All Forum Posts by: Jay Hinrichs

There's been a variation on this buy in the path strategy in the East Bay from Milpitas up to Hayward or so. Deep pocket guys buying up little tilt ups owned by small family type manufacturers....machine shops, print shops etc. Holding then selling to MF stack n packs. Prop 19 reassessment killing theese small businesses anyway if transferred to the kids.  AHJ's love the increased property taxes. Way out of my wheel house. I think that strategy is already slowing down though.

I have a modified idea to this @Austin Fowler that honestly, I hope I am wrong about.... 

The idea: 

Start reaching out to regional and spec builders. 

Do so in a pitch type manner, pitching a kind of life-boat as a buyer. I'd be shocked if any engage, but it's not to get the deal now, it's about planting the seed, and making that connection. 

Because the strategy is, and potential, that this winter season could get very ugly for some. Most if not all builders will still hold a healthy dose of GFC-PTSD. 

If this winter season lands with a convergence of buyer collapse, finance wows, and retail sales falling (retail as in consumer shopping, thus stoking "the recession is here" fears)....... well it's not just a "correcting" stock market that will be of fear, but that will probably be happening too. 

Again, I really hope I am wrong on this, I do. But things keep lining up for it.  

You just may get call backs from those planted seeds. And you just may be able to get yourself into some premium inventory for as little as say 80-cents on-the-dollar, but on cost-dollar! Yes, I could see some builders happily taking such a loss for the safety and certainty of being out and not getting stuck with hot-potato. Again, GFC-PTSD. 

Various builders know, and remember, assorted horror stories of so-n-so who held on, and held-on, waiting for a recovery that didn't come soon enough, wracking up more and more debts, only to get liquidated at a far worse bottom than if they'd just pulled the cord earlier when could. 

I think the coming play will be more so about buying equity than physically building it. 

Again, let's all hope I am oh-so-wrong...... 

But if I'm not.... well, I will be pulling out my rolodex and making some calls. Personally I will be looking to talk land because, honestly, I just don't have access to as deep of pockets as you do Austin. And land is cheap to hold. 

I had chance to snag a build-ready remainder of a development, 20 some lot's, at $25k per. I screwed it up, got too greedy, pressed for $17.5k. The one who did get it, they made millions. I promised self I wouldn't make that mistake again. 

It doesn’t necessarily have to be an either or strategy. There are benefits to both. I have clients who buy short term and/or long term rentals, and they also flip properties. I have other clients who are builders, and all they do is buy land and build new spot construction luxury homes. I have other clients who primarily focus on flips. 

There is merit to multiple strategies. One of the benefits of doing flips, assuming they are purchased for reasonable prices is that once they sold, there's an influx of money. The drawback to flips is the short term capital gains taxes.

Some of the benefits of owning rental properties, assuming they stay occupied the majority of the holding period at a market rent is the tenant pays the mortgage, there is monthly cash flow, and there's the benefit of annual depreciation that lowers the tax liability.

One of the challenges of flips versus owning rental properties is the flip is a one time event and in and of itself is not a continuous cash flow. However, I have clients who are constantly buying and selling flips, so collectively there is continuous cash flow, but only as long as they are able to continue buying and selling. 

There may be times when proactively buying and selling flips is a good strategy, but as the market changes, the better strategy may be buying and holding rental properties. 

One of the benefits my clients have is organized and up to date bookkeeping records and financial reports to analyze, so they can see where they are from a profitability standpoint and a cash flow standpoint. This helps them have the information they need to make informed decisions. 

 And yet you posted here for free 😂😜

@Marcus Auerbach

this is what we're seeing in Pittsburgh too. just to make up numbers... if a property is listed with an ARV of $250K, and needs $50K worth of work, it's priced at... $200K. which doesn't work for an investor, obviously. so it's much tougher to find distressed inventory at distressed prices.

can you provide more detail on your strategy?  i am sure i am not making as many offers as you are but trying to get that discount on something that's not as gnarly of a rehab mostly isn't working either =) are you making it work with volume, or your knowledge of the market, or both?

 Yep, I remember reading this NYTimes story last year about roadside motels having a moment with hipsters buying dilapidated properties and blowing them out with style. Not sure I'm into that, but man unique is a such a huge selling point right now.