All Forum Posts by: Jay Hinrichs

@Jordan Archer 

  no limit to how many you can buy,, however each state interprets the dodd frank in their own unique style.. and its the sellers responsibility to adhere to it not the buyer.

1 to 4 units under federal law is relegated to the dodd frank.. under many state laws if they are non owner occ  then they are exempt.. some states they are not and when seller financing them you must have an LO put the paper work together for the seller. ON sub too I think your good either way.  5 units or more is exempt nation wide and state wide.

@J Scott 

  60% can be achieved just look at the marketing pieces from the dudes in GB its happens all the time over here in Detroit Rochester etc etc  :)

@Richard C. 

  There are thousands of little villages all through the US that meet that critera.. Investors just have not really found them and or TK companies have not taken that approach.

When I went into Kokomo it was to fund deals for a TK company in PHX... PHX was dead at the time.. and they did not like the crime in the bigger cities so they opened up shop there and did maybe 50 deals... by and large it worked pretty good.. Like said the major benefit to a town like you describe is the lack of crime and or out right vandalism and stripping the homes which is reality in the bigger markets were the 2% rule  rules !

@Jordan Thibodeau 

  shiny object syndrome is I think what they call it.... To my knowledge I have not seen a neighborhood on the west coast go from A down hill.. I have only seen the exact opposite.

Look at East Palo Alto for example  25 years ago it was a Ghetto war zone I bought properties there sub 20k in the 80S... today prices are 500 to 800k and its no longer a war zone.  there may be some areas that have gone from A down hill just can't think of any in my travels or experiences.  ( west coast I am talking about not mid west or big inner city rust belt type places IE Detroit)

@Chris Clothier 

   That's a perfect description of a slumlord :)

I had a client in Alameda CA... you probably know it. he owned 200 plus doors free and clear and had been buying these properties since the 60's when bay area prices were dirt cheap.. But driving around town you could always spot an Art Jawad house it was the most beat up place on the block... but he made millions obviously especially when his junkers became worth hundreds of thousand each... back in the 80's I was still selling large Ranch parcels up in the Wine country .. And he bought a 1200 acre ranch that I brokered to him.. Paid cash of course  LOL.  One day I was visiting him at his place on the water there and it was rent collection day.. you talk old school.. tenants had to have their rent in an envelope pinned to the front door.. we spent 2 hours before lunch driving to all these crap properties picking up all these envelopes.. the front doors looked like pin cushions from all the rents stuck to the doors over the years...  

@Chris Clothier 

  the risk on the low end is the exclusion in many insurance policies for vacant house's when they get vandalized and stripped many times your out of pocket to fix those things and one event like that and that property will take 10 years to get back to neutral not to mention positive cash flow.. so that is why in my opinion C class or 2% rule being that most of the 2% rule I think we have determined is C class or worse.. Is a very risky investment for all BUT those that live and work it... IE house goes vacant they get it secured same day or next.. they are right on top of it.... As well all know in those areas a house left unsecured within hours can be trashed....And least the inner city C class.

I have done a bunch of funding up in Kokomo IN.. for properties that would probably be considered C class and defiantly hit the 2% rule.. but you don't have the theft issues ... YOu have issues with jobs and low wages and low rent and winter etc etc. So I can see the 2% rule in smaller satellite cities in the upper mid west that have no real demand and probably have more houses that there are people needing them.. Years ago when I first started lending there I walked through many hud homes that were vacant a year and they looked just like when the folks left.. You take a house in the big cities C class area or what I experienced in the South and any house left on its own for a year is gutted like a fish.

@Jason C. 

  agreed  that was my point if the investing public held strong to the 2% rule and rents being fairly static as they are  especially in some markets were there is huge amount of rental inventory and actually some downward pressure on rent rates... values would just really never change much... I bet in your market as hot as it is  investors are probably tickled to get 1% and your high quality properties are probably appreciating for the first time in many years from what I am hearing... I know they are at the wholesale level that's what my guys I fund deals in Texas are telling me.  But they are not in the C class areas. nicer stuff in Houston.

My other point for the thread in the beginning is when talking with a few BP members who are looking for their first buy and hold this 2% rule keeps popping up.. and they want to know where they find those on the West coast... Well answer is you don't... You can find deals for certain but the numbers are inverse... instead of 100k of property bringing in 2k in gross rent.. its a 200k house bringing in 1k in rent.  Now you can buy lower end product all up and down the west coast and get closer to 2% but you going to get into just as rough of neighborhoods as you get into in the mid west and out in the inner big cities. And you will experience the same thing with difficulties on the management side.. I had a buddy buy low end in Sacramento and after the 3rd time the houses was trashed by tenants he walked.

I like the other post about Goldilocks that's the key find that happy medium.

@Ed L. 

  when I spent a year in MS I actually created a funding facility at Community bank in your fair city... We used the funds up in Jackson but the banker was in Hattisburg so I have been there many times.. I looked at a few OREO's they had.. one of them was bunker style housing west side of town...made a run at it but did not land it.. It was 100% hud.

However even those local banks have a hard time lending in the C class areas except for very prominent locals like you said.. And like you said even the locals fail at the C class.

@Sharad M. 

  A class at least my A class won't run anywhere near those expense numbers here is why.

1. because of the quality of the tenant I can have my bookkeeper manage them for me No Management fee... White color tenants that pay rent on time electronically and don't abuse the houses. I only pay a Realtor for tenant placement when I need that done.. No need for PM

2. always rented no lost rent to speak of

3. tenants stay 2 to 7 years I have one tenant going on 7 years.

4. yearly maintenance is next to nothing... Now these were brand new homes when I bought them. but still 5 to 7 years down the track only very minor repairs.. IE change filter I furnace type of thing  and small plumbing. 

And again being in Oregon and those houses being in Madison MS its the live well sleep well theory.. Although we did get hammered with Hail last summer and I had to replace roofs but that was an insurance claim and an act from on high.

Ed... this statement about class A turning to b or c just is not the case on the coast if anything it gets better and values keep rising. there is no demographic population shifts like what happen in the mid west and south that take what once were prime areas and degrade them.. You do have revitalization happening on the west coast in all markets. and that is typically semi industrial turning into condo lofts or run down inner city.. But you do not have prime A residential going backwards that just does not happen.. I know it happens in your market I have seen it first hand ... you can have A run down house that needs major reno.. Like here in PDX and there are few on BP that are house flippers here.. but its a 300k house put 150k into it sell for 600k type of thing.. One turd on the block but it gets snached up quickly and reno'd on fix and flip here you need to pull the trigger like right now if your going to get anyting.