Brandon Brown has bought four dilapidated houses, fixed up three of them and found tenants for two – all in the last six months.
Like hundreds of investors in the region, Brown is putting his money and energy into Charlotte's bustling foreclosure market, hoping to turn real estate's hard times to his advantage.
He's searching for bargains he can buy, repair, rent and hold until the economy improves and housing prices start rising again.
But Brown's not a deep-pockets, real-estate mogul. He's a 25-year-old entrepreneur who works days at his first job as a commercial real-estate appraiser and broker. Nights and weekends, he searches for affordable properties, fixes up his houses and takes classes for his contractor's license.
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“He has an insatiable appetite to learn about things,” said Thomas “Skeet” Harris, who hired Brown fresh out of UNC Chapel Hill. “I don't think he can sit still. It's a good thing, but a rare thing.”
As foreclosures rise in North Carolina and across the country, investors like Brown are snapping up houses, sometimes at prices substantially below appraised values. State records show that 2008 Mecklenburg County foreclosure filings topped 6,500 through September and will likely set a record this year.
However, success in the complicated foreclosure real estate market isn't guaranteed, said Doug Heidinger, a longtime Charlotte investor who sometimes works with Brown.
“You get bitten by the bug and it's kind of addictive,” Heidinger said. “A lot of people think about it, but there are very few that execute it well. I think Brandon will be one of the few.”
Finding, not flipping
“The key is really learning (property) values,” says Brown. Investors need to understand the market to avoid paying too much for a home, he adds.He's not interested in flipping – quickly fixing and reselling houses like people do on TV shows. A lot of flippers run aground when they can't sell property quickly, or spend far more than they budgeted to fix up a house, he believes.
His strategy is to buy houses within three miles of uptown, rehab them, and keep them until prices go up significantly. He strives to spend no more than 65 percent of their appraised value after renovation.
But there are still pitfalls, he notes – unexpected repairs, theft, vandalism and unpredictable tenants.
Brown became interested in buying foreclosed houses soon after he came to work at T.B. Harris Jr. and Associates two years ago. He saw property changing hands, sometimes for less than 50 percent of its value, and wondered if he could buy.
He got his chance when he and his mother sold S.C. property inherited from his grandparents. He used his share in April to buy a two-bedroom house for $65,000 in Tryon Hills near uptown.
He bought it from Heidinger, a real estate wholesaler who buys and resells property to other investors. Heidinger, who has become a mentor, suggested that Brown enclose a side porch to create a third bedroom for added value.
Brown spent a month painting and repairing the house, then rented it quickly after putting up a yard sign. The house appraised at $117,000, and he got a cash-out refinance deal that allowed him to purchase the next property.
Using that strategy, he has bought two other houses, one for $35,000 and another for $56,500, and become a co-investor with Heidinger in a fourth. All four, located north or east of uptown, had substantial problems, ranging from fire damage to missing floors.
Brown took courses in home repair and learned everything from fixing roofs to hanging wallpaper. But he's learned it's often faster to contract big jobs than to do them himself.
Looking to the future
On a recent afternoon, Brown bounds into his old pickup and drives to the house he's renovating in Plaza Acres. Tall, soft-spoken and dressed in well-pressed khakis, he looks more like a college freshman than the owner of rental property.
The exterior and interior of the three-bedroom house are freshly painted in shades of beige, and the hardwood floors are newly refinished. The bathroom has been enlarged and tiled and a new storage area created for a washer and dryer.
But plywood covers a place where vandals keep breaking a front window. The last thing Brown will do before renting it is to put a new window in. He expects to rent it for about $750 a month.
That's the going rate, but Brown thinks his properties are a better value than most because they're attractive and offer more amenities. He thinks landlords get an undeservedly bad reputation and he'd like to change that.
After he finishes renovating the fourth house with Heidinger, he's not sure what he'll do next. It's getting harder for investors to get loans, he says, but he'd like to start buying foreclosed commercial property.
Long-term, Brown says he'd like to own his own real estate firm. “I'd like to do something for this city, to have impact on this community.”