Neighborhoods get a lift from investors who take on worst of the worst houses

In an episode of "REO-Life" by Kalamazoo production company IMEEDIA, Jeremy Cole jumps from the doorway of a crumbling mess that used to be someone's home.

"I love old nasty houses!" the 30-year-old housing entrepreneur shouts with glee.

Since the age of 19 Cole has been buying old nasty houses in Kalamazoo and Portage. As a licensed builder he rehabs them, and either flips or rents the result.

Before he gets to them, some of these houses are the epitome of the vacant, uninhabitable eyesore that brings down the value of a neighborhood. Wouldn't it be best if they were just given to the county land bank, to be made into an empty lot, maybe a nice community garden?

"No, no, no!" Cole shuts down that kind of talk. For him, as long as the house is still standing, there's a new home to be made.

"The old ones, the nasty ones, you get to basically start over," Cole says. "It's exciting when you walk into something that's just a dump. And you know you can change this thing and literally make it into the best house on the block."

On an unusually warm January Saturday morning, he and realtor Ramon Huerta lead a large group of potential house flippers on a "Property Krawl" around the east side of Kalamazoo. The first stop, a house on Phelps Avenue, is obviously still a work in progress. 

Outside, the paint is peeling. An upstairs window is broken. The house looks pretty nasty here and there. But after 60 days of rehabbing, it now has solid interior walls, a new roof, new fixtures, upstairs carpeting and redesigned kitchen and bathroom. 

"Over there was the dead squirrel, over there was the dead bat, we found some dead birds in the kitchen," Cole says, describing the house's condition when he started. "In this bathroom, you could look up right through the second floor and through the roof, and you could see daylight.... It was bad." 

The house had been on the market for a long time, with no takers. A realtor asked Cole if he wanted it. "I came in and looked, saw the sun shining -- it's a beautiful day, I can see the sun shining from the bathroom!"

He runs down the numbers for the krawl participants: He got the house for $9,000, he's spending $25,000 on materials. Theoretically anyone doing it themselves could get a "brand new house for $35,000."

But he's a licensed, experienced contractor who's hired a crew of four-six construction guys to work on it. It took two months to get to this stage, to gut and rebuild the interior and the roof, to put up plasterboard, paint, put down carpet.

Huerta adds that such a project is "a big commitment." It can't be done as a hobby, the realtor tells the krawl. "Hobbies cost you money." 

Cole's Big Commitments

The house on Phelps is just a hop from where Cole grew up on Dwight Street.

He was born in Kalamazoo, grew up on the east side next door to an old rental, "next to a slumlord -- so I get the point of having a code enforcement division."

Cole went to Western Michigan University to study finance and got a job in customer service at a local bank.

Around that time he was helping his father and uncle rehab a house. He found a mentor in real estate and rehabbing who showed him houses and possibilities.

"I knew that this is what I wanted to do," Cole says. 

He found a house on the west side, with "water in the basement, inside's a disaster, it was a dump."  

Just 19, he proudly told his parents he'd gotten a mortgage on the dump.

"You're so young!" was his mom's response. Jeannie Cole, accompanying her son on the recent krawl, reminisces. "We were happy, but I think I was more nervous than my husband."

"I said, I like painting, so I'll help paint." She put work into "several of them," Jeannie says, laughing.

He fixed up the house, used it as a stepping-stone to buying more, and became a landlord while still working at the bank. After he asked the bank why others were getting promotions but he wasn't, Cole found himself let go. 

"It was a blessing in disguise," he says, but it didn't seem so at the time. "That fear that cripples people? I was there."

Ignoring the fear, he bought another house. Four years after his first house, "it leapfrogged," and Cole found that he really could be his own boss.

Cole has several rules for his work. He's frugal, invests all his extra money into houses -- he points to his rusty truck as evidence of that. "I go to look at lakefront property, and my truck was the loudest one out there, people wondered why I'm there -- but I don't see value in nice vehicles." 

And he's sworn off mortgages. He's only had two; the rest of his properties were purchased with cash.

"I learned early on not to go into debt when it's an investment. These are investment properties -- these aren't your main home, these aren't where you're going to raise your family. This is a business, this is an investment. An investment needs to make sense financially and otherwise." 

He's purchased around 40 properties, he says. About half were flips, and some were "wholetailed," where he did a quick fix, not a full rehab, then sold to another investor.

Making Money, Making Homes

His methods work for him partially because he buys at below market value, mostly cases where "it's either tear it down, or Jeremy's going to buy it and rehab it," he says.

"The city's happy, the buyer's happy, I'm happy, the bank that I bought it from is happy."

Kalamazoo County has long been on a mission to take down foreclosed property in its war on blight. Cole sounds frustrated at the number of houses set for demolition by the county. "I could save more than half of those buildings this year alone. If you've got 42 on the chopping block, you sell 21 of those to me and you're going to be providing housing for 21 new families in Kalamazoo County," he says. 

"If I can sell somebody a home that they're going to take care of for 30 years, it's theirs. That's where people get their value from." He sees a "stark difference" between streets that are mainly rentals versus those that are mainly occupant-owned homes.

Focus on the finished product

Wrapping up the Phelps krawl stop, Cole tells the potential house flippers to not be turned off by a structure's problems, the broken windows, the dead critters on the floor. "Focus on what the finished product can be." 

Cole and Huerta teamed up to do their monthly krawls as a way for his real estate friends to network, see potential rehabs and chat about the numbers, designs, complicated codes, and more. In the past few months, they've opened it up to whoever would like to join. In December they had 12 participants. In January, around 30 showed up to krawl.

It's free to join, and "we're not selling anything!" Cole says. "Ramon and I have been board members for the local and state real estate investors associations for many years, so we've always been trying to get more people into investing. Plus, it's a lot of fun looking at houses all day!"

Dave Ault has been on a couple krawls. He's "run the numbers," trying to decide on his first investment property.

"From a neighborhood perspective, having these dilapidated houses sitting around doesn't bring value to the neighborhood," Ault says. But one does need to look at it "from a pure business perspective."

Cole's "a really great guy, and very willing to share knowledge to help people. That's what's really cool about this group, it's the networking, with he and Ramon leading this, sharing the knowledge and information they have from years of doing this," Ault adds.

Exiting the house on Phelps, Cole's enthusiasm carries on. "Opportunity exists!" is what he wants people to know about nasty old houses. "There's so much opportunity in real estate. We're buying properties for what our grandparents were buying properties for, $5,000, $10,000. We're here to show people the opportunity." 

Mark Wedel has been a freelance journalist working out of southwest Michigan since 1992. For more information visit his website.

Watch Jeremey Cole and Ramon Huerta lead a Property Krawl here.
 
Signup for Email Alerts