All Forum Posts by: Jay Hinrichs

@Bill S. The idea is to get responses I think If put a price in some owners will dismiss without engaging you.   We do a lot of direct mail for Lots... Now these are true vacant lots.. So there is not near the competition from those mailing to existing homes. and the list is much smaller.. So we customize the letter and individually sign each. nothing looks mass generated.. Then the idea is to get them on the phone and start to engage.. Price is something we get into late in the game.. Much of the time its creating a realtionship with the seller as they are not interested at this time but things change.. WE never burn the bring we always leave on good terms and ask if we can call them back in the next 6 months to just check in.. IN almost all cases if you have this relationship they will say sure call in 6 months but we probably don't want to sell then either... Well then something happens and their situation changes and your already in line with that personal relationship.... We did this in the Timber business for years.. Our leads were NEVER dead until the property was clear cut either by us or someone else. Until then they were are clients and we kept in touch as I said 2 times a year.

So if I was going into your area I would create that data base and look at these as long term client bases and keep my name in front of them so if something did change they call you first or are ready to go next time you ping them

I am currently doing this in 2 of my target cities. And we are averaging one deal per 200 or so personal letters... Just learned what the yellow letter was.. I understand thats a mass mail piece... Ours is truly a personal letter personally signed

@Terence Wang   making loans to own  or with the Idea would I own it for what I loaned is not the best strategy... The reality is if you have a foreclosure.. You are going to have lost 6 months to a year of interest. So deduct that from what you loaned. you will have 2 to 3k in cost maybe more. You will no doubt have issues with the property either functional or intentional IE your borrower is pissed and strips the house. Hold over tenants etc etc. 

If your going to purely equity lend.. then in my mind you need to back off another loan amount. 

In addition one of the main things I learned over the years IS LTV is nice.. But I like actual CASH to loan .... a 70 or 80% LTV loan but with NO cash out of pocket for the borrower is still a loan that is risky if there is a Hiccup. Those Loans that have ACTUAL CASH to LTV regardless of borrowers creds are much stronger loans in my experience.

IE I will take a 50% cash to loan deal with no income docs and good value docs Either my own investigation or appraisals.. Over an 80% LTV no cash in the deal 700 credit score. The no cash deal has a far higher chance of failure than the no Doc provable 50% CASH into the deal loan.

@Rob Cee   when hard money lending with folks you have no personal knowledge or relationship with one must use this analogy flying analogy... when I am done with my Runup at the end of the Runway and getting ready to take the run way to depart I go through a very quick last minute check and I always think OK what could kill me today if I over looked something... When I lend money I use the same principal how is this borrower going to take this money and not pay it back.. Thinking through all the ways I could end up being departed from my funds.

At the end of the day one can not totally insulate yourself from default it happens, but to mitigate it what I have done the last 8 years or so is be patient and found a nice group of folks that are now repeat clients.  Now this is not realistic If I was running a large company but for a private investor looking to invest in TD's this can be a good way to create long term relationships that are mutually beneficial

Check with the state of WA many of the loans your contemplating do not need a broker or NMLS licensure

@Aaron Norris   Just fyi I have recommended your company to many LA investors as an alternative to going half way around the country and trying to buy a cash flow rental. Not sure if you still have the 7 or 8 year buy and hold product. But I liked that product. I have meet your dad a few times at various events and I really like his presentations and especially his experiences in Texas

@Rob Cee   Its the original intent of the borrower if there is a compelling reason that the borrower had to make a change in direction and can prove that some outside event or agency created a different direction everyone one in the transaction is fine.. You can't regulate or insulate yourself from those coming into a deal with fraud on their mind.

Agree with Jeff on this point

@Jason C.   class of property like you state is in the eye of the beholder !! and very much dependent on the area of the country you work or reside in.

good exercise would be to take Detroit and put it into A B C D class by area and see if anyone can agree on that  LOL.

My lending days in Detroit was an eye opener... All PM's were armed,, Office was razor wired and bullit proof glass.. ARmed security guards checking the contractors into and out of the rehab jobs.. And when I first went there it all looked good to me on the surface.

If I look at my market in Oregon  its also laughable on the other end... We drop 30k lumber packs right off in the front yard.. No security in any manner.. Never had more than the odd neighbor steal a 2 X4... all mechanical plumbing etc etc is put in with no security. 

We don't lock the house up until its been sheet rocked.

Not that theft does not happen in my market it does but its just really rare.. And I am pretty certain in the low end rental markets if you did not secure a home all this stuff would stand a very good chance of being pilfered ..

But it sounds like your new to the game and I wish you the best... And your doing it right your buying properties you can watch like a hawk and you know your hoods that gives you the best chance of success... 

@Wendell De Guzman   thanks Wendell remember this just came up as I got a call from someone in my are Portland Or.. and he wanted to know why he could not find any 2% deals in Oregon...and he was frustrated.  Once he explained to me what this rule ( guideline was) at that point I realized its a regional thing and as stated for all intense and purposes only applies to low end rentals.

Further I postulated that if investors that are in the Know IE educated on BP and have this guideline in mind that values will remain static in those markets as the PRO"S will certainly only buy under those metric's and rents by and large are static in those particular asset class.  That was my point.

It was NOT my point to debate the definition of C and D class I can only go by my 15 year experience loaning in Detroit, Indy, Memphis, Atlanta, Birmingham, Jackson, Houston etc etc as to what C and D areas are like in MY perception.  I know what they are in CA... IE compton Watts  East Oakland  West Sacramento, STockton etc etc.

WE just don't have those kind of ares in Oregon and thats the end of that discussion. Our worse neighborhoods would be strong B in most areas that I am familiar with.. So its just perspective really.

@Dawn Anastasi @Chris Clothier @Ed L. @Ben Leybovich @Sharad M. @J Scott @Mike McKinzie 

Thank you all for a very spirited conversation regarding this topic.. great perspectives from all.

What I take from this is most of those that responded are in the bizz, IE they work it full time and it is their job.

Those that are successful in the 2% plus type properties generally buy their own deals wholesale over see rehab at best pricing, then self manage or bring the asset into a very controlled environment.   And stay right on top of them or in other words are members of the community were they invest and therefor has command and control .

And those of you who happen to live in parts of the country were these low hanging fruit can partake successfully in this business should count themselves fortunate that these assets are so readily available to you within a 30 minute drive..

I did not read anything that changed my mind that the 2% rule keeps prices from rising in any appreciable manner as value only rise's with rent increase's and rents are fairly stable in all these markets.

Lastly as to class of asset being it A B C or D that is in the eye of the beholder, my C could be your D or visa versa .....

Off to Milwaukee today then Chicago  Beer and Brats  Friday fish Fry, Deep dish pizza Miracle mile... should be a fun week on the road.

Best to all

@Jason C. 

  good honest answer on your wife going to your properties.. glad your aware.

In my C stuff over the years I would go there mid week during the day but we always were packing No way at night no way on weekends.  LOL  and no way wife by herself.

@Jason C. 

check back on this thread after 2 to 3 years of those tenants and see what your expenses are it will take a big bite out of that cash flow that cash flow is assuming they all pay rent on time and your have little or no fix it issues... As we all know those tenant bases are pretty rough on things...But if your going to do it go for it.. build up as many as you can so you can hire people to do the dirty work for you,,,, that I am sure is many peoples goal.. If you live there work it like a business it can work but it is a hard bizz no doubt and takes time and effort just like any other business.. You could also invest 100k in a coffee shop and probably make 35 to 40k a year Net.  But then you would have to deal with the employees>

@Jason C. 

  so back to the point of my post  2% or 3% or whatever kills values.. it drives the values down not up... It drives cash flow up.. But when you go to sell aren't other intuned and informed buyers going to want the same deal you got... 2 to 3% and your rents I would guess will stay static for years to come so you really don't have any equity growth.. in those areas.  But I have never been to Philly save a train ride through there from DC to NYC.. all I saw was boarded up  ( actually concreted in) tenements... It reminded me of Cairo... I was thinking man if someone just got to the states and their only impression of the states was this train ride they would not be very impressed between leaving DC and entering NY   LOL  I know there are great parts of every city  not taking a poke at yours. Just my obseravations.