Why Traditional Wood-Framed Homes Are Failing—and What Should Replace Them

Sergey Kesel (00:00)
I’m a big fan about reforms. I see future in the United States, especially in the South. Look at outside, it’s two weeks on the road, like a rain pouring. Everything flooded. Wood in the South, no good. We’re talking about Virginia, North Carolina, South Carolina, and so on. I believe future in the United States is insulated concrete forms. Complicated…

Complicated project I do on my own, I do by myself. All also gets like a, because I wanna take liability, I know exactly what I’m doing and move on because I study all of it. I feel very comfortable doing that.

Scott Bursey (02:08)
Welcome back to the Real Estate Pros podcast, powered by Investor Fuel. I’m your host, Scott Bursey. And today we have Sergey Kesel of Raleigh Cabinets and Remodeling with us. Sergey is an active real estate investor with a personal portfolio of rental properties. And he’s also an unlimited general contractor licensed across residential, commercial, and industrial sectors. This episode is going to be packed with insights on bridging the gap between contracting and investing. Sergey, welcome to the show.

Sergey Kesel (02:39)
Thank you for helping me.

Scott Bursey (02:40)
It is wonderful to have you here and to help our listeners get up to speed. Please give us the ninety second highlight reel of how your career ignited and where you’re pouring your fuel now.

Sergey Kesel (02:51)
Well, I mean, this industry for so long, more than 35 years, I see all in my life, nothing excites me anymore. But I try to do my best, adjust to new normal. Right now, my industry like need attention. That’s why I try to sign up and talk about it.

Scott Bursey (03:10)
Thank you for that, Sergey. And what really caught my attention about you was the way you’ve been able to seamlessly transition from the technical side of the construction industry into a successful real estate investor. That dual expertise is rare. It’s not easy to achieve.

Sergey Kesel (03:27)
Well, not easy to achieve, but I came from USSR a long time ago. If you want to move to new country, you have to bring something to the table. That’s experience and knowledge count. When I came over, I already studied construction and I already know construction in and out. And I came as a professional and it was easy for me. And I can read blueprint, can convert it metric to inches and this is it. I know exactly what I’m doing and it’s helped me design and build and also I shifted to investment because a lot of people ask me for consulting and from consulting I shifted to investment.

Scott Bursey (04:11)
Sergey, we’re curious to know, as a licensed unlimited GC, how do you leverage your deep construction knowledge to vet potential deals that other investors might just simply walk away from?

Sergey Kesel (04:25)
Well, first of all, all my knowledge I obtained is not credit of North Carolina. Yes, I have a local license, but all my knowledge I obtained from overseas and also from the state of Michigan. When I see a property, first of all, I’ll think about this property, not like an investor, I’ll think about as a general contractor what kind of quality I get. When I get quality, second one, see potentials.

In a potential if I have to edit up something or I have to remove something, how much profit margin or how much I can get and how much return on investment I get. It’s my formula. And my formula used to be when I got return on investment about 30 % and paid off my property, like during five years, I’m doing okay. But right now, I try to adjust to new normal. Junk house right now, so expensive, and add materials so expensive. It’s a big question mark. We need the reform in construction industry.

Scott Bursey (06:18)
Does having that builder’s eye change your underwriting process?

Sergey Kesel (06:23)
Well, builderize, I have a joke, in my level, we only have two types of projects, profitable and non-profitable. And what it is, you know, I supposed to be more realistic. If somebody sees something and try to cover it up, reality, and tell me, “No, no, no, no, no, I pay more, blah, blah, blah, figure out later on,” no, this is reality. You can get what you see. You know, like, and a lot of a lot of big mistakes when people compromise on something pay more and and suffering later on.

Scott Bursey (06:55)
And Sergey, we’d love to get your perspective on the biggest challenge you faced when shifting from being a a contractor to scaling your own rental portfolio.

Sergey Kesel (07:05)
Well, what can I say? It just shifted by itself somehow. I started buying property because construction is only geometry and mathematics, specific science. What it is, if you already know how to design, how to figure out everything, how to make decisions and become an investor, it’s only one step. It’s only a change of avenue little bit. This is it. Because sometimes the situation pushes you to that situation and it’s up to you if you want to accept it or not.

When I build for somebody else, remodeling, build new construction, design new construction—because I design all my projects—somehow, why not I buy a few properties, make a passive income? And I already know what it is, I already inspected. What I have to do is just open up my wallet and make an offer. And I did it a couple of times, it was very successful about. Not right now, because right now it’s crazy market. But talking about a few years ago, it was okay, worked out for me.

Scott Bursey (08:10)
Sergey, where do you see the the biggest untapped potential for small scale investors right now?

Sergey Kesel (08:16)
The part is the first deal, first and second deal. It’s the hardest part. But I believe if investors want to start with something, I recommend it: talk to a general contractor who has a license, not local license, I’m talking about North Carolina and from another state as well. They have like a different knowledge because different requirements, already get used to discipline, and they can give you more information than only local general contractor who study only one day seminar, no hands-on experience. It’s pretty much scammer with a license and another scammer who work under $40,000 because in North Carolina up to $40,000 not required any continued education, any knowledge, and pretty much it’s just scamming people, is my opinion.

Scott Bursey (09:12)
Sergey, you’ve spoken about the rising labor cost and material cost and things of that nature. I’m curious with the volatility, how are you protecting your current projects from those external pressures?

Sergey Kesel (09:27)
Well, I’m a big fan about reforms. I see future in the United States, especially in the South. Look at outside, it’s two weeks on the road, like a rain pouring. Everything flooded. Wood in the South, no good. We’re talking about Virginia, North Carolina, South Carolina, and so on. I believe future in the United States is insulated concrete forms. Complicated…

Complicated project I do on my own, I do by myself. All also gets like a, because I wanna take liability, I know exactly what I’m doing and move on because I study all of it. I feel very comfortable doing that. You know, like, but…

What scared me right now, we have a same old same old 2×4 and OSB construction. This one is a floppy disk supposed to be gone because it’s not working in reality. 2×4 walls not even hold like an R-value. You you’re talking about heat and HVAC. That one is the biggest problem and people pay a lot of money or wasting money on heating and cooling.

Scott Bursey (11:04)
And Sergey, you kind of hit home on efficiency. We’re interested to learn how do you manage the time balance between running a demanding GC firm and actively growing your own portfolio?

Sergey Kesel (11:16)
It’s very easy for me, it’s like a natural. Not everybody is an Olympic champion. You can buy the best shoes in the store, but you never get a gold medal. It’s not for everybody. I can tell you, not for everybody. You can try to make a profit margin and everything, but the catch is, if something going on, you have to know how to solve problems, have to know how to find the right people and the right subcontractor to to do repairs. If it’s not, have to change your clothes and do on your own, not waiting for special invitation and do it right way up to code. Even minimum code, have to do it.

Scott Bursey (11:54)
What does your professional network look like right now? And what sort of importance do you put on your professional network?

Sergey Kesel (12:02)
My professional network is easy. I just want to associate with people who are equal or higher. This is it. Loser does not count. It’s my rules. If you, for example, don’t know something and you have a good personality, no problem for me to share knowledge. But if you want to grab something and nothing in return and also a bad personality and also no knowledge, no way I will socialize because it’s…

But it’s easy for me because when I try to talk about topics investment or construction, I try to use terminology. If people know what I’m talking about blend in and we are on the same page. Who don’t know, who don’t know. I already figured out who it is. Inspector, a city official, investor, another builder, I don’t care. I judge people by result. Not, and only… two types of people in this world: smart and stupid. This is it. You know, and you can change personality, you just was born like that, you know, and you have to socialize with your crown. Unfortunately, it is what it is, it’s my opinion.

Scott Bursey (13:05)
Sergey, we’d love to hear one piece of advice you’d give a a general contractor looking to buy their first investment property today.

Sergey Kesel (13:13)
For me, it’s better to stop using alternative materials because ICF is the future in the United States. Lumber is no good. Even, for example, if somebody tries to do good job, since everybody uses new-growth lumber, this lumber doesn’t even hold any nails, all your good job is nothing. Also, it’s included if somebody tries to do good job on electrical or plumbing. If your house is full of your good job is blended in and became junk. We need reforms to make sure people get good quality homes. It means that what it is right now is to be changed.

Scott Bursey (13:59)
And Sergey, you’ve spoken about you’re investing in single family homes. What’s your vision for your operation, let’s say the next twelve to twenty-four months in that regard?

Sergey Kesel (14:53)
My operation, I have right now three projects open, my own. What I see, I already have difficulty finding good material because I have very high quality standards. And what I see right now, doesn’t matter what I’m doing, old schools are not working. We need something new and alternatives. That’s we need reform changes. Make sure it’s easy.

Because you have to realize that a real estate agent does produce anything. He only takes homes which the builders already built. And if a home is not a quality home, they force it to sell what it is. I believe that real estate agents are supposed to ask for reform and offer good products. It’s easy for investors, homeowners, and easy for business. If it’s quality product, longer. And you can add your good job to a good product, then you have a junk product and add your good job and blend it in in a junk.

Scott Bursey (15:56)
Sergey, for those of our listeners that want to keep this conversation moving, stay in your lane, collaborate with you on potential future deals, what is the best way for them to reach you?

Sergey Kesel (16:06)
I can give my phone number. My phone number is 919-295-4160. I’m more than happy to any questions, more than happy to help with design and give an offer for alternative material because I’m certified for many things. And just share my knowledge, and business ethic. I have to share my knowledge and be helpful for society.

Scott Bursey (16:32)
Sergey, thank you for joining us today on the Real Estate Pros podcast.

Sergey Kesel (16:36)
Or anytime.

Scott Bursey (16:37)
To our listeners, we appreciate you. If you receive value from today’s episode, please subscribe. We’ll be filling your tanks with the elite lineup of guests, just like Sergey, who are accelerating and setting the pace for the rest of industry. Until next time, keep your standards high and your vision clear. We’ll see you on the next episode, everyone.