All Forum Posts by: Jason S.

Looks great Brian.

I like the full rehab approach - paint, int doors, the whole nine yards. That's how we do it also.

When I see this transformation in this home you have shown and in the ones we do also I cannot help but think how nice it will be for the new resident. The investor community gets a bad rap over a lot of things, but when investors care to deliver a quality home, as you have done, it will serve the new family very well and a lot of times that makes a lot of difference in the lives of the family.

What's the amount of the re-hab? I know others will differ but there is an amount that, if you already trust the partner, will be more trouble securing with anything more than a simple MOU/Contract and Hiring contractor with a power of lien.

Are you doing the work yourself? Do you have contractor laws in your state? Maybe he plans to call you an unlicensed contractor at the end - not pay you a dime and report you to the contractor board?

Best practices say you need to have a contract. But that contract should not include that you are to do illegal activity (acting as a contractor when you are violating laws) - at that point the contract would likely not be enforceable - and if it is enforced through the courts, as stated earlier, your deposition will implicate you in illegal activity.

Or maybe I am rambling this Saturday morning, maybe you are hiring a licensed contractor - in that case - get a contract.

As was stated earlier. Make your unit comply with what is expected in your market.

In SoCal - gas seems to be in favor.

Yeah. We did not steal the flat screen either but that is not how the game is played. If you have yet to deal with some of the more saavy tenants then consider yourself lucky. Maybe it was because this was a home that we paid $650K for in the pre-boom days of 2002 - maybe it was just a saavy owner.

Just grab some DDT and have at them - if it is true that DDT can take care of the problem I say it is time to bring it back. There is no reason why citizens in an industrialized nation need to be at the mercy of these useless creatures.

These things can get dicey.

Is there personal property present? Be prepared to inventory it and dispose of it per the law, which means you cannot just throw it out. I was sued one time by a guy claiming we took his flat screen etc - even though we had pictures and full inventory and proper procedures for all of the rest of his belongings. It was an unbelievable hassle. He was even wanted by the FBI and he still managed to sue us through his lawyer - unbelievable experience.

Just clear everything through your attorney - cost of doing business.

If your guy is saavy enough to have a lawyer he may plan on catching you up on the little things and collecting some cash from you.

As for the possibility of the foreclosure being overturned... it does happen. It's an issue to be sorted out with your atty, the trustee, and a title company.

Bryan. I think I understand your initial thoughts in that you are wondering why an investor who you are seeking to buy into your fund is not willing to invest in a solid ongoing return and would rather wait for a home run and make it.

I think that most RE investors are not scientific in their approach. They do what they have done before and nothing else. In the past they have done well with the hit and run and they do not want to deviate from what has served them so well.

Ask many of these investors and they will tell you how a market can tank overnight, things can change at the drop of a dime, etc. They will have a thousand horror stories that you can prove wrong, but it does not matter, it is their experience telling them otherwise and your fancy equations do not matter.

I can bet that the investors that give you these excuses are very conservative and do not want to risk their hard earned capital. I have several friends who I could easily put into fix/flips with substantial returns, even if I am an extra 10%+ of FILO cash, it does not matter, they want a home run or nothing at all. Even if I am taking the extra 10%+ risk. As a result of knowing so many of these types of people I simply have given up raising cash, until recently inspired by Steve L, and rested on my own funds.

As for your reference to the precise equation - no, I do not feel that it would be valuable to a typical investor. It is valuable if you are dealing with traders and speculators like Niederhoffer or the like but these guys are not interested in the few million I could put to use. Traders that understand the equations are too big for what you are doing - or what I assume your are doing. You could put together some equations for larger use, such as with larger scale note purchases, but most of us lack the historical data to substantiate the equation and those that are willing to look at the data are already in place using it with MBS and other securitized instruments.

In the end it is business as usual and if I were filling a fund I would be looking to individuals that do not derive their primary income from RE. or at least those that are only operating at the higher levels of RE and find a 6% cap rate acceptable. Other RE investors are simply too used to making 30%+ on every 120 day deal.

An equation like that would have many elements including the underlying market risk of each invested asset, the way that asst performs in relation to the underlying market, and many other factors.

I was considering writing it out and graphing the true risk of investments given different LTV's in order to justify precisely calculate the theories that are espoused on this forum and then comparing them to different sliding scale stress tests in order to see how we could deviate without increasing true risk. But then I determined it is easier to make an appeal to logic given the markets in which I invest and that most people that I seek funding from would not care.

Though it could be useful in obtaining funds from larger hedge funds..... anyway its a pretty nerdy task and I do not have the time because I am not certain I will find capital that will invest based on the equation at least not any capital that would not already be persuaded with an understanding of the market.

Of course you are right and I could even quantify it and chart it with a portfolio risk equation - but Bryan was asking why so many investors think the way they do.

I would also add for Bryan that fund investors, IMHO, are different than the typical RE investor. It is difficult for the average seasoned RE guy to let go of control. Even TD buyers like to see their security on a particular property - though a TD buyer would likely be easier than a boots on the ground seasoned fix/flip/ttee buyer/land developer.

Bryan,

Many investors consider the time they are invested as exposure to risk. Therefore they would rather a home run with short term risk than several base hits, each with market exposure/risk in and of themselves.

It is the element of "exposure to risk" that can drive a person to only want to engage in the markets for those rare home runs.