Ep 04: REI MBA - Systems Are Key to Building a Successful Property Management & RE Business
In this episode, Jennifer DeJesus sits down with us for an interview to share her knowledge and insight on what it takes to succeed in real estate, especially in the current market.
Jennifer is the owner of Steel City Realty, which is a group of experienced, licensed Brokers, Real Estate Agents and Property Managers. The team has a combined 30 years of experience satisfying clients one home at a time. Their mission is very simple - to exceed their clients' expectations and to get them the best deal.
To reach out and connect with Jennifer, please go to either: https://www.wegrowempires.com/ or https://www.steelcityrealestate.com/
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Interview Transcripts
Tejas Gosai: “Hello. Ladies and gentlemen, welcome to real estate investor MBA. I am a co-host here. My name is Tejas Gosai and Jeremy Moyer is to my right and we have the lovely Jennifer DeJesus, who is one of the most professional and I would say most endearing Realtors, I know in the community. You've been guide to me over the past few years and I call you the queen of commercial, because I think you are. Jennifer has a property management company and she also has a very active real estate team. Jennifer, why don't you tell a little bit about yourself?”
Jennifer DeJesus: “So, I've been in real estate business for about 11 years. When I got involved in real estate, it was really just a means to an end. I was in corporate America and absolutely hated it. I couldn't stand to work in somebody else's box and I got into real estate because I just felt like it was, you know a place where I could kind of control my own destiny. About a year into the business, I happened to get in contact with an investor that was looking to buy investment properties. I helped him find his investment property and then sure enough, he said right after that…can you manage it? And at the time I really had no clue what he was talking about. But I was like sure what the heck let's do it. I remember walking into my broker's office at the time and just saying you got to help me. I can't let this guy down. I don't have any idea what I promised him, but I can't let him down. I honest to God just I figured it out. I worked with one client and got to learn, know his methods and what he was looking for in an investment property and why here and why the Lehigh Valley. That client is actually my financial advisor. He worked on Wall Street, he trades stocks. He is just he's just a wealth of information. But that relationship has brought me, an abundance of other clients and some very sophisticated, smart people that I've enjoyed the last 11 years learning from. So everything, I do about my business now is really to service the investors and every entity that I have is about investment properties.”
Tejas Gosai: “So yeah, that's what I was going to kind of throw in there. One thing that you've taught me in the real estate world is you you have to be able to answer every clients question and you taught me one thing like legacy investing and things like that. You've been in the field much longer than I have and you have that that one client that then spurred so much of your business. I know you don't like to share but I know you have hundreds of units under your property management company. My team refers you as our property management advisor. So it's really cool to see how you , kept the clientele and how difficult it is to find inventory and managed it. You know, I know it's not a walk in the park. You have a lot of different corporations, but maybe you can talk about how you've kind of conquered the landscape with your services.”
Jennifer DeJesus: “Sure, I'll be happy to. When I got involved in the investing, what I learned really quickly is that I enjoyed it. It became a very different business for me than then typical real estate, right? So typical real estate, you have a client you sell them a house, they buy a house, they live in that house forever, and then you move on to the next client. The thing that is different about my business is that these are business relationships; they are partnerships. It's not a one-time transaction. And then maybe you know the kids or maybe they sell 10 years down the road. It's not at all that. These are people that will buy a property site unseen. They’re people that trust me with millions and millions of dollars of their own money. But it's because I've mastered the understanding and the metrics to provide that…one-stop-shop, is probably the best way to describe it. So, how somebody interacts with me is, you know, they could either come in by way of property management because they were referred from somebody like you or you know, maybe they had a bad experience and they searched us out on the web. So we have a conversation and see if we are a good fit. Or they come in by way of real estate, because they saw one of our investment listings; they called on it; they wanted more information. We've helped them buy an investment deal. But then it's the step after that that is kinda of where our sweet spot is. So, you know, we take that investment that we've just taken the last 30 or 45 days and we develop a plan for, and then the property management company goes into action on that plan. And you know, I don't know any other real estate property management company or even real estate company where you not only have somebody that helps you look at the financials to purchase, but then has a plan and a team in place to actually act upon that plan. So as an example, if we were saying, oh, I want to hit a 12% return and I want to do X Y and Z capital improvements and I need to renew these leases and get least these rent increases. That is like what my team now goes and acts upon. Where I am involved is; I'm involved in the financial side of it. So I don't do the day-to-day operations of property management, at all. I have a very large team that does that. I have over 30 employees just in property management. And thats all they do; is facilitate the day-to-day operations. I take that investment plan and I'm like their investment analyst I should say. I help them analyze every, property every single year. We do reviews and we actually review my own performance with them. To say okay; look, here's what the goals were when you bought this property; look where we got to today.”
Tejas Gosai: “I think also just to add in like tax returns and stuff like that. Property management is not as simple as it may seem you have a lot of financial information.”
Jennifer DeJesus: Yeah, and we do everything. I mean we are completely full service. It was funny because I just had a phone call today from somebody that you know is in construction. So he does all of his own repairs and maintenance and he's like, oh, I only need somebody to collect rent. I'm like we're too expensive for you buddy. You don’t need me. We do full service and you know, it's not something I'm even willing to sacrifice on so not every client is the right client for us. But we are perfect for somebody that wants truly passive investments. Okay, because they live out of state or they don't know enough about it. They just know they want to invest in real estate. Maybe they don't have the team to do the construction or maybe they don't have the team to do the financials behind it. We literally do everything from start to finish. Literally you could turn off the camera. You could turn off your phone and your property is going to make more money whether I ever talk to you again, because you know, I want to make sure then to that, you know, you're continuously, you know referring us and you know that you're happy because when you're happy, you also buy more. Then that’s more properties and that's where that business relationship kind of keeps on going. So it was always the real estate and the property management, but we've grown since then. I've been doing this about 11 years and it wasn't until about four years ago that I introduced a maintenance and repair company in-house. So instead of subbing out all the work which is frustrating for anybody that has to do it. I now have employees that do all repairs and maintenance on all the pain all the buildings. It allows me to keep costs at a minimum because we charge hourly plus materials. So we keep it at a cost. There's no vendor markup. So really it allows us to control it. We have a better relationship with the tenants because we are there quickly, you know, I'm not waiting for somebody to get there. It just overall; it really equates to bottom dollars to the investor because if I keep your tenant happy and I keep your repair costs down you just made more money. So it just it really really works very well together and then you know as we got better at the repairs and maintenance that is I started getting people saying oh, well, what if you know, could you do like full-blown rehabs? We started a construction company and we've done major renovations. One of our most recent projects was we just did a three-unit rehab in Slatington. Prior to that, we did a five unit in Northampton. We gutted an eight unit apartment building in Banger. And these people are all making crazy money, because we were able to again cut out the middleman. These are like buy-and-hold strategies; not necessarily flips, although we could do flips for people. But you'll notice that if you really looked on the web you would never find my construction company. You may find the website and I do that on purpose. And I know you'll yell at me Tejas, because you think I should be advertising everywhere. But I really like flying under the radar. It makes them happy. It's like, you know I do the construction company again for our clients. It's a business relationship with another entity that they can do business with but also have consistency. So maybe someday I will run a construction company too; that we put out to the general consumer. But right now today, it is only a benefit for the clients that we do business with. And everything I do is really about those clients and just nurturing those relationships. So I'm okay with that, you know, and that makes me happy because it makes me feel like I'm doing something special for them. You know some of these people I mean some of the money that they've made; it's just, it's insane.”
Tejas Gosai: “You know, that's how we get to measure our success. How much money we made our clients.”
Jennifer DeJesus: “Absolutely. When new investors are saying some stuff to me like well, you know God you charge a lot for property management. I said, well first of all, if I'm not helping you make money, you should fire me because I suck, right? So you need to find a property manager that helps you make money. But, I always tell the story of that first investor that I was telling you about right. He always buys really small thing. That's just his motto. He buys anything from like two to four units really nothing bigger because he just knows that's kind of like the sweet spot in the Lehigh Valley for performance; for return. So, you know, he always buys these like, you know two or three units or four units; and he sold one that we held for three years. And you know, we sold it just recently and he takes obviously all the accounting to his accountant and his accountant sends me an email. And he goes this guy made 60% return on his money during the life of his ownership. First of all, how the hell did you do that? And I'm going to encourage him to quit his day job because you are going to make him a lot more money. Like that's all I needed to hear. Again, we take a very delicate approach with helping people, but we also help them understand like what repairs to do; what improvements to make; when is the capital, you know, when do you put the capital into the building; when do you choose not to. And how does that equate to dollars on your return? That's a big piece of the puzzle. And that's where I feel like you can hire anybody to do day-to-day operations, but you can you hire somebody that understands the financials behind why you even invest to begin with it. If you don't, you shouldn't really trust them with your money. We always say real estate is your highest dollar investment ever in your life. I don't think people spend more on the stock market than they spend on real estate. So with all the things that you have your most prized possessions or your most valuable possessions, why would you trust that to somebody that doesn't have a clue about why you even invest to begin with? So that's kind of what we do. And then you know, we have a title company, you know that we opened for a couple of years; again, same kind of thing. The title company does do other business with other investors or other clients, other real estate agent. Tejas, we've done, you know, some business to our title company too. But again, I want to cut out all the fees. I don't need all the extra fluff. I just want a vehicle for people to consistently be able to make money on their investments. I want the process to be, you know, very streamlined. I want it to be no fuss when I'm talking to new investors on the phone and they're saying things like well do I have to get an attorney? Do I have to do this? Do I have to call my insurance? I'm like, no. I have it handled. I actually don't even want you involved. I just want you to listen to me and I want you to do exactly what I say and we're going to be perfect. But seriously, you know but people, I think feel a sense of calm that they've got, not just me, but they've got an entire organization of vendors and contacts and people that work really well together; that have their back through the entire process, you know; so that's a really big deal. And now we've got the Fund that just launched in April.”
Tejas Gosai: What?! That's the best part! Don’t get into that yet; Jeremy has a question.”
Jeremy Moyer: “The system that you have Jen sounds amazing. I have been dying to ask this question for the past 2 weeks. Ever since the COVID pandemic that came out in March timeframe. I've talked to a lot of investors that invest here in the valley and you know are freaking out; the buy and hold investors; especially the C-Class properties, you know. So what is your property management company; I know you said you are not in the day-to-day, but I'm sure you hear some rumors or having some conversations with employees. What are you seeing right now? What do you see in the market? Do you see a Class A outperforming Class C. Do you see concerns still in market here, in the Lehigh Valley?
Jennifer DeJesus: “That's a great question. I've been getting that question non-stop, you know since this whole, you know, virus / pandemic thing kind of went down and you know. What I realized is, you know, of course the reaction is, oh my God, right but it didn't take very long for us to figure out that there's no oh my God here right. First of all, the reason the people invest in the Lehigh Valley, right and why this is such a hot market, is the demographic of our tenant for the B & C Class, that you just mentioned are those essential workers, right? They work in the hospitals. They work in the grocery stores. They are in warehousing. Those are our tenants; that is our population of tenants. So we were able to have a you know, we were able to have a very very easy collection, you know rent collection. We really were watching all of our number; we were making sure that you know, we weren't decreasing any kind of income, but across the board not only where we releasing properties faster during COVID, sight unseen, but we were actually able to collect all of our rent and more than we had collected the previous month. So like say February so, you know in our numbers kept growing, you know. Again, this is why you hire professional company, but we the minute we knew that we were challenged with some kind of issue in the biggest issue for us was not being able to show vacant apartments. So our construction had to stop. It's that oh my God, now, we've got all this vacancy out there. What's going to happened? You know, so that was the most challenging for us on but we knew that rent collection was a problem. We reached out to all the tenants; we asked for who was going to have a problem. We got them all the information of how to get help, you know, and I think that was a big piece of it is that we took that challenge as is really our challenge, right? It was okay. Here's the problem now, what's your solution? But I can honest to God's say that we didn't have any decline in rent collection. We had no decline in our leasing ability. We did not have vacancies longer than we typically would. We watched every number all the time. I also was a big advocate of giving our investors or our clients repeated updates; far more than they would ever have in any other situation. Right? Just because I thought it was necessary in this situation when everybody was nervous, but you know, this is why people come to the Lehigh Valley and invest and why this market is so hot. It 100% recession-proof 100% right?”
Tejas Gosai: “Thank you for saying that.
Jennifer DeJesus: “It's absolutely is and this is why I invested all my money here too. I mean, I have a ton of properties that I own and I feel very confident now to go back to Jeremy though. What you said is that the difference between that A, B and C Class. I stay away from A Class. I think it is an absolute bad investment; my perception. But I don't even tell my clients to go after. A Class should be left to developers. That's that's their thing. A Class should be left to the people that know how to get the grants, that know how to get the tax credits, that get benefits from the towns, you know, that's for developers. They do well in the A Class. But our clients really need the protection of the B and the C-Class markets where where your rent is a little; can be more stabilized and you're not affected by the economy. Because I guarantee you the next time, and it will, the economy shifts those A Class tenants now are moving to B class because they can't afford A Class and they have to live more, you know economically. So my advice is always stay away from A Class. I'm not an advocate. I don't want you to buy it. I don't want to manage it because I don't want to have to tell you why I can't collect rent, you know.”
Jeremy Moyer: “Makes a lot of sense.”
Tejas Gosai: So now that you kind of gave the appetizer for it, right? I am so excited that we get to say that Jennifer DeJesus and your team now has a Private Equity Fund. And this is you know; you and I talked, this has been years in the making. But I do think this goes back literally to like the beginning of like when you're a first realtor and you're trying to figure out, you know things and then you finally learn a lot, then you develop another layer and another layer and I mean what you're going into now is uncharted waters. But you already been in these waters a million times. It's just doing it in a different way. So I know that there's a couple other very successful real estate teams in the Valley that have had a Private Equity Fund. So I think this is going to be like, this is glorious for the Valley. I get to watch you do this the right way, the right capacity. But let's talk about it. So the reason that you can do this is because you have solved a lot of different problems procedurally, to be able to manage people's money via, you know a very difficult vehicle.”
Jennifer DeJesus: “Yeah, absolutely. I wouldn't be doing it if I didn't already have all the procedures in place. I mean we are not at all the largest company out there. We are not the largest fund. We're not the largest brokerage. I don't have any aspiration to be any of those things. I just want to be the absolute best at what I do and provide the highest quality of service. So, you know, I heard you on a call earlier today, Tejas saying, you know quality over quantity, right and that's exactly what we are. You know, I don't need to be the biggest of anything and I don't even need to talk about it. It's you know, I don't even like talking about myself, but I want to be the absolute best at what I do. And I'm okay with there being plenty of other Funds out there. I'm okay with there being a tough bunch of different Brokerages out there. But our method works for us and it works for our investors.”
Tejas Gosai: “I know you cannot share too much detail because there's regulations and rules. I mean the whole concept is, you know investors put money in and you put it to work to beautify the community.”
Jennifer DeJesus: “Yeah, that's exactly right. I mean essentially this was our answer to our inventory crisis, right? Because you know as we are currently in everybody knows that the Lehigh Valley is hot. So there's a lot of money coming. Here and it becomes increasingly challenging to consistently find new inventory. You and I Tejas work really really hard on the inventory crisis, right but there gets to be a point where you can only do so much for a client. So I want to be able to find properties for people that they can invest in different ways. Right? So right now investors are finding less inventory; 1031 exchanges are harder to complete because of all of that. So the Fund to me was just another opportunity right? I'm happy to take all my time and resources to deal, but it's going to go through the Fund, which is how it's going to work. So it was like an answer to another question. I believe that you know, your investments always need to be in different vehicles, right? You should never put all your money in the stock market. You should never put all your money in real estate. And if you have most of your money in real estate, it should be a different types of ventures, right? So, you know, the people that owned the doors and own the properties now still need other sources to diversify their portfolio; to be the best and have the most protection. That's what the Fund is about. So everything that I just described about what we do as an organization and how we protect people's money is 100% how my Fund is going to operate. I'm not practicing with people's money. Right? I'm doing what I do all day long and I have all the services provided. So we're going to buy B and C Class. Absolutely. I will not buy an A Class property. We are going to fix and flip and you know to build up cash reserves. We're going to you know only work with the best of the best lenders for leverage. You know, we are going to find off-market deals. I'm going to scour, you know the blighted list and anything that I need to do to find the properties and you know, our investors that are part of the fund are going to reap the benefits of that. So that's what we're doing. B and C Class only in the Lehigh Valley and doing things that I know are only slam dunk and if it's not a slam dunk, I won't buy it.”
Tejas Gosai: “Well, you're not as secret as you used to be now. I mean, I'm incredibly excited for you. I'm excited to watch you; help you however, we can. Maybe we can share some information. I don't know how you know, we can we can support but congratulations! I know it's been a crazy road and sadly we're running out of time. So Jeremy the one last question, I always like to ask is, what's your favorite restaurant in the Valley or in Allentown, Bethlehem, Easton area?”
Jennifer DeJesus: “Oh my God. I am a food connoisseur. Oh my God, I would say probably Apollo Grill.
Tejas Gosai: Nice. That's a good choice. We've been having this running thing. We ask everybody right at the end. And you'll see Jennifer's office, which is right near downtown. We have all our information below, please contact her. My partner, Jeremy is here; Jeremy Moyer. I'm Tejas Gosai. This is Real Estate Investor MBA. We're super excited to have topics like this and we look forward to having more programs and some questions. So cheers. Thank you guys. Thank you, Jennifer. Thank you Jeremy.
