Real Estate Cashflow Strategies, Flipping, and Lending Insights with Jack BeVier

Jack BeVier (00:00)
Last October, there was a really like a drop in interest rates, mortgage interest rates. And we saw a big, you know, a lot of activity, but then when rates went back up last November and it feels like showing activity has been soft since then. So that’s created a really unique set of challenges in terms of longer days on market.Both for our projects as well as the people that we’re lending to. A little bit softer values, especially in certain areas of the country. We’ve seen values soften, you’ve seen some areas soften by 10, 15%. Many areas soften by five. And so that kind of longer, or those lower values have affected free refi appraisals. And so folks may be doing a refi, but sticking some money, more money in the deal than they expected to.

Michelle Kesil (02:13)
Hey everyone, welcome to the Investor Fuel Podcast. I’m your host, Michelle Kesil and today I’m joined by someone I’ve been looking forward to chatting with, Jack BeVier who’s been making serious moves in the investing, property management, and lending space. So, glad to have you on the show, Jack. I think our listeners are really going to take something away from how you’re approaching

Jack BeVier (02:14)
and hopefully we’ll.

Michelle Kesil (02:42)
all of your investor managements and renovations and wholesale and yeah just so many things that you have in your portfolio to dive in and discuss with you so yeah excited for you to be here.

Jack BeVier (02:59)
Yeah, pleasure. Thanks for having me on. I’m really looking forward to it.

Michelle Kesil (03:02)
So first off for people who may not be familiar with you and your world, can you give us the short version of what is your main focus these days?

Jack BeVier (03:13)
Yeah, sure. So we run really three different businesses. We run a real estate business, property management business. Both of those are based in Baltimore, in central Maryland. And we buy maybe 75 to 100 houses a year and everything’s vertically integrated. So acquisitions, construction management, marketing and sales and property management are all in-house. So we’ll buy maybe 7,500 houses a year, renovate those.

and either keep them in our rental portfolio or sell them to homeowners. Do a little bit of wholesaling also, but mostly either keep them as rentals or flipping. And we built the rental portfolio up to about 850 properties and we property manage those for ourselves in-house also. And then we have a lending business, Dominion Financial, that originates fix and flip loans, know, RTL loans, as well as DSCR loans. We keep all the RTL loans on balance sheet and service them ourselves.

And we have kind of a unique setup on the DSCR side that we’re selling to maybe a dozen different loan purchasers. So it’s beneficial to borrowers because they kind of have, they have access to all the different guide, the SCR guidelines. So they know that their scenario is getting matched with the most efficient, execution. the cheapest rate, without having to kind of pay for the broker middleman. So that’s, you know, that’s been kind of our, our business model to keep pricing as tight as possible for.

know, repeat professional real estate investors.

Michelle Kesil (04:31)
Yeah, absolutely. That is many verticals that you guys have. What has been your key to keeping that running smoothly, holding, yeah, just so many different things in your business.

Jack BeVier (04:45)
Yeah,

it’s been, that’s been a challenge, right? Like we just been growing each business. We’ve been doing all of them for about 23 years and just kind of slow organic growth in each of the business models. They’ve got their different cashflow management challenges and at different points in time, there have been like more opportunities in the real estate side for flipping. Sometimes it’s been a great time to, you know, to add rentals. Sometimes the lending has been

more or less competitive. And so we’ve kind of like tried to pivot energy and resources between each of those business models as the market has given us different opportunities.

⁓ But always with like the core focus of, you know, distressed single family real estate investing or distressed residential real estate investing as being like the core skill set. And these are just different ways that we exercise those skills, either on the debt side or the equity side. So

That’s been a fun, you know, it’s been fun to try to manage that through, of course, a couple, you know, a number of cycles too. So that’s, it’s been, it’s been challenging and, you know, ever changing. So I’m sure that the next couple of years, things will look totally different than they do today. Cause that’s always just seems to be the case, you know, in three years, the market’s totally different and you need to constantly be pivoting.

Michelle Kesil (06:48)
Yeah, absolutely. That’s an important facet

of business is keeping up with the change and the pivots. So I would be curious, do you have like an experience from a pivot that you had to make or something that went sideways that you had to overcome that you can share?

Jack BeVier (07:07)
Yeah, sure. I guess I’ll go way back to like 2007, 2008 timeframe. We were really an asset based lender only and we were making loans in our backyard because we had a real estate platform and that seemed and that was like a great recipe for success, right? Like, you know, if I buy it for a hundred, I’d happily lend 80 on it, you The downturn kind of taught us some harsh

lessons though about like when the going gets tough, like who stays and fights and works it out versus who tosses you the keys versus who actually actively fights against you. And so we’ve kind of gravitated to more like professional real estate investors, repeat folks. We’ve had to get a lot tighter in pricing as a result of that. that’s kind of allowed us to scale and look for the best, know, kind of most talented.

real estate investors all across the country. But with a focus on quality of borrower, experience of borrower, we’re really interested in the nature of people’s experience, not just that you’ve done a flip before, but like, how complicated was that rehab that you did? Was that a patch and paint or were you moving walls or are we popping the top and building a dormer? And those are different things. Those are not the same project.

kind of learning, you know, and these are all lessons of like, because we didn’t do it that way, we like, you know, had foreclosures and took properties back and suffered losses. So like we’ve tried to like constantly made, make our risk management, ⁓ intelligent, you know, more and more intelligent, because, know, ultimately we need, you know, for us to be successful as a lender, like we need to have stability, we need to have low loss rates, ⁓ so that we can have the lowest.

⁓ fix and flip terms to go along with that, which is what our borrowers are looking for. that’s ⁓ always been a challenge, ever-changing challenge. We’re constantly tweaking to try to find the right fit of aggression in terms of loan to cost and guidelines to make sure that we think that this is going to be a successful project.

Michelle Kesil (08:55)
Yeah

Yeah, absolutely. That is so important. So what are you like most focused on right now when it comes to scaling and growing your business?

Jack BeVier (09:20)
Yeah, sure. So it’s an interesting time because I think that things have gotten softer over the course of the past nine months, especially like

last October, there was a really like a drop in interest rates, mortgage interest rates. And we saw a big, you know, a lot of activity, but then when rates went back up last November and it feels like showing activity has been soft since then. So that’s created a really unique set of challenges in terms of longer days on market.

both for our projects as well as the people that we’re lending to. A little bit softer values, especially in certain areas of the country. We’ve seen values soften, you’ve seen some areas soften by 10, 15%. Many areas soften by five. And so that kind of longer, or those lower values have affected free refi appraisals. And so folks may be doing a refi, but sticking some money, more money in the deal than they expected to.

⁓

And we have those same challenges ourselves, you in the projects that we’re doing. We have, you know, we’re subject to the same dynamics. So managing cashflow and working with our borrowers, you know, to help them manage their cashflow in their business has been, I think, you know, kind of the dominant theme of the past six months. And I think it’s going to continue too. So I think that’s where we’re at right

Michelle Kesil (11:10)
Yeah, absolutely. And like, what are you doing in order to get there? Is there some sort of like steps that you can share? Maybe other people are in a similar place as you.

Jack BeVier (11:22)
Yeah, I think it’s been mostly about avoiding pitfalls because the DSCR loan has been like a phenomenal tool for real estate investors, right? And it didn’t exist six years ago, like didn’t even exist. the rates were much higher than bank rates and no one was really borrowing DSCR loans to speak of six years ago. So it has been a huge benefit to the real estate investor community to have this predictable

you know, close in a couple of weeks refinance resource at rates that are competitive with bank rates. So that’s been the upside to it. The other side of that coin, though, is that it’s allowed people to grow really quickly without the brake pedal that the banks kind of used to provide to the industry in terms of asking you what your global debt service coverage ratio is.

Validating that you’re actually profitable like the DSCR loan doesn’t ask those things right now That’s wonderful because you don’t have to go through the proctological of having a bank like ask you for your tax returns and pick apart your cash flow statement which is a humongous pain and like have lived it and hate it and like so I’m super grateful that we like don’t have to go back to that but if If but you could also get yourself in trouble with that, know where you’re if you’ve got a good deal and you’ve got a FICO

you’re good, right? Like you can get a loan. Well, some folks may have gotten more loans than they should have, you know, and like, and maybe they don’t have, and they’re the cashflow fundamentals of their business aren’t as strong as they need to be to weather this kind of softer environment. So I think that like trying to like counsel folks on like, Hey, take a look at your business, step back, make sure that the cashflow model for your business works too.

you know, and it’s not just about equity building. You also need to manage cashflow. And that’s something that is not a lot of folks are, you know, have experience in or are being taught, you know, they’re being taught about how to build equity on their balance sheet, but they’re not being, there’s not a whole lot of focus on the unsexy part, which is cashflow management, but I think that’s what kills you. So that’s been our experience. That’s been the hardest part of growing for this long has been cashflow management. So we’re trying to just kind of like give some.

counsel to folks that we’re working with about managing cash flow, managing cash flow.

Michelle Kesil (13:36)
Yeah, that’s so important. So I know you’ve been in this industry for a while now and many of these listeners maybe are newer to investing or earlier in their career. Why are some like insights, advice, things that you could maybe share for people that are earlier on in their journey?

Jack BeVier (13:57)
Yeah, sure. I think the past couple of years have been tough from a deal making perspective. So folks that are getting into it right now, it hasn’t been the easiest period of time to find deals that particularly ones the cash flow well. Like it’s such a low inventory environment that finding a good deal has been really hard. And then the refinance rates have been, right now I think they’re in the high six, with us, I think the high sixes right now.

But, you know, whether you’re in like the mid sixes to mid sevens, the cashflow on that is not awesome. There’s not a whole lot of nine cap, you know, deals out there. Those are, that’s, that’s a gem. That’s hard to find. So I think that kind of just being patient and sticking to fundamentals and when you’re underwriting rental properties, especially being honest about what the expense ratio really is. see a lot of like wholesaler pro forma still.

that have like 25, 30 % expense ratios when, hey, my portfolio is 45%, 50 % expense ratio.

and then the cap rates, but the cap rates don’t look so good, right? You’re like, oh, you know, a lot of deals like look like, oh, I’m buying this at a six cap and I’m borrowing money at seven to buy an asset that’s gonna return six. That’s not a good formula for long-term success. So I think, you know,

being honest with yourself about expense ratios and your underwriting, but then also sticking to that underwriting is, I think, prudent advice. On the more optimistic side, think that because of every, in every distress situation, there’s an opportunity that comes out of it. So I am kind of excited for this winter, so to speak, whatever it is, three to 12 months from now.

where I think we’re going to see some additional softness and then as a result, buying opportunities and better buying opportunities than we’ve seen in a while from a cashflow perspective. So I think that’s kind of the silver lining here is that, for those who can be patient and are, you know, are patient and stick to their numbers, I think that the market is moving towards the investor that has dry powder and is ready to strike as prices readjust a little bit.

Michelle Kesil (16:45)
Amazing. Yeah, that is valuable advice. Thank you for sharing that. What would you say is the next big goal for you?

Jack BeVier (16:53)
For us, we continue to grow the lending business. We like competing with the big Wall Street firms that have gotten into the space. We continue to grow our volumes and get better and better on a service side. Our goal is to be able to lend nationally, but for whoever we’re working with to not know, not realize, for them to feel like we’re local lender.

that they can pick up the phone and get a human on the phone and talk about the nuance of the deal and get draws turned around very quickly. we’re really, and if they have any servicing question or servicing issue that they can get a human on the phone, frankly, right? And not just have to like get told, here’s what you have to go do, like go on the portal and figure it out yourself. Kind of like portals when you want it at two in the morning and you just want to like get a quote.

but like a human when you’ve actually got a problem that you want to solve and work through or a situation that you want to talk, know, bounce an idea off of us. So we’re trying to really scale the business without becoming, you know, this just like blob of, of like corporate, you know, this Bob of corporates, you know, lack of service.

And so I think we’re, you know, we’re, I’m excited. We’ve been building, we’ve been working on AI. We’ve been like really, uh, leaned into that since chat to be T came out, whatever it was two and a half years ago. Um, and we think la as of last August, the models got to a place where they could actually do really cool stuff. And so that’s, we’ve brought that into our business and are building it internally, which has been a huge, which has been a big investment and a huge learning curve for everyone here. Um, but it’s.

Enabled us to really start taking a lot of the more automatic data entry moving data around Analyze, know scrolling through PDFs Like we’re trying to really like get rid of all of that out of our workflow So that our people can focus on interacting with our customers and providing a great borrower experience so managing that transition or like figuring out how to make the technology work how to incorporate the technology into our business

while the train’s going down the tracks, so that we can free up our people to do things that are fundamentally human, and really embrace our humanity. That’s the direction that we’re pushing. And we’ve made a lot of strides on it so far. We’re gonna keep working on that. But I think that that’s kind of, our thesis is that’s what the future is, that the people interacting with people, and that is gonna be, and that isn’t going away.

Right? Like people want to do business with other people. but we also don’t need a person anymore to scroll through a PDF and extract a bunch of data from a credit report and a background search and input it into a software to make sure that you fit with guidelines. Like that stuff’s just going to be done automatically. And I think that that’ll lead to, or is leading to now, a better borrower experience.

and also a lower cost of operations, which translates to better rates, right? Because if that can originate loans for cheaper, then we can be more competitive on rates than other folks are. While providing a better, you know, borrower experience, we think that’s the winning formula. So that’s what we’re focused on.

Michelle Kesil (19:58)
I love that. think that’s so important to foster those relationships and human connection while also like leveraging that technological support that we have.

So when it comes to building relationships and growing your network, what has made the biggest difference for you?

Jack BeVier (20:16)
Yeah, sure. So like, I’m pretty introverted. You know, like we use Culture Index or if you look at my Myers-Briggs or whatever, pick your poison. I’m super introverted, so I don’t love going to like conferences and going to a cocktail hour and like networking in the room. That’s like not me. But I do love like one-on-one calls or taking folks to lunch. And I have found that I’m more comfortable in that.

environment. It enables me to have a deeper conversation, really get to know the person better. And I’d say really, I just made an effort to get out of my box a long time ago. I was like, I’m going have to do this. I’m going have to figure out a way to build a network without being an extrovert. And so I just started taking people to lunch because I’m super comfortable one-on-one and just made it a habit. It’s just like, hey, every week

free lunches with folks. now it’s become like Zoom calls and Teams calls, is technology has been great. Now I can network with people all over the country. But I’m just, try to be diligent about that to like constantly be meeting people and understanding their business and connecting dots and then introducing them to each other. So, and I’ve just made it a habit. I’ve just made it part of like my routine is to set aside time every week to do that.

⁓ And it’s just been a discipline thing for me. So that’s been my approach to it, given my personality type.

Michelle Kesil (21:37)
Yeah, I love that. There’s ways for everyone that works. All right. So before we wrap up, if someone wants to reach out, connect, collaborate, or learn more from you, where is the best place for them to reach you?

Jack BeVier (21:43)
Yep.

Yeah, yeah, sure. ⁓ I’m easy to get. My email is jack at the dominion group dot com. My cell is four one zero three five three five six six seven. And our lending website is w w w dot dominion financial services dot com. So all three of those are easy ways to get in touch with me and I love talking shop. So don’t be shy. Look forward to speaking with anybody.

Michelle Kesil (22:16)
Perfect. Well, listen, I appreciate your time, your story and perspective. We need more people in this space who are doing things in this right way. So thank you again for being here.

Jack BeVier (22:26)
No, my pleasure. really enjoyed the conversation. Thanks for having me on, Michelle.

Michelle Kesil (22:30)
Absolutely. And for those of you that are tuning in, if you got value from this, make sure you’ve subscribed. We have more conversations coming with operators just like Jack who are building real businesses. And we’ll see you all on the next episode.