All Forum Posts by: Jay Hinrichs

@Matt R.   for companies its just not that profitable.. most TK guys are making there money just like any other flipper.. on the front end. . when the buyer closes the TK operator has all their profits in pocket then its up to the owner to deal with the property and the PM...

In a partnership like we have been discussing there is little to no up front fee. So TK operators by and large just could not do this as they have to pay there WEst coast marketing folks and or national marketing folks  then there over head and such.. so they need to make there profit on the sale.

I did do just this as you state and bought 350 SFR's and it went very well and we sold and liquidated to some very nice results.

@Mike D'Arrigo @Brie Schmidt Mike I am going to disagree with you on the point between being and investor and a landlord.. Owning SFR rentals is just not that passive of investing in my experience which is considerable on the subject. And to represent or market or sell folks on the fact that this TK type of investing is the same as walking into your stock broker and picking a mutual fund is just not reality when it comes to these investments and the amount of time and effort and RISK one has to put into them.

Now again I am talking more on C and D class units... I own quite of few A class SFR's and the management experience in those is not anything like C and D. Its a totally different tenant base.

I have seen your product and your on the upper end for sure in Indy compared to others that are selling TK. So your personal experience's may not be as significant as those buying lower end units. 

My point in this thread is that in the long run if one can find a TRUE EQUITY partner on the ground in the MARKET you want to invest in that you WILL make more money in the long run and have much fewer sleepless nights with a partner than you will buying from companies that are making a profit selling it to you ( not off of MLS) and managers that are in the business to MAKE money and they make it off of your cash flow and repairs)

AS I stated.. If you have no leasing fee's no PM fee's and no mark ups on repairs. IE you have a partner that does this for you plus puts in equity. Not only that the partner on the ground is going to get the deal TRUE wholesale not marked up 3 times between the wholesaler and the contractor and the marketing company, thats the reality of the business.  If you have to set home and let other people source your deals your going to pay far more than a local in the same market and in the same asset class. If you have to hire PM to manage your property you have to pay for that.  So that was my point of the thread and what I liked about the pod cast.

AS for when partnerships end.. You simply need a buy sell in the LLC agreement. And since they will be in the properties wholesale and not marked way up they can probably exit for at least what they paid for them.. Where its very unlikely that anyone who buys through a turn key operator in a C or D class will make a profit trying to sell on their own it just is.

@Cliff Mccue 

agreed until one has owned a SFR rental for 3 to 5 years return on investment is just a guess.. And of course the marketing companies have to top one another in advertising returns.. so they leave a few key numbers out. So they can compete with each other.

biggest one is under stating on going maintenance when your buying these older homes your just going to have issues come up through out the year...

I think the statement "live were you want and invest were it makes sense or is affordable" leads many down a very bad path if they try to do it on their own with little or no ability to analyze the risk and are putting 100% of there outcome in for profit companies. .  ....

Investment properties are not passive investments as you stated . And out of state is very difficult at best..  ( Caveat I am talking about low end rentals) not A to B grade properties or nice condo's that have management in place for a lot of these things.

@Michael Dunn 

and really depends on the class of property.. if your buying in a predominantly rental area its hard if not impossible to establish a true ARV.. If you are buying in ESTABLISHED and KNOWN owner occupied and are doing RETAIL flips then you can get a pretty good handle on ARV through all the methods mentioned above.

However if your trying to comp low end cheapie houses that are rentals.. then they are only worth what basically a wholesaler will pay for them.. regardless of comps. I learned this the hard way myself.

every state has companys that do back ground checks and such for landlords  average fee is 40 bucks... for criminal and credit.  like Joe says just google them

@Dawn Anastasi 

 not from me He stated he has some in INdy and in Milwaukee that he is handling on his own and he stated those are rougher to manage ( investor talk for not hitting the numbers ) and other problems.

@Kelly B. 

 Well from Dawns perspective she will want to choose partners carefully as well plenty of money out there... But some people can drive you bonkers with questions, worry wartism, second guessing what your doing, not understanding how things work in C class, not understand how section 8 works.. Not understand most of the basics of owning these properties.. they are the most popular investment with many wanting to get into the RE game because the cost of entry is so low and the sophistication level of the investor does not need to be anything more than they have money.. Yet these are some of the toughest properties to run and manage bar none. So you take an experienced investors match them up with tough properties and that's why you have so many vacant houses in the low end the newbies and out of state folks give up.

By bringing in a local partner who has their S%$# together and has some CASH.. NOt just your cash and their brilliant Ideas you have the makings of a true beneficial partnership.

@Mehran K. 

  as you state going the PM route will have rough patch's no matter the city area etc.. And yes the PM wants to make money.. But believe me there is a huge difference in a PM and an OWNER PARTNER 

Its how I ran my 350 houses  and the only way it worked and I could truly be taken out of the day to day of PM and managing my PM..

I mean just think of the savings.  with  partner like you have which I assume is 50/50 on the up front cash and they are managing the deal.

1. Maybe they don't charge the first month rent as a leasing fee ( as an owner why do that)

2, Your partner is managing the property no monthly management fee.

3. Your partner is getting maintenance done at cost no mark up.. And even bigger can triage things to see if you really need work done or not.

So with the average PM arrangement your only getting 10 months of rent if you have turn over yearly which you will have in the lower end.. You will get some that stay but you will. And you save another maybe 5% on unnecessary maintenance and or mark up on the work.. you don't have re leasing fee's you keep the late payment penalties.. ETCETC.

So by taking on a true partner like this you can save 25% a year in fixed costs 15% at a minimum that is the difference between hitting your numbers and thinking hey I should have bought apple stock and got the 7 to 1 split. 

there you go Stu ask and you shall receive !!!

@Dusty Warner 

hard money rates are very much regionalized... Like right now in CA.. every other investor lends money so its pretty competitive for rates and terms... Same in PDX were I am at.. basically most of these lenders want to get to a 18 to 20% apr with combination points and interest. In the small loan your talking about I would not get too hung up on the cost of it as I would with picking a really great lender to work with.. One that you can establish long term relationships with.. When I was in my heyday of HML I in turn looked for borrowers that were going to be repeat then gave them the best service I could.. ONe off borrowers are a lot of work and can be problematic.. And if they tried to negotiate me off of other lenders I just told them to go to the other lender I am very good at what I do and you will see that I am worth it if you don't then its your choice of course.

this was especially true during the financial crisis. I have been loyal to my little commercial bank and my banker for 20 years. I never negotiate points and rates with him.. Or say I can go to U bank and get a better deal.. Well that relationship came back in spades during the GFC  when all my fellow competitors were getting their credit lines pulled. I had 5 and 4 got pulled but this bank stuck with me.. Now as I am runnin and gunnin again my competition needs to borrow hard money and I get mine at bank rates.. And hard money in our market requires real cash equity ( usually the lot paid for 80 to 300K0 then they will do verticle. My bank will give me 90% of cost... And its good to have some skin in the game.. So I can do a 300k new build with only 30k out of pocket and a nice interest reserve and borrow right at 6% were my competition needs more cash ( which they usually borrow at high rates) and is paying 20% apr for the same money.. It allows me to lower price if I need to and or I make that much more per deal...So the relationships are all important.. I would bet you the bigger players on this site all have the same go to guys they have been using for years

Got my IFR ticket in the 172  No GPS NO auto pilot... But I would not fly the one with the ADF could never work those out very good.  NOw with Cirrus is 3 buttons and your done!!

Good luck on your project.  And fly safe