All Forum Posts by: Jay Hinrichs

Hi!

Im looking to get a fix and flip loan and was referred https://lfglending.com/. They have some great terms. Has anyone used them and had good/bad experiences?

Thanks!

Hello, 

My fiancé and I are closing on 4.86 acres. Our plan is to build something smaller on the land and parcel it up because per the zoning (residential) of the township, there must be only one home per lot. So as I understand I have to create a plat through an engineer and present what Im going to do if I want to build 4 homes on the property. The totality of my plan is to divide 3 equal lots, build economical but marketable homes on each, rent/sell them, then use the equity from them to collateral our forever home on the remainder of the property. I think I will long-term rent them most likely as we are nurses and see ourselves taking care of our parents later in life, so ideally we would like to keep the homes. We just have no idea what to build, I don't really want to spend 250k. Any ideas of something that builds fast for a 1500 square foot home? I'm going nuts. We marry next August

Quote from @James Wise:

Quote from @Rick Albert:

Hello!

I'm analyzing properties and wholesalers are bringing me deals. The challenge I have is it appears to be so much risk tied to it, especially for an out of state investor. Here are some concerns I have:

1. There isn't a "due diligence phase." I can't lock up the property and go through the loan process, inspections, etc. Basically I lock it up and have to buy it.

2. How do I verify this is a legit transaction? These are people with no license, etc. with no fiduciary responsibility to anyone, so how would I know this is actually a legit transaction? Can I choose the closing company that I trust?

3. How do disclosures work? The Sellers typically have to disclose any material facts about the property, but you are flying blind is my understanding?

Obviously I have some bias being a Realtor in my market, but if I'm spending my cash I want to know it is somewhat protected.

Any assistance would be appreciated.

Thank you!

 Who people are calling wholesalers these days, (people who are really nothing more than illegal Brokers), are trash. Total trash.

That is an awfully hateful statement James Wise. I don't know who you have been working with but my company does some wholesale deals and we are far from trash. I'm not sure what that even means but our company is Property Solutions by InfinitiWin- If we can't create a situation where everybody in the deal, and I mean EVERYBODY wins, we won't do it. We genuinely help people in really difficult situations and they are always grateful. For that matter, we also have a meetup group (except "meetup" groups are not really much meeting up these days) anyhow our meetup group that mostly meets on Zoom is called Ethical REI of Northern NM.

Quote from @Matthew Paul:

All that Section 8 income sounds ok . But the current administration has mentioned limiting the time frame on benefits . I dont know how , if or when it will occur .  But I wouldnt be putting all my eggs in that basket 

Not worried. Gonna kick 15M families to the curb? I don’t think so. You know how civil wars get started? How empires fall? It starts by kicking 15M families to the curb lol

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @Jonathan Weinberger:

Quote from @Steve K.:

Thanks for the update on how this went. I remember commenting that your projections from a few years ago were optimistic IMO. Sorry it didn't work out the way you had hoped and much respect for the honest update. I think the biggest issue is that your rents aren't high enough to keep up with all the expenses associated with owning property over time. 

 I mean - I’m not negative lol. Everything pays for itself. Even cashflows. It’s just not the jet and lambo life I thought. 

 Renting a private jet regularly(1-2x month) requires about $1million in net monthly cash to justify it for it's time benefits.  $100k/mo give or take $20-30k depending on where and how far is your base cost.

You could have a built a semi luxury 4-6 plane hangar in an area that accommodates a lot of air traffic. Just create & rent out the infrastructure. That would get you closer to owning a plane, ideally 2, one you rent out 100% of the time the other you rent out 50% of the time/use 50% of the time.

What told you a $2.4million investment in Detroit would create that for you?

A Lambo isn't really expensive, you could've bought one in cash with all this money. Not the best investment, but I get it. 

one can get a net jet subscription for about 125 to 150k and depending on the Jet then you burn off 5k to 10k per hour when Use it. 

 Still $75-$150k if you're flying 15-20 hours a month. That's WPB to Hamptons 5-6x/month.

If you're flying less then that, then the time of traveling really isn't costing you unless you're also a larg(er) party or you need privacy status.

The breakeven point on the point is usually 12 hours/mo of traveling if it's 1-2 folks. That's if your time is actually worth it. If it's just a random thing you want to try once, go for it. If its a way of business life, this is one expense you really want to fine tune as it adds up but also saves your ***.

International whole other ordeal. Most expensive trip we tried was 6 of us from Miami to Mykonos back in 2021-- $210k. It would be closer to $290k now. We go commercial now internationally. Private domestically. 

Quote from @Jonathan Weinberger:

Quote from @Steve K.:

Thanks for the update on how this went. I remember commenting that your projections from a few years ago were optimistic IMO. Sorry it didn't work out the way you had hoped and much respect for the honest update. I think the biggest issue is that your rents aren't high enough to keep up with all the expenses associated with owning property over time. 

 I mean - I’m not negative lol. Everything pays for itself. Even cashflows. It’s just not the jet and lambo life I thought. 

 Renting a private jet regularly(1-2x month) requires about $1million in net monthly cash to justify it for it's time benefits.  $100k/mo give or take $20-30k depending on where and how far is your base cost.

You could have a built a semi luxury 4-6 plane hangar in an area that accommodates a lot of air traffic. Just create & rent out the infrastructure. That would get you closer to owning a plane, ideally 2, one you rent out 100% of the time the other you rent out 50% of the time/use 50% of the time.

What told you a $2.4million investment in Detroit would create that for you?

A Lambo isn't really expensive, you could've bought one in cash with all this money. Not the best investment, but I get it. 

Quote from @Jay Hinrichs:

Quote from @Eric N.:

Quote from @Nadeem Alamgir:

Quote from @Henry Lazerow:

The idea is you get a crazy good deal so these risks are worth it. Reality is most wholesale deals are awful, fake rehab/ARV numbers hidden big ticket repairs and not even far enough below prices you can negotiate off MLS. Just work with a realtor who invests themselves and can find you a good deal.

Agreed, it's a volume game, and yes, some of these guys are scammy, but if you can filter them out, you'll find deals you won't see on the market. Even with their assignment fees added on, the value add deals make a lot more sense than most MLS deals.

Most of posters on this thread are real estate agents. They resent wholesalers because they believe wholesalers are stealing their bread and butter. Some brokers and RE agents just hate wholesalers, and this will never change.

Here is the truth: 

1. Real estate agent has a conflict of interest when representing investors. Agent is always interested in inflating the worth and price of property, because agent earns commission based on the sold price of the property. I have seen a lot of investors in deep dirt , because they paid retail price on as is property that is not worth half of what it costs to buy and fully rehab it.

2. Wholesalers are humans, like politicians, cops, attorneys, brokers, agents, doctors, astronauts and etc. Some are scumbags, others are not. Some are competent, others are clueless. Some are deliberately deceitful, others are transparent. 

3. Investor is not a mentally challenged , elderly or minor consumer, in need of a nanny or third party guardian/protector. Investor is an entrepreneur and as any businessman must accept the risks and responsibilities that come with running a business. Lazy and stupid investors will always fail, but smart ones will study their market, understand that they are responsible for their own actions and will only buy properties that make sense investing in.

4. As a flipper I am currently looking to buy a property in $1.1M - $1.3M ARV neighborhood. I have a partner who is GC. I have a team of three realtors in the area where I am looking to buy a house for rehab. I know how much it will cost to rehab the house, based on whatever variables and finishes I select. I know DOM for those houses listed in 1.1.M-1.3M range. I will only buy it if I can get it for ARV minus Cost of Rehab minus 10% resale cost minus my closing costs, minus my Hard Money Cost (interest/origination fees) minus holding cost and minus $250,000 I want to make in 6 to 9 months period if I buy that property. Whatever that number IS (after all deductions) is MAO I will pay for the property. If I don't get it for that number I will NOT buy it. I would rather NOT flip than loose money or work and sweat while everyone else makes money. I am the only person responsible for doing my due diligence.

5. As a wholesaler, I do my best to get the property for less than 70% of ARV minus rehab costs and my assignment fee. I know what underwriters and hard money lenders look for when they approve hard money and DSCR loans. But when I have property under contract I don't expect contract buyer to rely on my numbers or analysis. I usually say: here is the house and this is my asking price. At most I will disclose ARV, based on comps in the area. Rehab costs are for me personally to figure , so I can properly negotiate the selling price with the seller. But I don't think it's a good idea to share it with buyer. I may share it if I know they have plenty of experience, to show that I have a clue what their cost of rehab will be. But generally wholesalers should avoid posting rehab costs for a deal. I don't know who they will use for construction and where they will get their materials. Some investors run their own crews and have GC license. They have storages and use stored materials from previous projects and buy dirt cheap materials and appliances from auctions. Others hire general contractors who charge premium for running the project, they pay full price for materials. As you can imagine, cost of rehab can vary drastically from one to another investor. So, I will never be able to tell buyer what exactly it will cost them to fix the property. They are the ones who must figure it out. I will run mid point numbers just to figure what the property is worth as an investment opportunity before I put it under contract.

P.S. I liked your response that's why I replied to your post. You are honest. If I ever decided to work with a realtor I would pick someone like you.

Biggest risk is cash buyers get no title insurance on the wholesaler assingment fee.. if there is a title claim and the buyer gets paid out they lose the assingment fee.. poof gone.. no wholesaler is going to cut them a check.. Most folks simply do not know that title companies will only insure the underlying contract amount..  

For me I insist on buying extra title insurance to cover the fee.. Most wont do it so its a dialing for dollars situation. many never heard of it.. U have to educate them.. but in markets I am funding high volume flippers its a must and I do find a company that will accomodate.. Average one off investor might not have the same pull based on lack of deal volume.

I think this is something buyer has to do, not something wholesaler should be actively participating in or offering. Assignment fee is just like the closing costs, attorney's fees , origination fees and etc. Buyer received services and paid for them, and none of the parties that provided the services should be on the hook, unless there was some sort of fraud or misrepresentation involved. Of course, buyer is free to purchase extra coverage, if they elect to do so. But I don't think it's responsibility of the wholesaler to offer it.
What I know wholesaler must do is to disclose everything that he is aware of. For instance, suppose there is a ground rent on property. There are legitimate, brick on concrete foundation houses that stand on grounds that still collect ground rents, dating back to colonial times. If wholesaler fails to disclose such leasehold (at least in the jurisdictions I have dealt with), he will be on the hook once buyer finds it out. He might be on the hook even if buyer finds out during title search, doesn't make a fuss about it at closing and later comes after wholesaler when they want to redeem the land. But ,aside from such encumbrance that assignor must disclose, any other liens issues and insurance for those type of claims should  be the responsibility of the buyer and the title agency to clear. 

Note that I am not posting this to argue or dispute your position. I believe business interests are best served when everyone acts in a good faith, including the buyer, seller and wholesaler. I personally have never heard of extra insurance coverage to cover the assignment fee, so I will discuss this with my local title agency that handles my transactions. They are very good and thorough on everything, they do comprehensive title search before insuring it. May be they should advise buyers to add extra coverage when producing the title insurance for them. 

Quote from @Nadeem Alamgir:

Quote from @Henry Lazerow:

The idea is you get a crazy good deal so these risks are worth it. Reality is most wholesale deals are awful, fake rehab/ARV numbers hidden big ticket repairs and not even far enough below prices you can negotiate off MLS. Just work with a realtor who invests themselves and can find you a good deal.

Agreed, it's a volume game, and yes, some of these guys are scammy, but if you can filter them out, you'll find deals you won't see on the market. Even with their assignment fees added on, the value add deals make a lot more sense than most MLS deals.

Most of posters on this thread are real estate agents. They resent wholesalers because they believe wholesalers are stealing their bread and butter. Some brokers and RE agents just hate wholesalers, and this will never change.

Here is the truth: 

1. Real estate agent has a conflict of interest when representing investors. Agent is always interested in inflating the worth and price of property, because agent earns commission based on the sold price of the property. I have seen a lot of investors in deep dirt , because they paid retail price on as is property that is not worth half of what it costs to buy and fully rehab it.

2. Wholesalers are humans, like politicians, cops, attorneys, brokers, agents, doctors, astronauts and etc. Some are scumbags, others are not. Some are competent, others are clueless. Some are deliberately deceitful, others are transparent. 

3. Investor is not a mentally challenged , elderly or minor consumer, in need of a nanny or third party guardian/protector. Investor is an entrepreneur and as any businessman must accept the risks and responsibilities that come with running a business. Lazy and stupid investors will always fail, but smart ones will study their market, understand that they are responsible for their own actions and will only buy properties that make sense investing in.

4. As a flipper I am currently looking to buy a property in $1.1M - $1.3M ARV neighborhood. I have a partner who is GC. I have a team of three realtors in the area where I am looking to buy a house for rehab. I know how much it will cost to rehab the house, based on whatever variables and finishes I select. I know DOM for those houses listed in 1.1.M-1.3M range. I will only buy it if I can get it for ARV minus Cost of Rehab minus 10% resale cost minus my closing costs, minus my Hard Money Cost (interest/origination fees) minus holding cost and minus $250,000 I want to make in 6 to 9 months period if I buy that property. Whatever that number IS (after all deductions) is MAO I will pay for the property. If I don't get it for that number I will NOT buy it. I would rather NOT flip than loose money or work and sweat while everyone else makes money. I am the only person responsible for doing my due diligence.

5. As a wholesaler, I do my best to get the property for less than 70% of ARV minus rehab costs and my assignment fee. I know what underwriters and hard money lenders look for when they approve hard money and DSCR loans. But when I have property under contract I don't expect contract buyer to rely on my numbers or analysis. I usually say: here is the house and this is my asking price. At most I will disclose ARV, based on comps in the area. Rehab costs are for me personally to figure , so I can properly negotiate the selling price with the seller. But I don't think it's a good idea to share it with buyer. I may share it if I know they have plenty of experience, to show that I have a clue what their cost of rehab will be. But generally wholesalers should avoid posting rehab costs for a deal. I don't know who they will use for construction and where they will get their materials. Some investors run their own crews and have GC license. They have storages and use stored materials from previous projects and buy dirt cheap materials and appliances from auctions. Others hire general contractors who charge premium for running the project, they pay full price for materials. As you can imagine, cost of rehab can vary drastically from one to another investor. So, I will never be able to tell buyer what exactly it will cost them to fix the property. They are the ones who must figure it out. I will run mid point numbers just to figure what the property is worth as an investment opportunity before I put it under contract.

P.S. I liked your response that's why I replied to your post. You are honest. If I ever decided to work with a realtor I would pick someone like you.

Vegas is the Detroit of west coast. The appreciation you observed is the result of CA influx. It’s real, but you can’t fundamentally bank on it continuing. There’s so much land and not much economic diversity to support continued appreciation. You’re basically relying on CA migration, and while that may be a strategy, it’s a risky one.