All Forum Posts by: Jake Kucheck

You guys...

Nothing in the Inland Empire can be considered a war zone. I promise.

-Guy who owns plenty of doors in actual war zones

Greater fool theory in play here, somewhat.

As of right now, the big money (REITs and Private Equity) are focused on B(ish) properties, just as lenders were traditionally focused on A-paper and Alt-A borrowers in the beginning of the mortgage boom. Then, when they run out of those but still have capital to place, they will open up to C markets with the same ***-backwards metrics they use to evaluate B markets, just like lending was eventually opened up to subprime (with equally if not more ***-backwards um... "metrics").

I'm holding all my rentals until the big money realizes/decides there isn't enough B market to go around. Then selling enough that I can buy more (to sell to them). You'll get a premium for helping them place capital swiftly and in one place, in addition to the premium you'll get for them not having a clue what they're doing.

This is really a much more basic question, and isn't necessarily one that is specific to CA, although southern CA is a particularly popular market to apply the premise. The question you are really asking is "does the market I am physically located in bear a risk/yield equilibrium in line with my investment objectives?"

There isn't any one answer to that question, because people live in lots of different places, and have lots of different investment objectives. If your goal is to get yourself a tax write-off (mortgage interest deduction) while hoping for appreciation and taking a big hit on (probably negative) cash flow, then So Cal (and OC especially) is a terrific place to start. If your goal is to maximize your Cash-On-Cash returns by acquiring low cost properties in C areas while doing as much as you can to mitigate the trials and tribulations of high turnover, crime, and unreliable property management, then you should probably start elsewhere.

If you don't know which of these strategies (or which strategy in-between these two) is the one you want to utilize, then the only thing that is clear is that both of these (and all other) markets are wrong for you. Having a game plan, finding a market that will allow your plan to be successful, and executing that plan are how you become successful.

@Karen Margrave you're asking macro questions that have micro answers. Yes, of course we still find note arbitrage and flip deals, in both Riverside and Orange Counties. There are still rental deals available, although I'm not a big fan of CA from a risk/yield perspective or a tenant law perspective, but for people with different appetites (or really big companies with the ability to pass risk on to low-cost capital), there is certainly still enough inventory to go around. It's all a matter of perspective.

Two thoughts here:

1) There are only a handful of attorneys in each state who actually know their stuff when it comes to securities law, how to use it to your advantage, what timelines are for processing depending on which exemption you are using, etc. In CA, the Reg D exemption is pretty quick and depending on which subset you use, can actually give you a lot of or very little leeway in your marketing/networking efforts. Conversely, Reg A is the SEC equivalent of a blank check for the most part, but can take up to a year to get processed.

Find these folks, and let them do your heavy lifting for you. And pay for it. Seriously.

2) You are going through all of this to raise $1 MM? Agree with Don that $10 MM is kind of the minimum, although I spoke with an investor today that liked our model but said he wouldn't consider an equity investment in anything less than $100 MM, and wanted to know how quickly I could scale up. Maybe he was posturing, but it's always good to be reminded that we are very, very small fish in the greater scheme of things.

Reputable company... not doing as much business as they once were. They'll make a lot on anything they sell you, but it'll be above board and fair.

No kidding. It seems like a complete fallacy to rate something that doesn't exist yet AAA, especially when the company providing the underlying assets that derive the yield is a privately held company. Zero accountability.

At least somewhat concerning that the timing of this push by CNBC is right before all three of the publicly traded SFR REITs do their Q3 earnings calls. It really looks like the machine is pushing to make this the next big thing.

Video here.

This is all about management.

If you're going to be able to retain management, and you can vet their past performance, there is a good chance things will go (relatively) smoothly. If you are bringing in new management, expect 3-6 months or problems before the ship is turned around. If you are self-managing... don't expect that to be scalable forever.

As they say, management of the many is the same as management of the few. It is a matter of being organized.

Ellis is probably right here... although she didn't specify the nature of the preferred return so I think the argument could be made that she is in a grey area. Although, probably not worth posting these kinds of things on BP, not really the right crowd.