Skip to content
×
PRO
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
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here
Pick markets, find deals, analyze and manage properties. Try BiggerPockets PRO.
x
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: Jesse Brewer

Jesse Brewer has started 5 posts and replied 7 times.

Post: Prepared and qualified buyers

Jesse BrewerPosted
  • Commercial Real Estate Broker
  • Florence, KY
  • Posts 8
  • Votes 2

It is no secret that we are now in a seller’s real estate market and competition can be fierce for the hottest homes in the best areas. So if you are a buyer looking for that perfect home there are a few things you can do to be ready to help give you the edge over the competition:

  • 1.Get pre-approved by a lender. This will not only help speed things up but it shows your agent and the prospective seller that you are a serious buyer and you have the capability to close the transaction.
  • 2.Try to narrow down what it is you want. I suggest making a list of “have to haves” and “want to haves.” Some examples may be:
  • a.Have to have: garage, 2 bathrooms, certain school district, etc.
  • b.Want to have: fenced yard, cul-de-sac street, close to certain work place etc.

By having this written out and prepared your agent will then be able to narrow down what it is your looking for and show you homes that meet your needs and wants. This will help you “pull the trigger” faster in making that offer when you see it instead of wasting valuable time searching and searching for that home only to keep losing out because some other prepared home shopper knew what they wanted.

  • 3.Be reasonable and realistic in your search. If you have champagne taste, then it will be difficult to shop with a beer budget. In Northern Kentucky most homes sell for 94% or more of list price and while everyone wants a bargain you also need to keep in mind that most homes will sell for a fair price these days and it’s your job to be realistic in your search so you do not only set yourself up for disappointment but you also respect the time and effort that your agent is giving you to help foster a successful transaction.
  • 4.Lastly when you do find that home be sure to not be overly picky on the minor details. Most of the time most problems buyers find with homes are cosmetic or an easy fix such as re-painting a room, swapping out some plumbing fixtures etc. and are very easy to do. So if you find a home that has a lot of the have to haves and even want to haves don’t overlook it because you don’t like the paint color or type of fixture. This does not mean excuse major big dollar problems and defects as those should always be weighed in with the most utmost importance in the buying decision.

Post: Manufacturing Value Add Opportunities

Jesse BrewerPosted
  • Commercial Real Estate Broker
  • Florence, KY
  • Posts 8
  • Votes 2

Jim you are absolutely correct!

Post: Manufacturing Value Add Opportunities

Jesse BrewerPosted
  • Commercial Real Estate Broker
  • Florence, KY
  • Posts 8
  • Votes 2

That situation has happened to me more times than I'd like to admit!

Post: Dogs and Landlords

Jesse BrewerPosted
  • Commercial Real Estate Broker
  • Florence, KY
  • Posts 8
  • Votes 2

In the apartment business I often get a lot of people requesting to move into an apartment or house and they want to bring their dog, or in some cases their dogs (as in plural). As a landlord I do not allow dogs in my apartment properties at all, in our single family houses we will allow 1 dog but we do have restrictions. Most landlords (myself included) generally do not like dogs at all; however, as an individual I love dogs, I even have one myself his name is Jack and he is a Great Dane.

The reasons most landlords prefer not to have dogs in their rental units is historically most landlords at one time or another (usually multiple times) have had a bad experience with a tenant and their dog. Most tenants who have dogs (I say most because there are some that do not fall into this category) do not take care of the property as if it were their own and when you add a pet dog (or dogs) in that equation things are dirtier because of the dog feces and urine, the dog tearing things up (scratching doors and walls) and the annoyance of leaving the dog alone and it barking constantly affecting the neighbors (this is more of an issue with apartments not houses). Another major problem I have had personally in the past in apartment communities is the dogs were always taken out in the common areas to relieve themselves and the owners (my renters) would not take the time to clean up after them then the tenants without the dogs would come along and have to deal with dog **** all over the yard and you can imagine that is not pleasant.

Another hot button when it comes to dogs is breed restrictions. Most landlords that allow dogs will have a breed restriction on pitt bulls. This is not something landlords do because they do not like pitt bulls. They do it because the insurance carrier tells them that if there is ever an incident on their property or a pitt bull is found living there during an inspection then their insurance will be canceled. So if you have a pitt bull do not get mad at the landlord that tells you that it’s not allowed, it’s not the landlords fault that the insurance company is restricting the breed. Their only option would be go to a much higher priced carrier, but that would result in you paying a much higher rent and let’s face it, you don’t want that. 

Post: Presentation is everything when talking the numbers

Jesse BrewerPosted
  • Commercial Real Estate Broker
  • Florence, KY
  • Posts 8
  • Votes 2

We live and work in a society and market that is always changing. The millennials are now buying their 1st (and even 2nd homes), investing in property and becoming the professional work force of today. This means the way we all do business, purchase property and communicate with each other has drastically changed and continues to change today and if you are in the business of selling homes or mortgages then you need to get with it or get out of the market.

I have heard several agents complain that their buyers lost out on a deal because buyer and seller couldn’t come to an agreement on price. Recently this happened to a good friend of mine who sells a lot of first time homes and she was telling me that her buyers would not come up from $102,000 to meet the seller’s demands of $106,000 and walked away from the deal. After listening to her tails of real estate woe I processed the information and asked her how did she present the information? At first she was puzzled then went on to tell me that she showed them the comps and that the property was worth well over $115,000 so they were not overpaying and that this house met all their “have to haves” and some of their “want to haves” in a home. It made sense for them to buy it at the $106k and she was right in that statement; however, where she failed to close the sale was how she presented the information.

She looked at me with a sense of confusion so I went on. I asked her “when was the last time you bought a car?” She told me it had been a couple years and then I asked if she financed it and she nodded. I then went on and asked her did she remember that process and how the salesman presented the information? They never discussed price of the car at all. Instead they focused on the monthly cash outlay. For example, if you were ok with spending $350 per month for the car and the salesman came back and said “I can get you in the car you want for $377.00 per month out the door chances are you didn’t focus on the price of the car but the $27 bucks per month and rationalized that as two lunches out per month, couple packs of smokes or maybe a round of drinks (depending on where you live) and chances are if you really wanted that car you would pull the trigger and spend the extra $27 per month. All the while what the salesman did was get you to increase the purchase price up on the car say an extra $1,500 bucks without you realizing it because you were focused on the monthly cash outlay.

I then went on and used her example of the purchase of the home. I suggested instead of focusing on going up $4,000 (because we all want a deal and we will be damned if we increase our offer because we see on TV all the time how people buy these houses on the cheap and why should we be suckers… WRONG). I proposed that she ask them if the house that meets all their wants, that is ideal for them (according to them) was worth paying an extra $20 dollars a month than they originally budgeted. This type of thinking stimulates a different part of the brain as now when presented this way you start to think “**** that’s only a lunch or two out a week, maybe a couple shots at the bar on Friday night or something along those lines and when you look at it in that context it makes it hard to pass up on the house you really want for just a couple shots of whiskey per month or lunch out occasionally.

This tactic isn’t something new and edge cutting. It’s been around for years just most real estate agents are not hip to it and let their deals fall apart because they are focused on the purchase price and comps, and while those things are important you need to also be prepared to go at your clients in a different way to make the decision that ultimately they will probably thank you for. So if you’re a real estate agent invest in a mortgage calculator app on your phone (most are probably free anyways I think) and have the conversation in a different text and watch more of your clients “sign on the line that is dotted.”    

Post: Manufacturing Value Add Opportunities

Jesse BrewerPosted
  • Commercial Real Estate Broker
  • Florence, KY
  • Posts 8
  • Votes 2

In these market times if you are a real estate investor then you are familiar with the term “Value Add” but if you are not familiar, value add simply means do something to a property to improve its value. Typically this refers to cash flow properties, more specifically apartments but the term and its application can be applied to any commercial income producing property, and it means you are doing work to increase the cash flow, which increases the value. It may include doing physical upgrades to get higher rents, bringing in new management to run the property more efficiently or filling vacant units with paying tenants. All of these things would increase the cash flow, which increases the value thus making it a “Value Add” opportunity or project.

Typically when a “value add” opportunity is taken out to market it is advertised as such and usually these properties are distressed, have a lot of deferred maintenance, occupancy issues and or have some other functional problems such as poor management or negligent ownership. In most cases these deals are priced very inexpensively and are perceived to be a great deal. They are easy opportunities to identify and if the property is in a decent location the competition can be very fierce and many investors are lucky to have a short window of time to perform due diligence and execute a contract.

In most instances these “value add” opportunities are typically in neighborhoods that would be classified as a “C” grade or even a “B” grade neighborhood on a scale were “A” grade neighborhoods would be considered the most desirable and “D” would be considered economically challenged and crime ridden. It is not very common to find a true “value add” opportunity in B neighborhoods and it is extremely rare to find a true “value add” in an “A” class community.

Typically most of the “value add” opportunities have too many problems that conventional bank financing is not an option. Investors trying to get into these deals are forced to either pay all cash or secure some type of bridge financing in order to get the deal then. After that they have to hit a carefully projected proforma to get the cash flows coming in and seasoned so that they can either sell it or obtain a conventional loan. It is because of the upfront cash needed to purchase and then bring the property to where it needs to be that most of these deals are in the “C” grade neighborhoods are sought after.

In this market of new opportunity of the “value add” there are deals to be had across any property class; however, often times the more expensive ones in the “A” class are either over looked or not recognized because on the surface it may appear to be a performing property but once you really dive in and peel back the onion you may discover a great opportunity, or you may be able to “manufacture a value add” opportunity where many others have failed to recognize it even existed.

In the Cincinnati market for example most C class apartment deals will trade in the $20,000 - $25,000 dollar range, B class deals will trade in the $25,000 - $35,000 range and A class deals will range anywhere from $35,000 - $60,000 per door and sometimes even more if it is a new construction product. When it comes to purchasing a “value add” project you can expect to pay 8 – 10,000 less per door than these figures (give or take) and then inject approximately 3- 5000 of capital per door thus having the remainder for your profit. Seems pretty simple right? Well in theory it is but I can tell you there are great opportunities missed because investors are so focused on finding a property that is distressed and has all the signs of a classic “value add” opportunity that they will often times overlook that A class property, that is fully occupied but under rented, the deferred maintenance may not be that great, the management has the perception of doing a good job (note: I said perception because at one time they probably were doing a decent job but they have become outdated for the market and property and are no longer maximizing the properties true potential) and the price is much higher than the opportunities they are comparing too, which would be the distressed C and low B class deals.

Now I know what you’re thinking “sure sounds good in theory but when has this actually happened?” Well I’m not only going to describe in theory but I’m also going to outline a few examples of an advertised “value add” opportunity as well as some that were manufactured. After you read these case study examples you will then ask yourself which opportunity would you prefer for yourself and then maybe you will view these types of opportunities as possible investments for your own portfolio.

Example 1 - This property was a 24 unit property in a class A area in Northern Kentucky, maybe 3 miles from down town Cincinnati. The property was owned by the same family for thirty to forty years and was maintained very well. It was dated with older kitchens, but everything was in very good shape. Each unit is two bedrooms, hardwood floors and there were garages for tenant use. Other tenant features included tenant paid heat and water. The landlord had kept this property at 100% occupancy and rarely had a vacancy. When we analyzed his rent roll we discovered that the majority of his tenants had lived there for ten – fifteen years or more. One of the glaring things we noticed was the level of rents he was achieving. The average rent for one of these units in this prime located was $625 per month, but some of his older tenants were paying even less than that. Our team did some market research and we felt that we could easily achieve $800 per month if we did some updating to the interior of the units. The property was purchased for $1,000,000 and the seller gave a credit of $10,000 for some roof work that needed to be completed.

We put together what we felt were sufficient upgrades to the units to help us achieve the higher rent. The cost to make these renovations was approximately $5,000 per unit. We were calculating an increase of $175 per month, or annualized $2,100 increase in revenue for a $5,000 investment. When you do the math that's a 42% ROI (return on investment) for the updates to the property.

The construction on the new units started and we found out that we underestimated the market on these and wound up fetching an $850 per month in rent instead of the $800. With a $120,000 investment into the units the income increased $64,800 per year. The value created on this was over $600,000 making the fair market value of this property close to $1.6m dollars. So when you factor in all the cost of about $1.3m you can see where this class A value add had a hidden opportunity to create $300,000 of equity in as little as 18 months.

Example 2 -- For our second property I’m going to talk about an advertised class C deal in Cincinnati. This property consisted of 99 units and it was plagued with every issue you could imagine. Vacancy, deferred maintenance, several units that were down, major items needing replaced such as roofs, plumbing lines, windows, exterior curb appeal and even some structural issues needing to be addressed. The property was purchased for 1.355m ($13,686 per door) and the renovation budget of $5,202 per door ($515,000) was set. One of the problems going into this was the property realistically needed a renovation budget of closer to $750,000 to complete the needed repairs. The end value of this property would be roughly $22,000 per door ($2.178m). So you can see here that the owners of this property put out a lot of risk and ultimately wound up investing $2.105m) to create an additional value of $73,000 in value. In my opinion this is an awful lot of work and risk in a risker grade of property to only create $73,000 in value. Keep in mind this was one of those advertised “value add” opportunities that was perceived to be cheap and a good deal.

Now I’ve given you two side by side real live examples of an advertised class C “value add” and a class A “manufactured value add” deal. After analysis of each deal, considering all the numbers and size which deal would you feel better about being a part of? I’m not trying to say that all C class value add deals are bad but the points I’m trying to make are the following:

-Don’t overlook an opportunity because there is no initial appearance of a value add. You need to really learn the submarkets, fundamentals of the property and look for areas the current ownership is not capitalizing on that you may be able to take advantage.

-Don’t overlook a property because of its initial price offering and size. As you can see from the two examples I outlined above the smaller, higher class deal, is a much more lucrative opportunity than the larger advertised value add opportunity.

-Just because a property is offered up and perceived as a value add opportunity does not mean that it truly is.

-When you do identify a great opportunity do not be afraid to take action.

It’s important to remember that no matter what property type or opportunity you are looking at that it’s important to be thoroughly and efficient in your due diligence so that you can make an informed, calculated but not too hasty of a decision on whether to invest or not. More importantly it’s also crucial that you surround yourself with the proper support and team members of real estate brokers, property managers, contractors and other supporting personal because you can be given the grandest of opportunities but fail miserable and fast if you do not execute it property. Finding and identifying the opportunity is only the beginning of the successful value add project.

Post: Having a qualified buyer be ready

Jesse BrewerPosted
  • Commercial Real Estate Broker
  • Florence, KY
  • Posts 8
  • Votes 2

It is no secret that we are now in a seller’s real estate market and competition can be fierce for the hottest homes in the best areas. So if you are a buyer looking for that perfect home there are a few things you can do to be ready to help give you the edge over the competition:

  • Get pre-approved by a lender. This will not only help speed things up but it shows your agent and the prospective seller that you are a serious buyer and you have the capability to close the transaction.
  • Try to narrow down what it is you want. I suggest making a list of “have to haves” and “want to haves.” Some examples may be:
  • Have to have: garage, 2 bathrooms, certain school district, etc.
  • Want to have: fenced yard, cul-de-sac street, close to certain work place etc.

By having this written out and prepared your agent will then be able to narrow down what it is your looking for and show you homes that meet your needs and wants. This will help you “pull the trigger” faster in making that offer when you see it instead of wasting valuable time searching and searching for that home only to keep losing out because some other prepared home shopper knew what they wanted.

  • Be reasonable and realistic in your search. If you have champagne taste, then it will be difficult to shop with a beer budget. In Northern Kentucky most homes sell for 94% or more of list price and while everyone wants a bargain you also need to keep in mind that most homes will sell for a fair price these days and it’s your job to be realistic in your search so you do not only set yourself up for disappointment but you also respect the time and effort that your agent is giving you to help foster a successful transaction.
  • Lastly when you do find that home be sure to not be overly picky on the minor details. Most of the time most problems buyers find with homes are cosmetic or an easy fix such as re-painting a room, swapping out some plumbing fixtures etc. and are very easy to do. So if you find a home that has a lot of the have to haves and even want to haves don’t overlook it because you don’t like the paint color or type of fixture. This does not mean excuse major big dollar problems and defects as those should always be weighed in with the most utmost importance in the buying decision.