All Forum Posts by: Jay Hinrichs

@Chris Clothier 

  Agree 1000%  and I think as veterans, you certainly are one and very experienced in the space... If investors on BP who chase these things realize that its really chasing rainbows then I think we have done a service for the community at large.

So my point was really to those just starting out.. Just like the fellow I was talking to today that was trying to find that 2% deal , for some it exits for the pro's those that do it full time and have for years.. the new up and comers like Sharad.. they can be there but for mom and pop or first time investor pretty dangerous stuff really.

@Sharad M. 

  good points  and the 2% rule is alive and well in those mid west markets but not on the coasts.. Why is that??  can anyone answer that question.  Why is the price to rent ratios so good in one area and so poor in another? 

Is it supply demand?

Is it tenant demographic?

Is it low median income  so cant afford higher rents.

Is it ceiling on rents.?

Is it the fact that there is a lot of risk in that asset class and not in others.

Believe me I am all for the 2% rule in the proper context.. And I think your on the right track where you can bring investors in to your program and help them spread risk and return. My point again though is with the 2% rule how will properties ever increase in value if rents never rise or only rise very minimally.?  J Scott won't be buying those you won't buy them then who will buy them.. the less knowledgeable investor?

Just playing devils advocate here :)

@Jeremy T. 

Riding the storm out on a winters night in the rockies.. or something like that. I was going to school in Leadville when that REO speedwagon hit the charts. thanks for bringing back the memories.

@Chris Clothier 

Chris good points... I can flat guarantee you that In the SFR's in the PDX area that it is no more than 10% rentals... What your looking at is apartments.. and we have loads of them way more than you have in the mid west .. And they are by and large A class properties that sell for 4 to 5 caps and in Beaverton these apartments support Nike and Intel along with Genentech Fujitsu and many other high tech companies they call it the silicon forest so our multi here is nothing like you see in Memphis.. Last time I was in Memphis I probably drove by 4 or 5 large apartment complexs that were boarded up.. you just would not see that here in Beaverton. Our apartments sell for 80 to 100k a door.....friend of mine bought an 80 unit in Memphis two years ago for 4k a door.. I told him don't do it.. he dropped another 10k a door in it.. and of course it being c class it got destroyed he sold it and lost 400k ..

We build 12k housing units a year here up until the crash but its coming back...  4 to 5 thousand are multi family the rest SFRs I would venture to guess there is a fraction of that kind of activity in new construction for multi in Memphis but I could be wrong....

The reason is houses are not rentals is because medium price is 270k and rent for 1k so its not a real hot bed for investors wanting SFR's as rental houses, it just is not... The rental market is in multi and plex's I don't disagree with total population being renters and owners like you point out.. and my information may be flawed as well about Memphis and I just use Memphis as an example. that's just what many have told me over the years. And when I was foreclosing on dead beat owners from LA there in Memphis when I talked to PM's trying to figure out what to do this was the info I was given.

There is no denying though there is a whole new paradigm  shift from home ownership to rentals for the rest of one's life.

Back to the 2% rule my main point on that was,, if investors stick to the 2% rule and rents never rise which they don't much values will never rise either unless investors are willing to lower their % return... Like J Scott said he is not lowering his return # so he seeks out those areas that it can be achieved and I suspect he has a full blown machine that can make that work.. the average investors trying to buy their first rental if they follow the 2% rule in my personal opinion will be buying in a very tough to manage Ghetto type situation.

I am would venture to guess that the properties you sell don't hit the 2% rule and you would never suggest that investors buy in those neighborhoods.

@Dean Letfus 

 I saw that Andrew Waite is part of your company.. that seems strange for an independent journalist to endorse a particular TK company ... And be a principle or at least the appearance of a principle in your company.. maybe that's for the foreigners benefit, being a fellow Kiwi.

@Dean Letfus 

  Problem is Dean as I point out.. so many folks at least on this site think this is what they should be doing and if they don't hit that its not a good deal. So I think reality is.. those that live in a community have access to true wholesale deals like Sharad they make this metric easy but those living on the coast they can't come close get frustrated then migrate and try areas that maybe they should not have.

@J Scott 

 right now I am in 2 markets providing funds for the wholesalers that are providing product to the hedge funds  its a volume play.. and being a lender type we are used to small margin and lots of deals..... But they are fickle bunch those hedge funds and they are running into the same issues that private investors run into.

IE:   management sucks and or stole their money, rents are not what they were told ( go figure) rehabs lasted a year or so then major issues.

So now what we provide is.. New roof new AC  new sewer line to the street pretty tight product. we don't make a bunch on a deal ( no one on BP would touch it thinking its too little of profit) but its consistent once we hit their metrics.

@Karyn T. 

I know see were this big West coast Mid west deep south divide comes from.. You have this huge rental industry in the Mid west... Its so much larger than the west coast. When you have whole huge cities like Memphis with 50% or better of all SFR's are rentals. How is that going to ever turn around and all of a sudden become owner occ neighborhoods I think the owner occs move to new construction or better areas while they flee the old rental hoods.. but that's just my thought.

If every thing being equal and you did not know any better and you thought you were not getting a good deal unless it was a 2% deal and your west coast based I can now see why there is this disconnect and also those get frustrated because they can 't get 2% and think that is what they should be doing and flood out to the mid west. Where in fact they probably would do far better staying closer to home over time, when you add in ease of management and TRUE appreciation. When you look at our market the Northwest less than 10% of SFR's are rentals.. so you can't find an area that is all rentals they don't exist.

@J Scott 

  been there done that bought 350 of them  got bought out in Oct happiest day of my life :)

although we killed it in Atlanta.. When I had to sell a few of my REO at 35k for a 10 year old home in Atlanta a year later I turned around and bought 50 of them then sold to hedge fund for nice gain. ONe way to make money is not look at hedge fund as killing a market just follow them and figure out how to buy a head of them and then sell to them.. that's what I am doing now in the space.

@Thomas Weir 

  just check craigs list for note buyers... You call one and then its a shock to their system that they actually got a call.. then they hesitate for a few minutes why they scurry around trying to find there script.. then they read the script like a bad actor.... LOL