All Forum Posts by: Jay Hinrichs

@Account Closed 

much like buying a Co op ... I almost made the same boo boo in Mississippi when I was buying my Go Zone inventory... There are many SFR subdivisions there that do not allow Rentals of any type no matter what... And these laws have been taken up the latter and upheld.

Not so common in CA at least in my experience there. And when I was writing CCR's for developments I did in N. Ca we would never put that restrictive covenant in.

@Chris Clothier   last comment on this thread

I was at a NMLS CE class last Friday.... and the instructor was raising the bubble issue.

I personally don't think we have a big bubble coming again anytime soon.. The events that led up to the last one were once in a Century type events.

So how I wrap that back into this TK thread is simply the environment that led to the GFC and how investors bought property and how they are buying them today is very different.

Pre 08 it was all the rage to use a HML to put the TK buyer into title then do a rate and term refi with many folks not only getting into the deals with no money down but cash back at close.. We did many deals were investors would close on 4 homes simultaneously and get 5 to 8k cash back on each through refi proceeds.. Now the WEst coast marketing guys had a field day with this... Hey buy a home it cash flow 100 a month and get cash back.

I was the HML that put those folks into title I did this over 2000 times from 2002 till the crash.

At that point our underwriting criteria was simply a pre approval from a lender and we closed 99% of the deals we did.. until the crash.

So it was the whole scenario of getting into these deals with cash back.. The banks thought hey they will put the cash back into reserves and properties will continue to go up.

Well reality was they went and took the cash out and bought a car a boat a jet ski a trip you know all the things they deserve as good consumers. And the banks just did not require enough experience or reserves to be making these kinds of loans.

So what happens is in credit tight and constricting job market.. The cash flow was never materialized these group of investors blew there reserves on stuff.. And then when the houses needed 2500 dollars for a turn over they did not have it and the house goes vacant and a default occurred. So in essence these investors that had plus 700 cred score but no reserves got wiped out en mass.

NOw today you don't have that scenario.. you have a huge amount of RE being bought for Cash.. The banks actually require in most cases and if they have half a brain the investors need 20 to 30% down PLUS and 6 months reserves verifiable.. Along with the reset in values. I think we have a much stronger play for buy and hold...As the investors that are buying today have skin in the game and are smarter than they were 10 years ago with all the public information. But you still have people buying in Hoods and Ghettos thinking it will work and its those that do that that live out of state that are going to end up not doing well as we all know... Locals can work those areas just fine and run it like a bizz.. sitting at home in LA with that asset class will drive you nuts.

@Chris Clothier 

  Well said... And yes I probably do lay it on A Little thick... I certainly am not opposed to investing out of state 60% of what I do is out of state.. However having foreclosed on well over 100 people living in SoCAL that bought TK in the mid west I have a bunch of first hand experience at how these deals can go wrong and how the Socal investor was really in over their heads.. And it was in every market I worked in ATL Bham JAX Memph. INdy CHC Ohio.. I became the proud owner of 200 of these houses that investors walked from and when I was trying to do work outs with them and figure out what the heck went wrong that's were I got a PHD in Mid west investing the tenant base, the buying in the wrong part of town buying from bad TK folks and getting sold too hard by West coast sales people that had no skin in the game and No real estate license to be selling this stuff in the first place..

What folks need to know to get a fair and balance look at investing is the points you make in this post about the Assets they think they are buying.

So while its important to have the good team on the ground and PM as we all know.. Choosing the market and Asset class is just as important.

And I think so many folks get lulled into the idea of getting started in RE and hey I can do that for very low amount of dollars OUT of state ( speaking of West coast or East Coast investors) they get blinded by the sales pitch. Only to learn about  the reality of the asset class, And the Demographic of the tenant base etc etc way down the road.

So if one is going to go into this type of investment its good that they get both sides.

Which leads me back to the comment I originally made about the post that these assets throw off 20% NET cash flow ...And of course they do if you do not count all the expenses :)

Ok off to take another NMLS test  have  a good one.

bidding services that are full service in my experience charge somewhere in the 3k range per deal that they actually get.

this was common in LV  PHX  ATL.  Not sure what price ranges your working in ..

@Adam Haman 

I had similar circumstances.. started selling RE at 18 making 60k a year in 1975 when my buddies were pumping gas in CA for 1.35 and hour. But by the time I was 32 ish I had had enough of selling folks... Did well ... But I just went into other areas of RE that interested me.. HML Development Building... etc etc. So now 25 years later that's what I do I lend money to JV partners.. I develop RE and build houses. And have a lot of fun doing it.. I don't work with buyer or sellers anymore.. I do still have my CA brokers LIcense and OR brokers license and MS brokers license along with NMLS Mortgage bankers license in Oregon and even tomorrow I am taking the UST test that will allow me to be in 41 states. But the funny thing is I don't use any of them.. I just do deals have fun.. And living in ORegon its all about taking vacations to the sun....

Lastly everyone has their own threshold of expenses and what it takes to live.. but as time goes on that number goes up.. So what may seem attractive now 4500 a month I can pretty much tell you won't be attractive in later years. HELL my Obama care is 1500 a month for me and my wife alone. And if you have kids that are going to college etc etc. Unless you have trust fund or family money to help with that. Maybe you stay in RE but look at some other end of it..

I know it took me a few years to not feel weird if I was not working on the weekends. But developing lending and building require little to no nights and weekends.

@Sharad M. 

I have seen those restrictions in higher end developments in the Deep South.

And of course NY.

glad you had plan B :)

@Mike H. 

your description of potential return of 20% on a rental turn key  is Flawed and very misleading to a newbie buy and hold investor.

You have no vacancy factor NO maintenance factor.. No Opps factor. NO factor for turn over and re renting the property and paying 1st months rent as commission.

And the biggest is assuming appreciation.. there are only a very few markets in the US that appreciation is REAL...

under capitalized developer and a non sophisticated lender  leads to all sorts of problems

that are usually negative to the lender.

I would pass on this deal and if you want to be a lender and you have no experience hook up with a local REPUTABLE HML and have them make a few loans for you so you get the drill

@Account Closed 

No credit no docs what do these banks base their loans on Just LTV?

I can see them loaning on Prime CA properties but have a hard time seeing them loaning on any of the SO called cash flow mid west or rust belt type of properties.

But maybe here in Oregon they would be a fit that's a good tip I think I will make an inquiry.

@Jeff Barnes 

so your not a custodian?  and your taking fee's for helping investors invest?

Nice Niche  and powerful one too when you get a bid enough client base.