks didn't know what to do with it. Because we spent money up front in good faith to make the building work for the banks with no expectation we would get it back the seller stuck with us and ultimately we were able to negotiate a private note to finance the building.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes, the agent on the other side Kim Hamer is excellent. We own a brokerage and my wife ErinAnn Beebe handled our side of the transaction, she is excellent as well.

Post: Zillow Shuttering Its' iBuyer Program

Craig BeebePosted
  • Real Estate Agent
  • Lewes, DE
  • Posts 4
  • Votes 2

On November 3rd Zillow announced that it would close its' Zillow Offers group. Zillow is closing down their offers program following loses in the third quarter of 2021 of $380 million. Zillow has announced layoffs of 2,000 employees as a result of the division closure.

Zillow offers is an example of an iBuyer program. IBuyer programs are "instant" or technology enabled buyers who purchase homes from consumers without placing it on the open market for price discovery. Zillow Offers purchased residential homes based on the popular "Zestimate" pricing algorithm. Homeowners are familiar with zestimates popping up telling them what Zillow thinks their home is worth. When a home was purchased through Zillow Offers; Zillow charged consumers a fee of about 7.5% of the purchase price.The iBuyer then "flips" the purchased home back on the market attempting to sell it at a profit. Zillow's business model failed to produce a profit.

Where Did Zillow Go Wrong?

Zillow's Zestimate applies market level pricing to a single home. This method works well if you are purchasing a product that is very uniform. Think about products you can substitute for another with little change in its' value. If I purchase 1,000 kernels of feed corn; one kernel isn't remarkable from another. You can easily substitute one for another. Residential real estate is a little different. A single buyer may have a strong preference for your home versus the home directly across the street for lots of incredibly personal reasons.

A home in one neighborhood could be the same model from the same builder as another neighborhood. Consumers can still exhibit a strong preference for one neighborhood over the other. It might be something as small as the way you turn into the neighborhood from the main road. Algorithms are good a picking up macro level trends, they struggle to understand micro level trends at the home and neighborhood level that consumers display. These are things that human beings excel at. It's the area where emotional intelligence excels over artificial intelligence.

The cumulative result of these consumer preferences and algorithmic pricing is that the consumers willing to sell to Zillow were those with the least desirable homes. Zillow's algorithm did a poor job distinguishing these less desirable homes and overpaid. Great for those owners, terrible for Zillow's shareholders.

Are iBuyers Going Away?

No, iBuyers are not going away. I think iBuyers are a valuable participant in a healthy housing market. There will always be a segment of the housing market for sales that are distressed or people who just don't want to deal with selling a home on the regular market. iBuyers are a new twist on wholesaling and other forms of off market home buying that real estate investors have done for decades on a small scale. I think adding better tools through technology to an old trade is a good thing for both consumers and investors over the long term.

Are iBuyers for Most Consumers?

iBuyers and selling to a real estate investor is probably not the right choice for most residential home sellers. In the State of Delaware, residential home sales are closed at an attorney's office. The attorney will conduct a title search and other due diligence for the buyer to make sure you have the ability to transfer a clear title and title insurance can be issued. As of November 2021, real estate attorneys in Southern Delaware are rather busy. They need time to complete their work so even if you receive an immediate offer you will need to wait at least 30 days for the closing attorney to finish their work.

The Southern Delaware residential home market currently favors sellers. October 2021 current days on market for Sussex County Delaware residential sales was 35 days according to Bright MLS data. The short time on the open market limits the benefit a seller receives by agreeing to an immediate sale before the open market can determine what a home will really sell for. With iBuyer charging fees to purchase a home that are competitive with a traditional real estate agent, the appeal of an iBuyer is limited in the current marker.

Post: What will be the impact of the Coronavirus crisis on real estate?

Craig BeebePosted
  • Real Estate Agent
  • Lewes, DE
  • Posts 4
  • Votes 2

@Bryan Kim

I’m sure you already looked but the uptick in spread on high yield debt is stunning and rapid. There was a more gradual spike in 2016, this one went parabolic.

Bond traders are panicking and dumping more risky bonds.

Post: What will be the impact of the Coronavirus crisis on real estate?

Craig BeebePosted
  • Real Estate Agent
  • Lewes, DE
  • Posts 4
  • Votes 2

I think there will be some short term fallout from the Coronavirus panic.  There are two prongs to this and both end up in the bond market.  

If you have enough economic damage from the Coronavirus and/or the crash in oil prices, it can spill over into corporate failures.  There is a lot of corporate leverage out there and has been.  Borrowing costs are low, a sustained drop in cash flow is still a killer for a nice chunk of the highly leveraged.  That’s enough to make banks nervous and tighten their lending standards.  That tightens real estate up.