$42K/Month in Cash Flow By Buying a…High School?

David:
This is the BiggerPockets Podcast show 776.

Jesse:
I think it’s important to say when you buy a high school, the very first thing that you need to do is go buy some go-karts and a minibike and rip around the school on the go-karts and minibikes with your friends.

Rob:
Perhaps the best advice ever given on BiggerPockets.

Jesse:
Yeah, yeah. If there’s anything you take away from the day, it’s that.

David:
What’s going on everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast here today with Robuilt, Rob Abasolo, my co-host, and a very cool episode for you. Today, Rob and I interview Jesse Wig, an investor in the Pittsburgh, Pennsylvania area who’s also a real estate broker and salesperson who does a lot of different things in real estate and has put together one of the most unique deals I’ve ever heard of, which I’m sure Rob must have had you pretty gassed up. You like a good, unique deal. Tell me what you liked about today’s show.

Rob:
Well, first of all, I agree that it was a very cool show. And when you said that, I thought you were going to say, “Rob, joining me here in a cool shirt,” because I am rocking, I think, a shirt that I could see you wearing yourself. What do you think?

David:
You know, I don’t know if in my personal evolutionary journey I’m at the point where I can wear a John Mayer shirt. Oh, it’s his whole body too. Even worse. I thought it was just his head and a guitar. This is the equivalent of one of what a 13-year-old girl would’ve put on her bedroom wall of Leonardo DiCaprio or Jonathan Taylor Thomas, and you’re wearing it on your person on purpose.

Rob:
That’s right. Well, for me, I am a Meyer head, if you will. And speaking of being a Meyer head, today we’re talking actually to the unofficial mayor of Munhall.

David:
Yes, we are. That is Jesse’s nickname. And if you have been trying to figure out ways to creatively find deals in today’s market, you stumbled across the perfect podcast. This is a guest that has a strategy that I’ve never heard of that absolutely crushed it. Rob’s jaws and I were collectively hanging on the floor as we were listening. And if that’s not enough, he also gets into a strategy he uses to raise the comps on all of the properties he owns in the same neighborhood while giving practical advice for what you can do to sell your homes for more when you’re flipping. All that and more in an awesome show we have for you today.
But before we bring in, Jesse, today’s quick tip is simple. Consider the ways real estate makes you money that you may be taking for granted or unaware of. Today’s guest, Jesse, has found several ways to create wealth that you may have never even considered, and this could open your eyes to possibilities that were right in front of you the whole time and you never even seen them, just like the love interest in a romantic comedy. Rob, anything you want to add?

Rob:
Just quick tip number two, buy the shirt at the concert. If you’ve been skipping out on t-shirts, I know they’re 50 bucks. And if you’ve gone to concerts for 10 years with the same artist, just buy it live. You only live once, David. As the millennials would say, YOLO.

David:
Yeah. So if you’re feeling really bad about how your real estate investing journey can turn out, just look at Rob wearing the shirt. You’ll immediately feel better about yourself. This is actually the feel-good episode of the year. Without further ado, let’s bring in Jesse.
Today’s guest, Jesse Wig, is an investor and broker. He lives and invests outside of Pittsburgh, Pennsylvania, the proud dad of two pit bulls and soon to be dad of a human. Jesse, welcome to the show.

Jesse:
Thank you very much for having me. I’m happy to be here.

David:
Yes. Now, first question, once you have a human child, does that mean you are going to stop referring to yourself as a dad because you have two dogs?

Jesse:
It’s like the hardest question in the beginning.

Rob:
Got him. I love this.

Jesse:
Yeah, the hardest one out of the gate.

Rob:
I love this. I don’t think we’ve ever stopped someone right out the gate, David.

Jesse:
I know. And I have to… Oh, no, I’m going to get sidetracked. I said, it’ll be easy. I’m going to talk about myself and I’m going to talk about real estate. Look, I’m looking forward to having a human baby. I’m looking forward to having a human baby.

Rob:
Nice.

David:
Wow. What a political answer. See, this is what’s happening. He doesn’t want to offend PETA by saying, “Yeah, I’m going to stop calling myself a dad” because of animals, but he also doesn’t want to offend all of the human race who’s like, “Why do we call people dads because they have dogs?” And that was not fair of me to start this thing off, but I’ve always wondered, it’s a trend right now to say that you’re a dad or a mom of animals. Everybody’s doing it. And I’m like, “But I don’t know anyone with kids that does that.” So I always wondered.

Jesse:
So I’d be like, I still have three kids now once I [inaudible 00:04:24].

David:
Yeah. No one does that. That’s what I mean.

Jesse:
Yeah, right.

David:
Once you have a human baby, no one says, “I’m a dog mom anymore.”

Rob:
Oh, I see. I see.

David:
They’re like, “Now you’re a real mom, right?” I just said real mom. I might have just offended PETA there. If you’re listening to this podcast and you’re an animal parent, please don’t complain. We love you. But yes, this is a tricky thing. So I’m curious, Jesse, how that’s going to work out. You’re going to have to let me know once the baby comes.

Jesse:
Oh, of course. Of course. Yeah. I made notes.

Rob:
And I’m curious about your real estate journey.

David:
Oh, yeah, I suppose. We could talk about that, I guess, if you guys want to be boring. So today we’re going to dive into an unusual but highly lucrative deal that you were a part of. A couple rapid fire questions to give us the quick stats on that before we get into your story. First off, what kind of property is this?

Jesse:
Sure. You’re talking about the school. Yeah. It’s a 55,000 square foot Catholic high school that myself and my partners purchased.

David:
Officially the first person that I’ve ever interviewed or even met that turned a school into housing. This is super cool.

Rob:
This is cool.

David:
What did you pay for this property?

Jesse:
$100,000.

David:
$100,000 for an entire school?

Jesse:
Yep. Yep.

David:
Okay. We’re going to have to figure out this thing. What’s the cash flow right now?

Jesse:
Let me say this, we probably generate close to 41,000, 42,000 a month gross income from the building.

Rob:
Wow.

Jesse:
I’m going to say that, yeah.

David:
Are we going to get the details later? Are you going to tell us what the net profit is?

Jesse:
We’re probably around the ballpark of netting low 20s a month.

Rob:
Yeah, I already knew I was going to be mad. Like you said, you bought at school and I was like, “Oh, I already want that.” And then you’re like, “We bought it for 100K,” and I’m like… To squeak out a decent return, we’re talking like 20K profit a year and you are effectively getting that a month, so I’m mad. You’ve made Rob mad. Congratulations.

Jesse:
Well, listen, if it makes you feel better, I bought it and I was a sole owner, and then I’m currently only the minority owner. So that’s not all going to me.

Rob:
Okay, okay. That’s fine. I’m less mad.

David:
But yeah, that probably just means that you made a bunch of money selling ownership of the property. So it’s not cashflow, but it’s even better.

Jesse:
I feel like I had a really good deal.

Rob:
Cool.

Jesse:
I feel like I had a really good deal.

David:
Well, you officially turned my partner Robuilt into Robummed, and I’m curious to hear how you did that. Now, before we get into it, let’s hear about how you got into real estate. What were you doing before real estate?

Jesse:
Yeah, so I was working at a juvenile delinquent independent group home. Pretty toxic environment. I was ready to get out of it. I knew an individual that was in Pittsburgh, Pennsylvania that was flipping homes. So I moved two hours south from Erie, Pennsylvania and started working as a laborer, punchlist guy on this house the individual was flipping at 10 bucks an hour. I have a really interesting story about being there if I can share that with you.

David:
Yeah, let’s hear that.

Jesse:
So this is part of my story, I’ve told it many times, but at one point when I was working on this home, I was laying on my chest for a week straight on a pillow with a dental tool carving out grout lines that the agent had found three or four layers down in the kitchen. They wanted to keep this tile, so it was one inch by one inch tile. And so for a week straight, I’m carving out the grout lines because they’re so black and filled with different dirt and such. So we acid cleaned it and a couple of their options just didn’t work very well, so just scraping out these grout lines for a week at 10 bucks an hour. And I got to tell you, at one point, laying on my chest cold, because the tower was just so cold, I was like, “I think I made a mistake.” So yeah, that was the beginning.

Rob:
Did it make you want to go back to the previous job or no?

Jesse:
At times. Because the previous job, I became an assistant supervisor and you had the ability to sleep in the unit and get time and a half. You just needed a staff on site. So there was some perks about that job, but ultimately I decided, no, I’m going to stay in real estate and I’m ready to make some moves.

David:
This sounds like the beginning of a Disney movie where you’re working for free in an orphanage situation, and they’re like, “Okay, now get on your hands and knees and peel potatoes all day long,” and you’re like-

Jesse:
Similar.

David:
…. languishing away, crawling on your belly on tiles scraping it with a iron toothbrush, wondering like, “Someday my prince will come.” But you didn’t wait for your prince. You went out and made it happen. So this is a pretty cool way to start the hero’s journey. What did you do on your first deal as an investor? How did you get out of tile cleaner into real estate owner?

Jesse:
For sure, yeah, so that didn’t go very well either. However, the individual I was working for, I said, “Hey…” I was about six months in just construction, punchlist labor stuff for this guy, and I said, “Hey, I want to flip a house. What do I do?” And he’s like, “Find some private money. Find a house that needs work,” handful of different things. I started working with the real estate agent up in Erie, PA. That agent is now my wife, so I married my realtor.

Rob:
Oh? Wow.

Jesse:
Yep. Yep, interesting story there. So the first house I purchased, skipping a lot of details, I probably overpaid. I under budgeted. I didn’t know what I was doing. I didn’t calculate for property tax, for interest payments, for heating bills. Just lack of experience, just young and ready to make moves, right? My buddy and I flipped the house, did all the work from YouTube videos. And when that house did end up selling, I lost $43,000 in the first house I flipped.

Rob:
Okay, so let’s talk about that. People always talk about their losses and they’re always like, “Yeah, the first house I lost 60,000. I lost 43,000. Did you just have that chilling in your bank account? What happens when that happens?”

Jesse:
Man, what an interesting story. So at the time that I’m renovating this home, I am bar backing, so I’m not making money. When I needed to pay interest payments or property tax on the home, I was borrowing money from my friends. I borrowed a couple grand here. I borrowed four grand from my girlfriend at the time, now wife. So I just started borrowing money. I had no money at all. So the funding on that deal was a first position from a standard hard moneylender and then a second position of a smaller amount from a friend of mine that I connected with at a 20% interest rate, by the way. Just knowing nothing, I was like, “Hey, how about 20%?”

Rob:
That was your friend, this?

Jesse:
“That sounds good.”

Rob:
Your friend?

Jesse:
Yeah. Yeah.

Rob:
I don’t know if they were your friend, I’ll be honest.

Jesse:
Right? Well, he likes to make money. He’s a businessman.

Rob:
Okay. Okay.

Jesse:
You know what I mean?

Rob:
I can’t blame him.

Jesse:
So once I finished the house, I moved to Pittsburgh. But the house didn’t sell for about a year and a half later after it was finished. So probably six months in, nine months into sitting on the market, I’m like, “Wow, I’m going to lose money.” So I realized I’m going to lose money. I honestly had no money. When I moved to Pittsburgh, I moved in a very rough house intentionally to start saving money. I was starting to save money, trying to get caught back up, getting prepared. When the time came that the house was sold, and I was going to lose that $43,000, the first investor was going to be fully paid off, I believe, if I remember correctly, or very close to it. Full principle amount plus interest. And then that second investor, I went to him, I said, “You have to sign off on this loan. You have to satisfy the mortgage and I will pay you back.”
So when the time came, I was hustling. I had a little bit of money saved up. I sold my vehicle. It was a decent vehicle, it was a Chevy Tahoe, and got a little money from that. Bought a thousand dollars like Chevy Cavalier or something that I’m driving. I was able to come up with about $20,000. So I have that 43 grand I owe at the closing table. I was able to come up with an extra 20 grand, so I paid him. Now I’m down to broke, back to zero, and I told that investor, “Give me time. I’m hustling, I’m making moves. I got my real estate license. I’m down in Pittsburgh and I’ll pay you back.” It took me about a year and I was just grinding, hustling. Probably a year, a year and a half, and I paid him off.

Rob:
Wow, okay. And were they amendable to that or were they like, “Okay, this is our last deal moving on from here”? Or did they respect that you were able to make it happen?

Jesse:
I mean, I have a great relationship with them today. So yeah, I mean, I think they believed me. I made a mistake, but I’m a man of my word and there was zero question that I would make them whole and I did. And I didn’t just make them whole in their principal amount, I made them whole on the full interest. And that 20% continued to accrue during that time period.

Rob:
Cool.

Jesse:
So there was no adjustment whatsoever.

Rob:
Good for you. That’s really, really, really great.

Jesse:
Thank you.

Rob:
Yeah. Follow up question not as important or impactful, but when you say that the realtor was your now wife, did you meet said realtor for the first time on this project?

Jesse:
So I was introduced to said realtor by a friend of mine, and she said, “I’m getting my real estate license” and I said, “I’m looking for a flip.” She said, “Okay, I’ll help you out.” I said, “Perfect.”

Rob:
Okay. All right. So that’s a real ROI right there. You got a wife, congratulations.

Jesse:
Well, you know what I said? 100%. 100%. What I do want to say is that, yeah, my very first experience with my wife, I lost $43,000. So I give her a hard time. But no, I couldn’t be happier, couldn’t be happier. It was amazing.

David:
All right. So that was a pretty gnarly entry into flipping a house here. What got you back into investing after that?

Jesse:
For sure. So I mentioned earlier I got my real estate license and I moved to Pittsburgh while that house was still on the market waiting to sell as a flip. I got my real estate license and was just hustling as a real estate agent. And I knew I wanted to get back into investing, but there was a lot I had to learn. So when I was down here, I was just doing a lot of networking, connect with people, asking questions, learn as much as I could. And I had to make up for the 43 grand I lost, right? And so I gave myself a little bit of time and just understood real estate better and the real estate market in Pittsburgh and then kind of weighed my options of how can I get back into it and mitigate my risk a little bit from a financial standpoint.

David:
Do you remember what some of the things were that clicked in your mind during this period of learning real estate better? Was there specifics you can point to where you were like, “Oh, I thought it was this way, but I realized it was that way” or a pattern that you recognize? Anything for people that are in that same stage of, “I’m trying to learn real estate,” but they don’t know what that means?

Jesse:
The first thing that comes to mind, and I hope this answers your question here, but the first thing that comes to mind now is I very rarely do a deal now unless I feel like I have at least two exit strategies. When I went into that first flip, I didn’t know what a BRRRR was, right? It was like, purchase this, renovate it, sell it, right? And there was no backup options. But looking back, if I was in the same position, the amount of knowledge I have now, I would’ve refinanced. I would’ve made a couple adjustments and probably got out of that for little to no money out of pocket. But yeah, the biggest thing I would say is just having two exit strategies when you’re entering a deal.

David:
So you learned how to analyze a property for cash flow? You learn-

Jesse:
100%.

David:
Right? And that was before you just knew about flipping houses, which I think is where everyone starts, or at least the uneducated about real estate looking at it like, buy low, sell high, because we all understand that concept whether it’s stocks or whether you’re trying to buy a couch and sell a couch for more, you’re making money on Etsy. Buy low, sell high is something we all understand. And that was how you got into real estate with just that one track mind and then you started to learn what buy and hold real estate looked like.

Jesse:
For sure.

David:
Maybe what neighborhoods were better to have tenants in. You started to evaluate like if this property would cash flow or how much equity would have. Is that what you’re saying when you’re saying you learned how real estate worked?

Jesse:
Yeah, that’s accurate information. Yeah, you’re right. Underwriting the deal, understanding your options more. It was limited knowledge and in just one track mind. It’s the perfect way to put it.

David:
And where did you go to get this information at that time?

Jesse:
I had a mentor, the individual that was flipping houses that I started working with for. So when I say that, I ask them a handful of questions, but I just kind of… And this is good and bad about me, I just kind of make moves. I just pull the trigger and I get things done.

David:
You learn by doing is what you’re saying.

Jesse:
Yes. And so like I said, that’s good and bad about me. I work with a life coach and we establish very early on that I have an alter ego and his name is Kane. So we got Kane and Jesse. And it’s the way I operate. Kane kind of runs a show a lot of times. So we just pull the trigger and make moves, which is helpful and hurtful at times.

Rob:
I think it’s a good thing. I was actually just talking to a student last night who they’re like, “Yeah, I don’t know. It’s a bad habit. I just do things when…” I’m like, “No, I think that’s the most important skill you can have because you can figure it out on the back end. Whereas most people try to figure out on the front end and lose every deal that ever comes across the table.” So I think obviously you need to counteract how quickly you act after you take action and you need to make sure that your ducks are in a row, but I think acting quickly is the number one skill you can have as a real estate investor personally.

Jesse:
I couldn’t agree more. There’s no question whatsoever that the reason I’ve reached a level of success is because I take action.

David:
Yeah. And in general, if I had to pick between the person that carefully analyzes every step, my personality is probably more that way, which is why I end up being a pretty good educator because I have to understand every single piece of the engine before I trust to get in the car and drive it, versus the person like you that just jumps in and does it and figures it out as they go, your personality will ultimately learn faster and be more successful if they don’t quit. So I don’t want anyone to hear this and think like, “Oh, you’re being reckless.” The key to people like you is learning if you know you’re just going to jump in and do things, mitigating risk becomes incredibly important. You don’t want to put your whole nest egg into the first deal when you don’t know what you’re doing and you’re trying to figure it out, right?

Jesse:
For sure. For sure.

David:
It’s like learning how to know, “I’m going to make mistakes. It’s going to bleed money, but I’m going to learn quicker so I make sure that I don’t lose all my money or all my time or all my opportunity” is extra important. So getting back into moving forward for you, walk us through your strategy for how you’re increasing value and setting your own comps now that you understand real estate better.

Jesse:
Yeah, for sure. So after I moved to Pittsburgh, I moved to an area called Homestead, Munhall West Homestead. It’s three boroughs all kind of together here, literally across the river from Pittsburgh. I saw that there was a lot of opportunity here in real estate. To be very frank, the area is a little rough in sections, but there was a lot of opportunity based on location, some of the development that was already in the works right there on the waterfront. And so I realized that being an agent, I worked with a lot of buyers and so I can understand what is interesting or appealing to them. And so I realized there was an opportunity here to where if you can create a cool enough product, a trendy enough product, then you can kind of pull buyers to a certain area. You can get this house for 115,000 or 150,000, you know what I mean, after renovated.
And so what happened was, or what I do I should say, is the concept is fairly easy. I’ll buy five homes all in the same area, okay? All five of those houses I’ll renovate just as nice, except house number five might be on a street that’s a little bit nicer than those other four homes. In addition, I’ll put a little extra money into the house that I’m going to sell. The items that I put money into doesn’t necessarily make the home more valuable from an appraisal standpoint, it makes it more valuable from a… It’s like more sellable, right?

David:
Yeah, you’re going to sell it quicker.

Jesse:
That’s right. If a bedroom has an accent wall, it looks cooler, it’s trendier, but it’s not going to appraise for more, okay? And so what I do is I renovate all five. I place tenants in four of those homes. House number five, I put little more money into it and I sell it for as much as I can to create a comp and increase the value in the area. So from a flipping standpoint, I’m different than most people because all of my efforts are in one area. And so over the years, I’ve increased the comps to… And now when I say this, it doesn’t mean all the houses were the same criteria. Some were a three bed, some might be a four bed, but it can show you that general idea.
The first house that I flipped, purchased, renovated, the resale number was 115,000. That was a big deal for the area, okay? 115,000, 150,000, 190,000, 212,000, 270,000, 425,000. And so all of the homes that I own in this area are continuing to increase in value because of the comps that I’m creating. So I play a big impact in this market and I’ve been doing it for years now.

David:
This is why it is so important to have a good real estate agent selling your houses if you’re flipping homes, if you’re just selling anything because the point you made gets missed on so many people. Value can come in many different forms. Just when you think about how we determine what a property is worth, there is not one singular agreed upon metric for determining what it’s worth. There’s what an appraiser would say it’s worth. There’s what a different appraiser would say it’s worth. There’s what it’s worth from a cash flow perspective. There’s what it’s worth if you were to sell it the versus if you were to hold it. There’s what it’s worth to a buyer on the open market that really wants it.
Real estate, we talk about it as if it’s this objective numbers oriented entity, which you do have to approach it from that way if you’re trying to make money, but values are incredibly subjective. Your point really highlights that that an accent wall, to an appraiser, is worth nothing. They’re not going to give you the extra $12 of value for the paint that you put on it. But to the person who’s buying it, it might make them pay five grand more than a different house that had the same bedroom bathroom count because they want to make sure their offer gets accepted, not someone else’s.
Real estate agents who live in this space, we see this all the time. We see the people that come to us with a home and we know this is going to be hard to sell. It’s got outdated stuff. It looks ugly, it smells musky. But the person who owns it says, “It’s got the same bedroom and bathrooms as that house that sold for 270,000 why would mine only sell for 220,000? You’re ripping me off.” But we know that house had a landscaped yard, really pretty area, nice view, closer to the school. It got four offers, that’s why it sold for 270,000. Yours is going to get zero offers until it sits on the market for two months, and then we reduce the price.

Jesse:
Yeah, absolutely. It’s a very good point and very accurate. Because I mentioned this earlier, being an agent, I have good insight to what buyers are looking for. And the truth is, the vast majority of time, people are pulled or there’s heavy emotion involved in the home. And if it’s a really cool, really trendy house, people are willing to pay more. Period. So it is not a sure thing you’re going to get the appraisal, and there’s challenges with that every time, but that has worked for me so far and I’m continuing to do it well.

David:
Well, it’s tiny little piece of information that lead to big results. Rob, what do you think about this whole thing? Because you’re not a real estate agent, but you’re kind of a fly on the wall right now.

Rob:
So the thing that I’m looking for clarity on is when you were talking about the strategy, I thought you were saying that you were making one really nice so that you can sell it at a higher rate so that you could sell the other four basically. But it sounds like you just placed the tenants on there. So what is the purpose for making that fifth one nice and selling it at a higher one if it’s not necessarily benefiting like your next flip? Does that make sense?

Jesse:
I think I follow what you’re saying. So let me try to answer that for you. The idea here is that I’m not looking… And that’s the way I say I’m a little abnormal than other people. I’m not looking to make money on my flips. I’m looking to increase the value of the home in the area as much as I can because that will build my net worth from an equity standpoint on the four homes that I keep-

Rob:
Got it. Got it.

Jesse:
… the tenants are in place.

Rob:
Got it.

David:
So let’s say you break even on the flip and you bought it at a price where all the homes were valued around 200,000 and you’re able to sell it for 250,000, but you broke even for whatever reason. You have four other homes in that neighborhood that were valued at 200,000 that now get pulled much closer to 250,000. Theoretically speaking, if every one of them goes up by 50 grand, you have four of them, you just increased your net worth by $200,000 by breaking even on a flip.

Rob:
Oh, okay.

Jesse:
Exactly. And so that’s why I’m willing to… That’s where all my efforts are here and that’s where I’m focused on. I’m very long-term goal oriented and I’m working on building my net worth, not the quick buck on the flip, right? And so yeah, I’ve continued to build value in the area and build equity.

David:
Oh man, Jesse, I love this man.

Rob:
Yeah, I’m really glad I clarified that because that is genius because you basically made 200K on that flip.

Jesse:
That’s exactly right. And the truth is, there’s times, like one of my most recent flips, I mean we worked on it for 12 months. It was a very long project and I made 10 grand. When I say make 10 grand, if I work on a project for 12 months and I walk away with $10,000, I lost money.

Rob:
Right. Right.

Jesse:
But the increase in value of all the other properties. And what’s funny is that it’s a small community and there’s a lot of people that have lived here his whole life. And every time I list what I call my comp setters, people are like, “No way. There’s no way you’re selling that.” And I have every time. You know what I mean? I’m not saying that’s going to continue, but it’s worked.

David:
Here’s why I think this is incredibly important for everybody who’s trying to make money in today’s market. It is harder than I’ve ever seen, Rob, I think you probably agree, to cash flow and to make money in real estate right now. It’s possible to do as a house flipper, it’s getting close. I don’t want to say it’s impossible. It’s getting incredibly difficult to find a good cash on cash return on real estate because of the competition we have. And in order to thrive in the market we’re in right now, you have to break out of the cash flow microscope that you’re just looking at this one way to make money in real estate. You make money several ways in real estate.
And I’ve been talking about a better way to look at money rather than just cash in the bank is money is a store of energy. The store of energy that we call cash is when you keep money in your savings account or in your checking account. And flipping houses, if you do it well, can increase your energy in that storage vehicle. But it’s ineffective because you have capital gains taxes, you have risks that you’re throwing into this entire thing. You have market fluctuations where you can actually lose money. So you try to flip a house and lost $43,000 out of that specific storage.
Equity is a different way of storing energy. It’s stored inside of the asset. And your strategy, though it’s semi complicated, although it’s actually somewhat simple if you understand it, is a way of amplifying the energy that you are storing in the other properties that you have. It’s not being taxed. You have vehicles to get the energy out of it, a cash-out refinance, a HELOC if you want, a 1031 sale that’s going to be tax friendly, different methods. And though this might sound like it’s fancy, for lack a better phrase, it’s not at all. This is very fundamentally sound approach to real estate investing.

Jesse:
Yeah, absolutely. Absolutely. That’s what I tell people. I mean, it sounds like it could potentially be difficult, but all my efforts are in just one area. And I think most people don’t do that. I mean challenges, finding deals and things of that nature, but it’s worked for me and I’m continuing to do it. It’s essentially BRRRR-ing an area, an entire area, if you want to look at it that way.

David:
Well, it’s also how realtors tend to look at geographical locations. We look at them like farms, right? You want to send all your mailers, do all your door knocking, hold all your open houses ideally in the same neighborhood because you’re touching the same people, you’re building up your presence and your brand in that neighborhood. The same people are seeing your for sale signs on houses when they’re driving to work. You could sell 10 houses across the entire city of Pittsburgh or 10 houses in one location. And if you sell them in one location, that’s going to give you an amplified exponential return on people that come back to you to sell their house. So you’ve kind of taken that approach that realtors have and applied it to the world of real estate investing and you’ve seen similar results. Do you think that’s where you got it from?

Jesse:
No. No. It’s not where I got it from. To tell you the truth, where I got it from was I moved to this area specifically because I have pit bulls as we mentioned earlier. Okay, I’m a dog dad, right? I moved to this area specifically because it’s difficult to find a place to rent when you have pit bulls based on breed restrictions. So I had a friend that had a house that was really rough shape.
Anyways, I moved here. And after I moved here, I knew I could pick up real estate for very inexpensive. I mean, I bought a house for three grand. I bought a house for five grand. So very, very inexpensive. As you can imagine, it needs a lot of work, right? But once I was here, I thought, “I believe this house is worth X amount.” And it’s like but there’s nothing else saying it based on the comparables that it is, and I said, “How do comparables come about when a house sells?” And that just blows my mind. It’s like, “Okay, well I can make a big impact on this market by creating something that a buyer will be so emotional about that they’ll pull the trigger on if I can get over that appraisal hurdle.” So it was more about I was creating a cool product in an area that I wanted to focus on and I knew it could be worth more. And so I knew I just had to sell a house to create that comp. That’s what it was.

Rob:
And how long had you been outside the Pittsburgh area?

Jesse:
When I moved to Pittsburgh, I moved to this area, Homestead, Munhall West Homestead. I say that because they’re all connected, you’re interchanging. But I moved directly here. When I say across the river, I mean literally across the river. I could probably throw a baseball and hit Pittsburgh.

Rob:
Okay.

Jesse:
I’m not very good at baseball. I could probably throw something over there.

Rob:
A rock.

Jesse:
Yeah, a rock. A rock.

Rob:
So we’ve already established this is a really genius strategy. I mean, since going this route, setting your comp and everything like that, how has it been working for you on the grander scheme? Do you feel like… Is it one of those things? Because it seems like you sort of have to do it a few times before it really starts having an effect on a zip code or a neighborhood. How’s it actually panning out for you now?

Jesse:
For sure. I mean, when I first got back into real estate investing, I did one deal a year or two deals a year. So I’m not making an impact on the market. Skip ahead seven years and people start to catch on and see what’s happening, and someone’s like, “A home sold for 220,000? So a home sold for 270,000?” I’m like, “Yeah, yeah.” So the area starts gaining some traction, gaining momentum, and it’s not just me over here anymore. I feel like I was a little bit of a pioneer to an extent from a flipping standpoint, a renovating standpoint in the area and became fairly known in the area in a short amount of time for taking these risk and putting that type of money into these homes. But yeah, it’s a collective effort between multiple different investors in this area now and just the community in general. It’s just definitely getting stronger and there’s getting a lot more attention and it’s turning.

Rob:
That’s cool.

Jesse:
It’s definitely transitioning, revitalizing.

Rob:
You’ve earned somewhat of a moniker, like a nickname in the area, right?

Jesse:
There are a handful of people that call me the mayor of Munhall, yes.

Rob:
Very cool. Hey listen, it’s the titular title, unofficial mayor of Munhall. And David, do you remember what titular means from our last podcast?

David:
I remember it was looked up. Yes, it means significant in name only. Is that fair?

Rob:
Yeah. Yeah, pretty much. Look at you, Dave.

Jesse:
Well, I’m glad that you brought it out because I had no idea. I just nod and laughed.

David:
That’s the same thing that I asked Rob. “Why are you saying that? Do you even know what that means?”

Rob:
And I was like, “Basically.” And I gave the answer and you’re like, “That’s not what it means.” And then I gave a congruent answer that I think counted. Anyways, okay, so love this, love the answer to that. That’s really amazing. And I think it’s super smart to go about this way. It seems like it takes a little bit to build, but honestly, probably not as long as one would think. Tell me, so you said that you kind of moved right outside, whatever, that’s where you moved to. How long was it? Were you there before the school came along?

Jesse:
Yeah, so I’ve been in this area for probably six or seven years I would say. I purchased that school about three years ago. So I guess I was investing for about three years. I started to become known in the community. And so people were connecting me with deals, off market deals. Not even wholesalers. Just like I was known in the community because I live in the community and I invest in the community. And so people are like, “Hey, I know about this school, individual needs to get rid of it.” I’m like, “Yeah, I’d love to check it out,” you know? And so it was brought to me. And so I picked up in 2019. I think it’s important to say that when you buy a high school, the very first thing that you need to do is go buy some go-karts and a minibike and rip around the school on the go-karts and minibikes with your friends. So we already did that. So that was a blast.

Rob:
Perhaps the best advice ever given on BiggerPockets.

Jesse:
Yeah, yeah. If there’s anything you take away from today, it’s that.

Rob:
Honestly, that sounds pretty amazing. I’m jealous of that bucket list experience right there.

Jesse:
It was awesome.

Rob:
So someone brings you this high school and then you’re like, “I’m going to turn it into a giant house.” What did you even have in mind when it came across your desk at first?

Jesse:
So when I first got connected to it and you walked the building, it’s just like, “Wow, this structure is amazing.” Just the building itself is amazing structure, beautiful brick, huge windows, tall ceilings, terazzo floors are out, just huge auditorium, very cool gymnasium. When you walk into the building, it’s just a vibe. It’s a really cool space and it’s like, “Man, I want this. I want to be involved. I believe in this area. I think I can figure something out with it,” right?
And so we went under contract at a different number after I ran or did some inspections and things of that nature, phase one inspections and such. I was able to get him down from what we were under contract at of 175,000 to 100,000. So yeah, after I acquired it, first thing we did was grab the mini bikes and the go-karts. And after we mess around for a few weeks, I knew that I needed to connect with partners to get this deal done, whatever we were going to do, because of the size of the job and from the financial standpoint as well. It was just beyond my means.
And so I started asking around, talking to people, explaining that I had a think, brainstorm on different ideas of what I could do. I connected to an individual, his name’s Dan Spanovich. Dan and I went back and forth for a little while about partnering up. He had had experience converting a property before, like a conversion, school to… Or maybe it was a warehouse to apartments. So we started having that conversation, but the truth is like we couldn’t come to an agreement on evaluation of what he would buy in at. And so it kind of fizzled and I lost Dan, if you will, from a partner standpoint. We couldn’t come to an agreement.
So probably a month later or two months later, I was connected to another individual, a friend of mine, Adam Colucci, from New Jersey. We started talking. And after he walked the building, he was just like, “I want in. I want to be a part of this.” So we quickly came to an agreement on the valuation of the property and became 50/50 partners. After about maybe a year of us spinning our wheels, trying to figure things out, come up with a plan, we reconnected with Dan Spanovich and came to an agreement on the buy-in. And then he got back into the deal. And from that point forward, we knew we were going to do apartments. And so the truth is that Dan was the brains of this operation and we couldn’t have done it without him.

David:
This is a really good background into this very intriguing deal that neither Rob nor I or anyone else I know has ever heard of. We’re going to jump into this traditional deep dive style now that we have an idea of what this thing looks like. So how did you find this deal?

Jesse:
The deal was brought to me off market because I’m plugged into the community, the truth.

David:
Okay. So this is just people that know this guy buys real estate and they said, “Maybe he will buy this thing that we need to sell.’

Jesse:
Yep, that’s right. There was individuals in the community that really believe in the community becoming revitalized, transitioning. And so they’re bringing me deals because they know I’m taking action.

Rob:
Very cool. Yep, when you put yourself out there, I’ve been telling people to send me unique deals and stuff on Instagram lately, and people send them. They do, because a lot of people are too scared to take on a school or on a unique property or whatever, but they want to see it get done because they want to see it have new life, right? So very cool, man. How did you negotiate it?

Jesse:
So they were originally asking 225,000. I knew that the seller was in a tough spot and had to get rid of the property, so it was already kind of a fire sale. And after I put it under contract, I got it under contract for 175,000. Once I did my inspections phase one study and such, I’m not surprised, but we came across asbestos and a few other things. And after I got the remediation quote, it was 75,000. At this point, it was weeks into the deal and we were getting very close to the point in which the seller needed to sell. And so right or wrong, I knew that I kind of had the leverage here. And so I said, “Hey, I want 75,000 off for the asbestos remediation and I’m not moving forward.” And they said, “Okay, done.” And we closed a few weeks afterwards. So that’s how I was able to get it significantly cheaper than even they were asking.

Rob:
Did it end up actually costing 75K to get the asbestos remediation done?

Jesse:
I believe it may have been. Yeah, I believe it may have been. I mean, I think we may have got… I’m not 100% sure, but I think it was in that ballpark for sure.

David:
Okay. And how did you fund this deal?

Jesse:
Investors. Private investor. So I have experience with single families and small multi-units, I’ve been doing that for a while. It was a private individual that funded the deal.

Rob:
What did you end up doing with it? Was it flip? Rental? BRRRR?

Jesse:
Yeah, so we did a full conversion. We converted the school to 31 apartments and we’re keeping it as rentals.

David:
And more importantly, you rode go-karts all over the entire place to christen the purchase.

Rob:
The extra income is the go-kart track income that they produce in the gymnasium.

David:
Rob, we may need to do the same thing in Scottsdale.

Rob:
That would be really cool.

David:
Put a go-kart track.

Jesse:
And even more importantly, we got to talk about the details of that. In the gymnasium, there was a water leak. The gym floor had bowed so much that there was this big, we’ll say jump, we’ll say minibike jump. It was bowed so much that we would, we’d come ripping around through the cafeteria and hit this bump that was in the gymnasium floor to jump in. I mean, I got videos. That was a good time.

David:
That’s pretty awesome.

Rob:
That’s awesome.

David:
Okay, so what was the outcome after all was said and done?

Jesse:
Yeah. All in, we’re about 3.3 million into the school, and our most recent valuation was 4.7 million.

David:
Wow.

Rob:
That is not what I expected on any of that. That’s a lot.

David:
You could have paid the 250,000 and it probably wouldn’t have even barely made a dent in this deal. That’s funny.

Rob:
Right.

David:
I was not expecting numbers that big-

Rob:
No.

David:
… you were saying.

Rob:
You could have-

David:
You whittled them down to 100.

Jesse:
I know. And so with that being said, I think that my dad called this my golden goose. We all know that this was a killer deal. It very rare, if ever, come across deals that you’re going to be able to build that much equity and have that much cash flow. We purchased the school across the street and I can tell you, although a great investment, we would 100% do it, it’s not going to shake out to be the numbers that we have on the first one.

David:
Yeah, that’s the reality of real estate investing though. Sometimes everything goes your way, sometimes nothing goes your way. You kind of have to take the good with the bad. And people don’t like that because it’s easier to look at everything individually. That’s not the way that this world goes. Sometimes the city gets involved and makes your life hell. Sometimes they’re like, “Oh my God, you’re finally going to do something with this. Let’s help you.’ There’s so many variables that you can’t always lock down. It’s definitely part art and part science.

Rob:
What lessons did you learn from the deal? Anything in particular that you came out of this kind of like, “Oh man, okay, now I’m ready for the next one of these”?

Jesse:
For sure. Yeah, we definitely learned a lot. I mentioned this earlier, is that Dan, he was our savior man. He ran the show. He knows what he’s doing and he did a great job at GC and the whole project. And so there’s definitely a lot I learned, I have a lot more experience than I did previously. Things to look for such as the size of your utilities, like can the electrical withstand 31 apartment units? Microwaves and dishwashers and things of that nature. So what size of the electrical do you have run of the building? The size of your water line, can it support 31 apartments? Do you have a standpipe for sprinkler systems? You got ADA compliance. So there was a lot specific to larger apartment buildings that I wasn’t familiar with. And learning about sprinkler systems, learning about ADA compliance and the size of utilities that you need was just a very informative for sure.

Rob:
And I got to imagine if you’re buying something, I know a lot of times these older buildings come with tax benefits. What was that whole situation like with this school?

Jesse:
Yeah, so a huge piece there we didn’t even touch on yet is that we worked with the National Park Service and we were able to obtain historical tax credits maintaining a lot of the original character of the property itself, original windows, and auditorium, doors, certain things of that nature. So there was a huge tax benefit there. We were able to obtain close to three quarters of a million of historical tax credits.

David:
But I’m assuming these are credits that came from you buying a property in this specific area where the government said, “Because you revitalized this area that we really want to be rejuvenated, we’re going to give you tax credits moving forward”?

Jesse:
That is correct. Yes, we got both state and federal tax credits there. So we were in a, I guess, historical tax credit area and had the ability, so we went through an application process. It doesn’t mean you’re approved, but we got approved. And we’re actually getting approved for the school across the street. So as of now, it looks like we’re getting 630,000 on that property.

David:
This is another great point of how money comes in more than one way with real estate, and we can miss it when you just look at cash flow or buy low, sell high. They basically gave you 150 grand a year and in tax credits rather than giving that to you in cash, but it’s the same thing.

Jesse:
100%. It blew my mind. It blew my mind. It’s like, “Wow. More knowledge wrapped around this. It’s like I should buy one big building a year to obtain the historical tax credits if I can,” right? I won’t have a tax bill.

David:
Yeah, it’s certainly… We’ve often said it’s hard to find good deals, but you can make good deals. And I noticed a lot of people, they look for this home run deal. “I want to buy a place for 100 grand that’s going to be worth 4.2 million or whatever it was. I can’t find one of those. What am I supposed to do?” But when you add up a whole bunch of base hits into the same deal, you get the equivalent of a home run. It’s just looking for all those different angles like what you did.

Jesse:
Absolutely.

David:
All right. So what’s next for you? You’re doing another school across the street. Is this going to be your thing? You’re going to become the Pittsburgh school converter?

Jesse:
A few things I don’t want to go too deep into, but yes, we have a school across the street. I personally acquired a school a couple months ago, likely not going to convert it to apartments at this point. But another thing I’m focusing on, two partners of mine, we’re putting together real estate fund, so we’re looking to get a fund up and running soon. And then another item I’m working on, I’m working on a startup company, a property tech company called Viewing Time that will essentially allow tenants and buyers to view properties with a one-time code themselves after they become verified. So we’re currently talking to some VCs and get ready to hopefully launch that in the next month or two.

Rob:
Well, that’s awesome, man. I mean, I think there are a lot of good takeaways from today’s episode. The big one standing out to me is that you can be successful at something that you failed at on the very first go of it, right? You had this flip. You lost $43,000 at it. Most people would not continue on after that. And fast-forward to today, and you’re an extremely successful investor that owns one of the coolest properties in Pittsburgh. You got the tech component of your business too. You have no intention of slowing down. And it all comes from a failed flip. I mean, going back to that, would you ever really want to change the outcome of that flip?

Jesse:
No. You know what? This is what I always tell people, I am genuinely happy that I lost money on my first flip from the amount of stuff I’ve learned. I would have preferred it to be five or 10 grand, you know?

Rob:
Sure. Sure.

Jesse:
But no, I’m happy with what shook out because it put me in a place of where I am today.

Rob:
Yeah. So you hear that everyone? Go lose $43,000 on your first flip. No, I’m just kidding.

David:
Yeah. Now we found you by being featured on CNBC’s Make It. So shout out to them for putting your story out there. For people that want to learn more about this fascinating investor doing things differently than most people we interview, where can people find out more about you?

Jesse:
Sure. Yeah. You can connect them with me on Instagram at @jessewig, J-E-S-S-E-W-I-G, and I’m on TikTok as well. Same thing, @jessewig.

Rob:
Do you do all the funny dances and then you point and then the text shows up and then you’re like, “Five…”

Jesse:
No.

Rob:
No? Okay.

Jesse:
I literally don’t know about this. See, I guess I’ve been off for a little while.

David:
Jesse, it’s terrible. Okay. I want you to imagine a 49-year-old real estate agent with no social skills that is terrified to actually go on social media that gets talked into this by the 23-year old in her office. And so rather than talking on there, they do this little bounce thing where the music plays and there’s a little bubble that pops up that says like, “Do you think you need 20% down?” And then they point up here and they dance and it says, “Well, you don’t. You can do it for 3.5% down.” And then they point in another direction, “DM me for more info.” It is the cringiest, most horrible thing and it spread like wildfire, like just-

Jesse:
Yeah, no, well, I haven’t done that.

David:
Thank you.

Jesse:
And I haven’t even seen it actually. I need to get back on. Check it out.

David:
No, no, you don’t want to see it, man.

Jesse:
Okay.

David:
You don’t. That’s why I’m saying I’m like a groundhog. I poke my head out. I see that on TikTok. I go right back in my hole and I’m like, “I’m not looking at this anymore.”

Rob:
Cut to two months later and that’s all David’s feet is going to be.

Jesse:
Yeah, exactly.

Rob:
All right. Well you can find me on TikTok not doing any of that stuff also @robuilt, on Instagram @robuilt. I do a lot of reels. I do a lot of trends though. I bring the comedy on TikTok. They say I’m the Walmart of comedy in the world of real estate. You can also find me at YouTube @robuilt as well. What about you, David?

David:
Yeah, I highly recommend everyone to go follow Rob as well. He comes up with original stuff based on a background as a marketer. I know I’m getting serious right now and you are being funny. It’s really, really good. And he’s not just copying any trends. He sets trends and that’s why he’s my boy.

Rob:
Carry on. Keep going.

David:
You can find me at David-

Rob:
No, no, no. [inaudible 00:46:52].

David:
Oh, you want to hear more?

Rob:
Yeah, yeah, a little bit more.

Jesse:
Keep going.

David:
You can find me at davidgreene24.com or follow me on all of your social medias, LinkedIn, Instagram, Facebook, whatever you use, @davidgreene24, add the E at the end, and look for the blue check mark, which I have now, so you won’t be taken advantage of.
Jesse, this was a fantastic show, man. I love it. I mean, you gave a ton of value from flipping houses to set comps in the area that you’re investing in, to investing in all in on one market, to seeing opportunity in a property that other people miss, to partnering with different people to make it come to fruition. This has been fantastic, so thank you very much. We’re going to have to have you on again in the future to get an update-

Jesse:
Absolutely.

David:
… on where things are going. What’s one piece of advice you can leave our listeners with who are struggling in today’s market?

Jesse:
If it boils down to, I’ve thought about this, the reason that I’ve reached a level of success is I just take action. I just take action. It’s that simple as ask a question, go to a networking event, get online, read. Just make moves. Take action.

David:
Nike, just do it.

Jesse:
Just do it. Just do it.

David:
That’s it. And to our listeners, thank you so much for being with us here today. We really appreciate you all and we hope that you enjoyed this show as well. If you did, please consider leaving us a five star review wherever you listen to your podcast. Those help us a ton. And check out our YouTube channel as well.

Rob:
Don’t consider leaving us a five star review. Take action and leave the five star review.

David:
And do it.

Rob:
And just do it.

Jesse:
I love that. I love that.

David:
This is David Greene for Jesse, just do it, Wig, and Rob, the Walmart of comedy, Abasolo, signing off.