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HIGHLIGHTS FROM THE PODCAST With Ben Preston:
1:30 - How Ben Preston began in Real estate 4:14 - The areas Ben recommends 9:14 - McCalla, Alabama - is it upcoming? 12:11 - Perks of suburban investing in Shelby County 15:57 - Mistakes new investors make 19:45 - Some things the best investors are doing 23:38 - The AHI process for a new investor 26:18 - Best areas to flip FULL TRANSCRIPT OF THE PODCAST AUDIOMatthew Whitaker: What are some mistakes you see investors make that maybe you've learned over the years? Ben Preston: Seeing a deal that's too good to be true. Because yeah, it is. Spencer Sutton: It doesn't exist. Ben Preston: I know, I know. Spencer Sutton: All right everybody, welcome back to another episode of the Birmingham Real Estate Investor. I am one of your hosts, Spencer Sutton. I've got Matthew Whitaker with us today, and man, we've got a special guest. We've got one of our allies here in Birmingham Real Estate, Ben Preston. So Ben, welcome to the show. Ben Preston: Appreciate it, man. Thanks for having me. Spencer Sutton: Yeah, absolutely. Ben is an assistant manager. He's also a sales agent at LAH here in town. Ben is a Birmingham native. This guy has been in Birmingham as long as me and Matthew have. He has been selling real estate full-time for the past 15 years. We know Ben because we've done some deals together. Ben has referred us some clients over here at Evernest and we really do appreciate that. Ben Preston: Yes, sir. Great to work with. Matthew Whitaker: Ben, first of all, before when we were talking, it sounded like you're an Auburn fan. So I just wanted to warn everybody that you may sound like you know what you're talking about, but you still are an Auburn fan. I'm just kidding. Ben Preston: Yeah, no comment, no comment. Matthew Whitaker: Ben, appreciate you being on. I'd love to understand your story, how you got into the real estate business. So just kick it off with how it started and how you got interested in real estate. Ben Preston: Oh man. Well, as far as real estate, I've always been intrigued with real estate, but I used to say back in my old life, I was actually a private investigator straight out of Auburn University. So I did worker's comp and disability claims for about six years out of Auburn. Did that, traveled all over the country and then just zoned back in here in Birmingham. Love people, love to help people. What better job to have than to service someone in purchasing a property? I just wanted to get into sales and real estate was the avenue that I took. Matthew Whitaker: And how long have you been in the real estate world? Ben Preston: 16 years. Matthew Whitaker: Great. So let's talk a little bit. You help investors. I'd love to just get started and understand better how you help investors and what are some investors doing that you see are working for them right now? Ben Preston: Yeah. Basically, if I'm talking to an investor, first of all, our initial conversation is, what are they looking for? What are you looking for? Are you wanting something immediately to bring in a cash flow? Are you wanting something to appreciate? What's your price range? So once I get that information, I got a little checklist. Once I get all that information, then I can zone in on a different area of town that would fit those needs for that particular investor. It's what I've been using. Matthew Whitaker: Do you have investors that are mostly rental property owners? Are they house flippers, a mixture of both? Ben Preston: Right now, 95% are just renters. Someone wanting to buy a property and rent it long-term. I haven't had a lot of flippers lately, but that's been the meat and potatoes lately. Matthew Whitaker: When you are interviewing these people and asking them, what are some of the questions that people need to be ready for when they call you? What are some of the decisions they need to have already made? Ben Preston: Well, the main thing is, Matthew, is probably just knowing what are your expectations? What are you looking for? Are you wanting immediate cash flow out of that investment? Are you wanting something to sit on long-term that has possibility to appreciate over time? Different neighborhoods offer different things. So just seeing what their long-term goal is. Matthew Whitaker: And I would think risk probably has a lot to do with that, right? I mean, low-income has the higher potential for return. Something higher income would have a lower potential for return, but maybe big appreciation. Can you talk a little bit about maybe even naming some areas that you discuss when you're talking to folks about these different areas? Ben Preston: Yeah. And another thing that I normally do too, if my client or my investor wants me to, is I, hey, I'm going to do this deal as if I'm buying the property myself or a family member is buying the property. So I'm going to give you my opinion and that's what I'm here for. But generally speaking, if someone's looking, it's hard to get in the market for less than, I would say good, comfortable area that I'm comfortable with starting off in that $80,000 and up range is my comfort zone running from that $80,000, I mean, all the way up to $200,000. I can find good investment opportunities in that price range in good areas. When I say good areas, that $75,000 to $100,000 range. I'm sure people that are listening are familiar with Birmingham, up in that Grayson Valley. Ben Preston: There's a couple of townhome communities up in that area, right on the Trussville, Alabama line, which you guys know all about it. I know obviously, you guys have a bunch of investors that you're, property managing there. Probably sold 25, 30 townhomes up there in the past year and a half. It was a good intro into someone wanting to tap into investments. You're looking at a $90,000 townhome and being able to rent it out from anywhere to $900 to $1,000 a month. And then if you're going to look into the school districts, they're probably one through five, maybe a two and a half or so there on the rankings from aol.com. But as far as if you're looking into the $100,000 to $200,000 range, got stuff over in West Alabama in the McCalla area where the Amazon distribution center is rocking and rolling over there. I think they have maybe up to 6,000 employees, most are subcontractors. I think they have maybe 1,500 to 2,000 full-time employees. I think the rest are subcontractors, but needless to say that that's employment. So that's really stimulating a lot of new construction I think in that area based on that. And obviously the Mercedes-Benz plant is over there. Matthew Whitaker: Yeah. Can I ask you a few questions about these two areas? So let's go back and Grayson Valley for a minute. For those of you don't know Grayson Valley is in the Northeastern side of town, off of Chalkville Mountain Road [crosstalk 00:07:03]. Yeah. Very close to Chick-fil-A. I actually had an investor in my car the other day and he wanted Chick-fil-A, so I much obliged to pull in there. But it is very convenient too, right? It's right off the interstate, especially this townhome community you're talking about. And then there's some other communities just back from there that are newer homes probably built in the 1980s that a lot of investors are buying. Ben Preston: That's right. And then Pinson is right North of there too, which is also a good place to get into as well. But like you said, I mean, location wise, I mean, for $100,000 for property and yeah, I took an investor over there. He came in from Iowa a couple of weeks ago and we ate Full Moon barbecue right there and we're sitting there eating them at Full Moon and I said, you just bought a townhouse, right, literally a quarter of a mile for here for $100,000 and it's great. It's a great opportunity for investors. Matthew Whitaker: So note to investors. If you come in town, we're going to take you to eat barbecue almost 100% of the time. Spencer Sutton: Or Chick-fil-A. Matthew Whitaker: Or Chick-Fil-A. So those are the two Southern delicacies and both of them are right there in Grayson Valley. Spencer Sutton: Hey, real quick. Tell me what you get with that townhome. Is that a 2/2 townhome, 1,100 square feet, 1,200 square feet. What kind of townhome is that? Ben Preston: Well, the two bedrooms are typically anywhere from 1,100 to 1,300 square feet. Two bedroom, one and a half bath, I would say low end now is probably $900 rent. I talked to investor the other day. I think he said he was getting $985 a month for his, but this is all hearsay. That's what he told me and then on the three bedroom, Spencer, those are a little harder to come by. I think you're getting probably, if I'm not mistaken, I'll probably get close to $1,000 for those. Not quite as big an increase as you would think one bedroom would add to it, but either way it's a great deal I think. Spencer Sutton: Most of the ones you're finding for investors are the two bedrooms, right? Ben Preston: They are. Spencer Sutton: Yeah. Got you. Matthew Whitaker: And let's hit on McCalla for a second because I do think it's at the intersection of a bunch of different things going on. You mentioned the Amazon distribution center. You mentioned the Mercedes-Benz plant. One of the things that I've found too is that McCalla is a great place where if one spouse works in Birmingham and one spouse works in Tuscaloosa and that may be at the Mercedes-Benz plant, that it's in the middle, right? Each spouse has an equal distance to work. So talk to me some more about McCalla, there's a lot of new houses that are being built down there. Talk to me a little bit more about McCalla. Ben Preston: Yeah. As far as the McCalla goes, yeah, like you said, I sold, I guess maybe it's been about three years ago, I sold 36 acres right there, off that exit to a builder out of Huntsville. And so I know that's a proposal for new construction going up and these homes are going to be built. They're going to start in the low twos and then I think we've closed on a couple of townhomes, a little place called Cheshire Park that several investors have jumped into over there. But they have new construction going on there too. So as far as when we talked about earlier about appreciation on some of these areas, I think McCalla is an area that's going to appreciate. So if you're able to get in there now, these townhomes that I've been recently selling in McCalla and the Cheshire Parc area are going anywhere from $145,000 to $155,000. There are two bedrooms, two full baths. They're building right down the street in the subdivision. I think starting point in those townhomes, it could be around in the $170,000. So knowing that, that's going to be a good place. I think those are maybe rented out, Spencer. I don't know, 1,250, maybe, I think you guys maybe are getting for those. Spencer Sutton: Yeah. I think we pulled some of those up the other day and looked at them. Ben Preston: Yeah. So those are great rentals, and the investors that have bought and purchased there are buying those. That's great, $1,250. It's not the 1% rule, but they know they're going to get appreciation in there for the long-term as well. So I think it McCalla would be a good area to look at. You're not going to get the steal price and the 1% rule, possibly that investors look at. But I think that appreciation for four or five years down the road is tremendous. Matthew Whitaker: Yeah. There's no doubt that area is growing. And if you're looking for it on a map, it literally is where 20/59 coming from Birmingham, 459 coming from the perimeter around Birmingham and both connect and head towards Tuscaloosa. So it really is at an intersection where a lot of things are going on. Obviously that's why Amazon's building a distribution center not too far from there because easy access to get around the city and around the state from there. Ben Preston: Yeah, it is. Matthew Whitaker: So I'm curious, let's talk about a few more areas. What are some other areas you're seeing investors buy rental homes? Ben Preston: Really all of Shelby County, which is south of Birmingham, south of 459 area, anywhere from, I would say from Montevallo to Hoover. Any of those pockets. If you can find something, email us or whatnot, and tell me. Love to have a conversation with an investor and see what they're looking for. If we can find something in Shelby County. Because there's three things you always look at to obviously, and that's the price, location and school districts are huge for me. That's one thing I'll typically look at too, and if we can get two out of three of those checked, it's usually a good investment. Matthew Whitaker: And I think it's important when you say Shelby County for people to understand a little bit about how Birmingham works. So Birmingham, unlike somewhere like Nashville or Kansas City is made up of municipalities. So individual cities make up Birmingham. And the two major counties that we invest in are Jefferson County, which is where Birmingham is, the City of Birmingham. And then Shelby County is just south of town, which is where Hoover, which is the second largest municipality around central Alabama is. And so Shelby County, how would you describe, Ben, the difference between Jefferson Shelby County from an investor standpoint? Ben Preston: I would say Shelby is more of a suburb of the city. I guess, it's the best way to describe it. There's a lot more development, well, not necessarily retail and commercial development, but as far as residential development. There's more room to expand in Shelby County as opposed to up some of Jefferson County. Now there's a lot of good places in Jefferson County as well. I mean, McCalla is in Jefferson County and then Claychaw is in Jefferson County area too. So there's a lot, but for some reason that price point is big too, commute time to downtown from Shelby County, schools in Shelby County. So there's a lot going on down there. Matthew Whitaker: Yeah. All of Shelby County is suburban. That's a great way to describe it. Whereas, this city center is more urban in Birmingham. Shelby County does have awesome schools. I mean the Hoover school system has Spain Park and Hoover High School that are very active in athletics and academics and all the way down through Alabaster, which has Thompson High School. So a lot of great school systems in the suburbs. The school systems, unlike a place like again, Nashville or Kansas City, are municipality based, which means each individual municipality has its own school system. So it's very intimate with schools because it's literally your community right there that is putting those schools on. So that's why everybody talks about school systems around here being so important. Spencer Sutton: And just on a map, when we talk in Shelby County, I mean, where Ben was talking about further south was Montevallo. So if you go down interstate 65, all the way down to Montevallo, you're talking about there and then moving back up towards the city, correct? Like Calera, Alabaster, Helena or some of those areas. And Pelham. Ben Preston: Yes, sir. Matthew Whitaker: So I'd love to know what, kind of pivoting a little bit, what are some mistakes you see investors make that maybe you've learned over the years? Ben Preston: Seeing a deal that's too good to be true. Spencer Sutton: It doesn't exist. Ben Preston: I know. I'm going in full throttle on something, sight unseen because majority of my investors, that's what we do. We're going in sight-unseen and rely heavily on me and the home inspector to get these properties and just, may send me a property saying, man, look at this. This is awesome. And I'm like, no, no, no, no, no. And that's what I'm here for because, especially if you're out of state and need some, I wouldn't say expertise advice, but needs some advice... Matthew Whitaker: Some wisdom. Ben Preston: There it is. That's really the main and expecting, if it's your first time buying a property period. A lot of investors I've worked with have never bought a property. They're renting where they live. So knowing that there's going to be hiccups in the process, home inspections. There's going to be things that need to be repaired. No home is perfect. New construction is not perfect. So just knowing that upfront that, hey, there's going to be some things that may need to be addressed with this property. When you say turnkey, they're still going to be, the key maybe be big. You know what I'm saying? But just to know that there's not a perfect property, there are things we have to work out. Matthew Whitaker: Spencer and I loved the story of the California investor that wants to know how big the lot is. And I'm like, why do you care how many square feet the lot is. It just goes to show you that in California, the how big the lot is, is super important. Right. Because the dirt may be worth more than whatever's built on it. It's like, Birmingham, it may not have as much importance. It may actually be a hindrance because there may be more yard to cut versus adding value to the home. Spencer Sutton: I think this is a really important point, working with somebody like Ben, somebody who has boots on the ground. We also take a lot of calls from investors who are asking us about specific areas and things. And what's interesting, I had, this is probably three years ago, an investor called me. He had just bought a fourplex and he was so excited because he told me it was in the municipality of Vestavia, which is a great area. I mean, it is a wonderful area as a fourplex and he was all excited about it. And he bought this thing off MLS I think. We go out there, we do our walkthrough, we do some maintenance to it. And then when we go to list it, we realize it's close to Vestavia, but it's actually in the city. It's not even in Hoover, it's the City of Birmingham. And it was one street of these fourplexes. And they were just tons of fourplexes and what he was able to get for rent just dropped dramatically, what he thought. So his performer completely blew up. So that's the importance of working with somebody local that knows what they're doing. It's a big deal. Ben Preston: So basically that was too good to be true. Spencer Sutton: Yes. Matthew Whitaker: I'm studying to get my broker's license in another state, but a lot of people need to know that in Birmingham, it's a buyer beware. I mean, you need to do your own diligence. In some states you're required to disclose certain things like that, but not in Alabama. And so you need to make sure that you team up with somebody that can wade you through the process. Matthew Whitaker: Speaking of, Ben, what are some of the best investors doing? What are some things you see them consistently doing that helps them be successful? Ben Preston: Man, I guess just finding that niche on price range and return, what they're looking for. I mean, sending me properties. Because a lot of these guys are on different time zones to me and they're sending them to me at 2:00 and 3:00 AM. So I'll see them at 8:00 or 9:00 AM my time. And then what do you think of this property? What do you think of this property? I think finding that little sweet spot. Every investor is different, but once they find it and feel comfortable with it, once you get that one purchase and get comfortable with it, you guys handle the property management aspect of it. Everything's smooth, everything runs as planned, then they're itching to buy another one. So I guess, that'd be the main point of it. Matthew Whitaker: Ben, I appreciate you saying that everything with property management runs smooth. I don't know that I can consistently say that. I mean, we certainly do our best, but just like buying a house, it's not a perfect science either, managing homes. Ben Preston: Oh yeah, that's right. But I think once they see how the system works and how everything flows, and I think after that, then they know where they stand and be like, wow, I can make this much money a month on doing this. Let's get another one. Had one recently come back to me. He's bought three or four from me. And these are all husband and wives, mom and pop. Those are the investors I work with, majority, 99%. And he's bought three, got them rented, just refiled them with the interest rates as low as they are. Apparently freed up some cash flow for him. And now we've got another one under contract. So I know a lot of investors are doing that too, getting some and then taking the cash out and purchasing another one. Matthew Whitaker: Yeah. It makes a lot of sense to do that. As long as you're fiscally responsible as you're doing it. And you're making sure you have plenty of margin because Spencer and I've learned that that leverage can increase your returns and decrease your returns exponentially both ways. So make sure that you're using a lot of wisdom and somebody like Ben can help you with that. Do you buy homes yourself, Ben? Ben Preston: I do not. No, I do not. Which is good. That way... Matthew Whitaker: It's great for an investor. Ben Preston: I would buy them myself. Spencer Sutton: That's right. Ben Preston: You can say I'm completely neutral when it comes to finding the deals and actually sending them to my guys and saying, hey, would you buy it? Yeah, I would. But I'm not currently in the investing scene. Spencer Sutton: Are these houses that you're buying for investors? Do they need work or are they pretty much turnaround? Ben Preston: Somewhere in between? No rehabs. I haven't gotten into those, but mostly may need some cosmetic work, some small stuff, some paint, some carpet, things like that. And when I'm searching for these guys too, I keep looking for, go ahead and find out the age of the roof. If it's HVAC, all that stuff. Those are two of the main things that my investors always ask is, how's the roof? How's HVAC? So if we can already find those out ahead of time and they're recently upgraded, then that's a plus too. But yeah, to answer your question, no rehabs. Close to turnkey as I can get them. Matthew Whitaker: Talk about your process. So an investor shows up, it sounds like you have some questions that you ask this investor and then how do you take it from there? The process to buying somebody's first rental house from you. Ben Preston: Like I said, majority of all of mine are sight-unseen. These are investors living out of state. So we talk over the phone or via email. And once I get those, that checklist of questions answered, then I'll start sending them properties. I can go ahead and send them a blank format of the contract offer to purchase, that way they can be familiar with that too. We can go in and cover the grounds for that because you'll have questions if you've never purchased a property before. There's contingencies, there's inspections. Go ahead and know that because you guys know as quick as things are moving right now off the market, I'm having to send my clients coming soons' just to hopefully have a chance to buy them when they do hit the market. So I guess it's a lot of preliminary work. And then as soon as one hits, I'm like, hey, Mr. Investor, here's your property and just be ready to jump on it. Matthew Whitaker: How do you feel the institutional buyers have affected what you're doing, if at all? Ben Preston: They have not affected my guys. Matthew Whitaker: Is that because you all are buying as close to turnkey, rent ready as possible Ben Preston: That, and most of these properties are going at or above list price. And sometimes the big institutions may come in just and their numbers may be lower or whatever they're looking for. So sometimes those offers may not be as seriously looked at. Matthew Whitaker: I mean, give a completely independent thought here, but tell me what you tell your investors to look for in a property manager. Ben Preston: Oh gosh. I mean, I think that the biggest thing that they're always looking for, because especially if they're out of state out of town. It's different if you're in town. You can oversee things, but somebody you can trust, future is straight. I mean, that's what everybody looks for. Matthew Whitaker: Yeah. We've always found that building trust is a lot about communication too. Right. Like figuring out how to best communicate with each other. So we talk a lot about trust at Evernest. I almost said the old name there. We're getting started with our new brand and almost said the old one. Spencer Sutton: That's right. Old habits die hard. Matthew Whitaker: Let's switch. Let's pivot a little bit from rental. Matthew Whitaker: Tell me a little bit, if you were going to invest in an area to flip, what would be some areas that you would consider doing that? Ben Preston: Oh gosh, anywhere that I would be investing in as far as turnkey, as a rental... I mean, downtown is hopping as far as for flips. There's a lot going on down there for someone wanting to flip a property. From what I'm seeing, almost anywhere in Birmingham would be a great opportunity to flip. I know that's a little broad, but it's the truth. If the numbers are right, there's not anywhere in Birmingham that wouldn't be worth flipping. Matthew Whitaker: Yeah. Well that's the thing. I mean, Birmingham, the real estate market is very hot right now and houses are just not sitting on the market very long. And so you're right there. When I think of how flipping, it also depends on how much money you want to invest. If you have a lot of money to invest, the over the mountain areas like a Vestavia, like a Homewood, those are awesome areas to flip a home. Very competitive there. The place where I would enjoy or where I do enjoy flipping homes is in that Shelby County, the Hoovers, the Alabaster, because you can find homes that are in need of updating, mostly cosmetic stuff. And those are fun to sell. I mean, those would sell retail in the $200,000 to $250,000, maybe $300,000 range. Ben Preston: And they're generally newer properties as well, the Shelby County properties too. Matthew Whitaker: Yep. Built in the 1970s, 1980s, 1990s, some split levels. So just a great area. Again, good school systems because these communities support these school systems. So Ben, if somebody wanted to get in touch with you, what's the best way for them to reach out. Ben Preston: Two ways. Obviously you can call me anytime. The best way to reach me, call, text me anytime at 205-305-6347. That's 205-305-6347. Email is quite easy. It's [email protected]. Matthew Whitaker: And I would imagine just anybody that has questions could reach out to you. There's no kind of obligations. You're not going to sign them up day one, but you just want to be a resource for people. Ben Preston: Sure. That's what I'm here for. Matthew Whitaker: Yeah. Good. Well, Ben, thank you so much for being on the show. We really love having local people with expert knowledge and you absolutely have that in spades. So thanks so much for being here. Ben Preston: Thank you guys for having me. Spencer Sutton: All right, everybody. If you enjoyed this episode, make sure to leave us a review, share it with your friends. And if you haven't subscribed already, go ahead and subscribe. Also be on the lookout. Matthew and I were just talking about, we just changed the company name from GK Houses to Evernest. So go check out our website. You can see houses on our websites that a lot of investors from around the country are buying. So anyway, we will have another episode out for you in two weeks.