All Forum Posts by: Dave Van Horn

@Mike Miller Just private messaged you with answers to your question.

@Connor Cushman , I would absolutely get both, as an agent since 1987, I’ve seen many septics systems fail over the years with everything from poorly installed pumps, rusted out steel tanks to poor drainage fields that couldn’t handle enough capacity, and many wells too, with poor quality water or not enough flow (i.e. gallons/minute). And when you go to sell some day, guess who’s getting a test? Your new buyer, and if that deal falls apart, now you’re forced to disclose.

Hi @Andrew S.

Apologies for any misunderstanding or miscommunication.

Perhaps our written correspondence and messaging from our Investor Relations Department didn’t explain this enough but Dan is correct.

It doesn’t make fiscal sense to continue paying such high rates in the current environment, especially with lower interest rates and access to more affordable capital.

I should also clearly state that it is a possibility we could call the 10% fund earlier than expected as well. At the beginning of the Offering documents for both the 12% and 10% offerings, it discloses that we reserve the right to redeem shares at any time with 10 days notice. Up until now we haven’t exercised that right, but we felt in pertinent to do so now to ensure the health of the fund and continue operations at maximum efficiency. Hopefully you can understand and would benefit from our 10% (or 11.6% rate with compounding) fund offering and continue working with us.

If you want to talk about it more directly, feel free to message me and I’d be happy to set up a call.

@Ryan Hazelwood

After 30 years in the business, not many actually! At least anymore. I really downsized my personal portfolio the last 5 to 7 years (recently turning 60 this past February). I started out when I was 27 as a realtor, but bought my first property at 29, an owner occupied duplex. Got more serious in my mid-30's and built up a portfolio of 30+ properties, then started to unload some of them just before the '08 crash. I also co-founded our Note business around the same time which buys/sells hundreds of 1st mortgages/REO properties but that's more as a business owner rather than an investor.

Today I have 21 tenants, and only 15 properties. My plan now as I get closer to semi-retirement (idk if you ever retire fully from a business unless you sell, and even then) is to offload a few more and keep the best of the best. Then buy a second residence in Austin, TX (maybe with more appreciation in mind vs. most of my other properties which were generally bought only for the purpose of cashflow). Hope this helps, I'm always interested in seeing other investor's stories also. Feel free to reach out if you ever need any tips or advice.

It's funny, I don't think these 3 things are mutually exclusive to the note space. Capital, sourcing, and execution (or asset management here) are probably the three most important things to nearly any business! The thing I found over a decade in this business is that when one of these 3 aspects is more or less " solved", another one is in need of fixing or at least upkeep. When we started, our issue was we didn't have enough money to buy notes. Then when we were able to raise an ample amount of capital we couldn't find enough assets consistently. And then when we did, we had efficiency issues with executing on all of these assets while doing parts 1 and 2 effectively. Add in an evolving market with stricter compliance, and well we had quite a fun adventure :)

So i guess my answer is, I think we've done our best to tame all three with strengths mainly in capital. If you're looking at just a portfolio of notes or an investment in a note fund the above may not apply but as a business you'll likely never be free of issues with any one of the three aspects mentioned above. I think the key is to figure out what you're good at in that equation and outsource or build in-house what's needed to fix/maintain the other pieces.

As for the effects of the pandemic on our business, it's definitely had an impact but so far not as big a one as we think. At least currently. Mainly it effected the execution side a bit, slowing down exits in a way that's outside of our control with courthouses closures, moratoriums, etc. Knowing and staying on top of foreclosure timelines/matrix is what's crucial here. It also effects us in less tangible ways too of course, like not being in an office for 4 months and counting - what that does to a company culture, team building, etc. is tough to say right now but we try to stay in touch in some ways now more than ever with zoom, slack, and the like.

Last thing I'll say on the improvement front, if I could look back and change anything about those 3 things it would be how i look at them in relation to our overall business model. A lot of our issues and challenges within those three really came out of the question of "who do we want to be when we grow up?" and not knowing that answer either out of indifference, naiveté, or just being plain busy working in the business. But building to sell while tackling all three isn't a bad place to start.

@Patrick Froehlich

My father didn't buy his first rental until he was 70. Then he bought 3 in about a year and lived on them further into retirement (this was after he lost a ton in the stock market). So it's never too late.

I started in Real Estate in my late 20's, didn't get serious until I was able to walk away from my contracting business after getting injured in my late 30's, then semi-retired I started a real estate note business in my late 40's and haven't looked back since. And the business in my 40's, which I still run today (now in my early 60's) has taken me all over the world, led me to write a book for BiggerPockets, and do such large deals I couldn't even imagine way back when.

I don't know that if I could do it all over again that it would be possible to do that at a much younger age. I found there's a lot of advantages to starting later. More life experience, a bigger network, and you also might have better access to capital - whether that's a larger retirement account or equity you can tap into. Plus, I can tell you raising capital now is much easier than if I was 25 years old. There's a credibility to someone who has been around the block.

So it's really about accelerating what you can leverage now to make up for lost time and exponentially build wealth.

@Andy Mirza We're seeing similar discounts already, but it also can vary based on size (we tend to buy $20MM and up) and the amount of equity in the trade, as well as the states where the notes are located due to foreclosure matrix costs and timelines.

And because of said discounts, we plan to aggressively be buying for the next 3 to 6 months. The low unemployment factor that Bob mentions certainly is something to consider but usually assets we buy today don't come to a resolution until 6 to 18 months later.

@Matthew B. I would be less concerned with one person owning these rentals and more concerned with the fact that 90% of the other properties in the neighborhood are in fact rentals, since this could impact a few things for you.

You'll see what I mean in condo associations for example. Fannie May requires 51% of the condos to be owner occupied since it can affect the property values, conditions, appraisals, and even effect the terms of your financing. HUD could be similar as well.

Not saying this always happens in a regular residential neighborhood but it could be a sign of declining values on the horizon. Something to be mindful of.

@Brandon Duensing

Sure thing. We have a 'Red Flag' list at my company when we buy. Hope it can give you some ideas.

Keep in mind it's not relevant for every single type of house and some aren't complete "red flags" rather just something to evaluate, but this is pretty much the soup to nuts version:

Title:

• Utility liens
• HOA's
• Taxes or Sales
• Notice of Commencement
• Easements, right of way, (i.e. shared driveways, basements, roofs)
• Deed restrictions
• Municipal liens or fines
• Type of deed and is it insurable
• Quiet title needed?
• Special assessments (i.e. paving, public water or sewer, etc.)
• Condo Associations, (2 Deeds) need docs, check reserves
• Housing Restrictions (unrelated parties, student, over 55, handicap accessible, etc.)
• Zoning, wrong use

MLS:

• Is it currently listed?
• DOM (Days on Market)
• No comps, or comps are too varied
• Active vs. pending ratio
• High tax assessment to value ratio

• Property in flood plain or zone and on flood map requiring insurance
• CLUE report, uninsurable or difficult to insure
• Insurance escrow or not
• Lapse, adequacy of coverage

Property:

• Squatters
  
• Functional Obsolescence
• Septic, onsite systems
• Well
• Lead or galvanized plumbing
• Terracotta sewer
• Property preservation
• Structural damage (expansion cracks, main beams)
• Landscaping issues: retaining walls, bamboo, soil shifting, etc.
• No permits
• Illegal BR size < 70 sq. ‘
• Winterization
• Mold
• Crime, heat index, walkability, schools
• Asbestos
• Poor location, busy street, etc.
  
• Termites
• Dryvit, synthetic stucco
• Urea formaldehyde foam insulation (UFFI)
• Radon
• No parking
• Age of property
• Old or no windows, unsecured building (SimpliSafe.com)
• Knob & tube electrical (60A), grounded outlets every 11’, GFI’s
• Underground oil tanks, oil heat
• Gravity or steam heat, octopus
• Roofing: Flat roofs, slag, slate, Yankee gutters
• Pests: fleas, squirrels, bats, bed bugs, rats, etc.
• Chinese drywall
• No firewall
• Below sea level, slab
• Lead paint (prior to 1978)
• >60% rehab, new construction guidelines & building codes (i.e. Insulation code, etc.)
• # of Bedrooms (1 or > 4)

Market:

• Decreasing property values
• Interest rates
• Rent ratio to Selling Price
• County or local government requirements, high fines, unusual laws
• Onerous property inspections or rental requirements (i.e. licensing, sprinklers, etc.)
• Population declining
• Economy declining, if there's only one or very few employers locally/high unemployment
  
• Cost of labor
• Violent crime rate
• High mortality rate
• Medical care availability
• Poor business environment
  
• Rural
• Buyer’s market/oversupply

Whatever you can negotiate! 100% financing is ideal if possible.

The least amount you put down where you still positively cash flow is the highest yield to an investor.