All Forum Posts by: Jay Hinrichs
Jay Hinrichs has started 333 posts and replied 42268 times.
Post: The 5 Ugly Truths of Real Estate Investing
#1 All Forums ContributorPosted - Real Estate Consultant
- Summerlin, NV
- Posts 44,059
- Votes 65,107
Quote from @Matthew Irish-Jones:
Quote from @Jay Hinrichs:
Quote from @Matthew Irish-Jones:
Quote from @Don Konipol:
Quote from @Matthew Irish-Jones:
After 15 years I can say I am successful in Real Estate. I have a Brokerage, multi million dollar Construction company, Property Management company and a sizable portfolio.
Here are the Ugly Truths about Real Estate I have learned along the way:
1. You have to sacrifice years of your life. When I first started I worked full time and invested on the side, before going all in on investing and building the business. Those days required 60-100 hour work weeks and almost all of the work on Real Estate was done nights and weekends. The idea that you can be a start up investor, be passive, and be rich is false. Bootstrapping in Real Estate is the furthest thing from passive I have ever experienced.
2. Our team started as a rag tag bunch of laborers that specialized in trash outs, cleaning toilets (that was my job), and painting. Now our rag tag bunch characters are doing full home renovations, apartment complex's, and large scale construction jobs. Through it all we have had the same core team members driving the team forward, and have experienced (even through Covid), almost NO turnover!!!
3. BRRR investing is not for newbie's. Its highly complex and your unknown-unknowns will absolutely crush you. I HIGHLY suggest the house hack strategy for new investors. Yes its a lot of work. Yes moving sucks. Yes its not sexy. However, its safe and achievable. You need a strategy you can pull off.
4. Investing in Real Estate is RISKY. Lots of rosy colored glasses in this industry and people telling me how safe Real Estate investing is. From 2010 to 2015 Real estate investing was fairly safe and it was tough to lose. With labor costs skyrocketing, interest rates up, and inventory low, its very hard to invest in Real Estate now. Lots of investors lose money, don't kid yourself that you can't lose in Real Estate. Sometimes the CapEx and cost to maintain properties well outweighs the income and investors absolutely end up selling for losses.
5. Investing long term is a wealth diversification strategy, not a lifestyle decision. If you come into Real Estate with the mindset of your life getting easier, you have more wealth, and less cognitive complexity you are going to fail quickly and miserably. You need W-2 income to invest. You have to work off hours on investing and instead of relaxing at night you will be staying up late crunching numbers and learning. The reality is if you get 20 doors you will retire in your 60's far better off than you would have without those doors. Acquiring those doors requires you to live below your means, save precious Capital for your investments, and work your A** off in your free time.
You can become a successful Real Estate investor, but the amount of time, effort, elbow grease, and the realistic chance of losing principle should not be underestimated.
About a month ago some relatively new “know it all” submitted a post that they thought would launch their career as a “guru”. It described how in his first two years of real estate investing he made a ton of money by borrowing in excess of the purchase price and still had $2 million in equity. While many responders asked for proof, and pointed out that his claims were patently false, I merely stated that if what he claimed was true it was a result of the “bubble” but prices could decline as well as rise, and pointed out the 35-40% decline 2008 - 2012. He stated that no time in history had real estate prices ever declined even 20%, and I didn’t know what I was talking about. About one third of the responders agreed - they actually didn’t know real estate prices, especially in certain markets can decline, and significantly. But listen, why would they listen to people who live real estate every day, who have spent 10, 20, or 40 years buying, selling, financing, real estate; when instead they can listen to a paid actor fronting for a marketing firm out of Las Vegas or Salt Lake City selling $40,000 “mentorship’s”?
Another hard truth about Real Estate is there are no Guru's. There are people that know plenty, and coach's and occasionally mentors you can learn from. But... the real titans of the industry are working full time in the industry making big dollars and taking you on as a client for $100 bucks an hour would be a massive headache and a financial loss.
"Those who can, do: those who can't, teach"
guru or selling a system is not real estate is education selling business .. very well thought out financed bizzness with the top folks in it making millions.. They basically dont have time or desire to be a landlord save maybe a LP or something.. there is no need to own rentals if your education bizzness is making you 1 to 10 mil or more a in earnings who needs RE rentals at that point they would just be a time suck and a drag on their bizzness.
all your other points are spot on.. its a long game and much harder than it appears for sure.
Totally agree. I guess the real question is how many of those Guru's making big dollars could make the same money as an investor, developer or someone else in the industry?
good question.. since few actually do the heavy lifting it would be hard to tell. As I stated there is no reason for a big money making guru to fool with any kind of small time rental real estate.. I have been back room vendor for Montalongo Vertucci Rich Dad Poor dad etc.. I was doing loans for their students to buy rentals when they came to the realization that flipping houses was to hard or BRRRR was to hard.. :)
Post: If you had $1M, how would you invest it?
#1 All Forums ContributorPosted - Real Estate Consultant
- Summerlin, NV
- Posts 44,059
- Votes 65,107
Quote from @Austin Fowler:
Quote from @Jay Hinrichs:
Quote from @Austin Fowler:
Quote from @Joe S.:
Quote from @Austin Fowler:
In my own case, I'll be putting the $1M in Crossing 5 from BAM capital. That's what I actually plan to do IRL. This is just the latest deal due diligence has been completed on, I've got no financial connection to the project. I like ground up multifamily development, and participating in such projects as an LP. Love addressing housing shortages. This will take me from 2200+ doors to 2500+ doors as an LP.
Can you expound on that a bit more, please?
Sure, happy to elaborate. I currently have a $31M portfolio spanning cash, stocks, renewable energy, 33 houses, 7 flips in progress, and an LP stake in 2200 doors of multifamily. LP is short for limited partner, and just means you contribute capital to a big deal managed by general partners (GPs). Being an LP in a multifamily deal means you are totally hands-off. You do the due diligence on the GPs (the operators of the deal) and the deal itself, choose the best operators with the best deals, and then you wire money into their deal. There are many, many different ways to invest in multifamily. My personal preference is development since I like being part of the process of increasing housing supply. As with anything in real estate, you do best when you find something you really enjoy. I *really* enjoy participating in building things. My current multifamily portfolio spans 15 addresses across 8 states, and 8 different operators. The multifamily properties range from just 32 units to 330 units. Each unit is a door. The next deal (Crossing 5 from BAM capital) that I'll add to my portfolio will be a mix of multifamily apartments, townhomes, fully serviced with pickleball courts, community center, etc, etc --- an entire community totaling 315 doors. The general parameters in multifamily development are frequently approximately four years to take dirt, build a community, lease it out, and sell it to a pension fund. The finished product is viewed by the pension fund a bit like a bond. If 5% income generated on capital (plus depreciation tax benefits and asset appreciation as rents grow) is deemed acceptable then a building generating $10 million of net operating income (NOI) each year would be worth $200 million. A typical development deal at the moment tries to build a building at a cost such that net operating income is around 7% of the total build cost. In other words built for significantly less than it can be sold for. Using the above numbers you would need to complete the building using under $143M to hit 7% NOI. In my case as an investor I generate massive cash flow by getting involved in a series of development deals: wire money in, four years later get more money back with the upside taxed as long-term capital gains, and the tax due only if I haven't generated sufficient deductions in prior years from other assets, and generally speaking I have more deductions than I need to zero out my income on paper each year. It's a conveyor belt of deals rather than holding assets long term for cash flow. Each development typically targets doubling the money you put in over those 4 years. Putting $1M into a single deal may seem like a lot, but it is less than 5% of my total portfolio, so it is an appropriate addition to it, and it will bring my total doors as an LP to over 2500. I currently have approximately $8M total invested in multifamily. Happy to connect with anyone that wants to learn more.
Austin ,
On the build to sell like your talking about how do you get cap gains and not ordinary income the building is being built to sell its inventory.. Just like when I built out my 90 home project here in Oregon its all ordinary income.. Unless of course the idea is build lease out and hold for at least a year or more then sell . But then your having to recapture the depreciation although I dont think you get depreciation for the whole investment only when the asset is put into service.. So I guess at C O ( Certificate of Occupany) is when the depreciation starts.. I dont know for sure but I am thinking I might be right I will have to check in with bam on the Crossing 5 deal .. thanks for mentioning that one.
Ground up multi-family with hundreds of units does indeed get leased up and stabilized before sale. Part of the reason these projects take multiple years from the point of view of the investor. There can be some depreciation associated with participating, and this will be recaptured, so this is not where the bulk of my deductions come from. I still have millions in banked bonus depreciation from when I bought 33 houses in 18 months during covid. Those houses continue to generate additional depreciation deductions each year. I also run a personally guaranteed debt fund, and that generates very substantial interest deductions, over a $1M a year. That business itself also has substantial costs to run that become additional deductions. In summary, the multifamily is taxed as capital gains, but my deductions come from elsewhere.
my question was not about your personal tax situation.. it was how tax treatment is done on a ground up apartment syndication that their intent is to sell it like inventory.. Its just like my new builds they are inventory so we do not get cap gains.. its why we need to make 100% or more COC which we do .. so when your paying ordinary income tax it still beneficial to be a new home builder. I have 4 entitlement deals going 3 as a capital partner one as a secured lender and those we will flip the plats one of them has an 8 figure NET profit which will be taxed at ordinary income rates.. ITs a 320 lot deal in WA DC sold to Lennar Corp.. the other two I did there one was sold to Toll Brothers and the other a regional. The one were I did a debt deal is in Bend Oregon and also sold to Lennar for townhouses and their apartment buidling arm. But again these are all ordinary income events.. so I guess its just the old adage we want right ones not write offs.. :)
Post: The 5 Ugly Truths of Real Estate Investing
#1 All Forums ContributorPosted - Real Estate Consultant
- Summerlin, NV
- Posts 44,059
- Votes 65,107
Quote from @Matthew Irish-Jones:
Quote from @Don Konipol:
Quote from @Matthew Irish-Jones:
After 15 years I can say I am successful in Real Estate. I have a Brokerage, multi million dollar Construction company, Property Management company and a sizable portfolio.
Here are the Ugly Truths about Real Estate I have learned along the way:
1. You have to sacrifice years of your life. When I first started I worked full time and invested on the side, before going all in on investing and building the business. Those days required 60-100 hour work weeks and almost all of the work on Real Estate was done nights and weekends. The idea that you can be a start up investor, be passive, and be rich is false. Bootstrapping in Real Estate is the furthest thing from passive I have ever experienced.
2. Our team started as a rag tag bunch of laborers that specialized in trash outs, cleaning toilets (that was my job), and painting. Now our rag tag bunch characters are doing full home renovations, apartment complex's, and large scale construction jobs. Through it all we have had the same core team members driving the team forward, and have experienced (even through Covid), almost NO turnover!!!
3. BRRR investing is not for newbie's. Its highly complex and your unknown-unknowns will absolutely crush you. I HIGHLY suggest the house hack strategy for new investors. Yes its a lot of work. Yes moving sucks. Yes its not sexy. However, its safe and achievable. You need a strategy you can pull off.
4. Investing in Real Estate is RISKY. Lots of rosy colored glasses in this industry and people telling me how safe Real Estate investing is. From 2010 to 2015 Real estate investing was fairly safe and it was tough to lose. With labor costs skyrocketing, interest rates up, and inventory low, its very hard to invest in Real Estate now. Lots of investors lose money, don't kid yourself that you can't lose in Real Estate. Sometimes the CapEx and cost to maintain properties well outweighs the income and investors absolutely end up selling for losses.
5. Investing long term is a wealth diversification strategy, not a lifestyle decision. If you come into Real Estate with the mindset of your life getting easier, you have more wealth, and less cognitive complexity you are going to fail quickly and miserably. You need W-2 income to invest. You have to work off hours on investing and instead of relaxing at night you will be staying up late crunching numbers and learning. The reality is if you get 20 doors you will retire in your 60's far better off than you would have without those doors. Acquiring those doors requires you to live below your means, save precious Capital for your investments, and work your A** off in your free time.
You can become a successful Real Estate investor, but the amount of time, effort, elbow grease, and the realistic chance of losing principle should not be underestimated.
About a month ago some relatively new “know it all” submitted a post that they thought would launch their career as a “guru”. It described how in his first two years of real estate investing he made a ton of money by borrowing in excess of the purchase price and still had $2 million in equity. While many responders asked for proof, and pointed out that his claims were patently false, I merely stated that if what he claimed was true it was a result of the “bubble” but prices could decline as well as rise, and pointed out the 35-40% decline 2008 - 2012. He stated that no time in history had real estate prices ever declined even 20%, and I didn’t know what I was talking about. About one third of the responders agreed - they actually didn’t know real estate prices, especially in certain markets can decline, and significantly. But listen, why would they listen to people who live real estate every day, who have spent 10, 20, or 40 years buying, selling, financing, real estate; when instead they can listen to a paid actor fronting for a marketing firm out of Las Vegas or Salt Lake City selling $40,000 “mentorship’s”?
Another hard truth about Real Estate is there are no Guru's. There are people that know plenty, and coach's and occasionally mentors you can learn from. But... the real titans of the industry are working full time in the industry making big dollars and taking you on as a client for $100 bucks an hour would be a massive headache and a financial loss.
"Those who can, do: those who can't, teach"
guru or selling a system is not real estate is education selling business .. very well thought out financed bizzness with the top folks in it making millions.. They basically dont have time or desire to be a landlord save maybe a LP or something.. there is no need to own rentals if your education bizzness is making you 1 to 10 mil or more a in earnings who needs RE rentals at that point they would just be a time suck and a drag on their bizzness.
all your other points are spot on.. its a long game and much harder than it appears for sure.
Post: Down Payment Funding
#1 All Forums ContributorPosted - Real Estate Consultant
- Summerlin, NV
- Posts 44,059
- Votes 65,107
Quote from @Lauren Lockett:
Quote from @Jay Hinrichs:
Quote from @Ashley Price:
I can see if we can get you funded. We fund in 3 days, rates as low as 5%, terms are 3,5,7 years with no prepayment penalty. Let's connect
these terms are not real.. OP be careful of upfront money and getting taken advantage of.
If you don't mind my asking, what is OP? I saw it mentioned a few times in the thread
sure its BP jargon for ORIGINAL POSTER IE in this case Amarri Persley
Post: If you had $1M, how would you invest it?
#1 All Forums ContributorPosted - Real Estate Consultant
- Summerlin, NV
- Posts 44,059
- Votes 65,107
Quote from @Austin Fowler:
Quote from @Joe S.:
Quote from @Austin Fowler:
In my own case, I'll be putting the $1M in Crossing 5 from BAM capital. That's what I actually plan to do IRL. This is just the latest deal due diligence has been completed on, I've got no financial connection to the project. I like ground up multifamily development, and participating in such projects as an LP. Love addressing housing shortages. This will take me from 2200+ doors to 2500+ doors as an LP.
Can you expound on that a bit more, please?
Sure, happy to elaborate. I currently have a $31M portfolio spanning cash, stocks, renewable energy, 33 houses, 7 flips in progress, and an LP stake in 2200 doors of multifamily. LP is short for limited partner, and just means you contribute capital to a big deal managed by general partners (GPs). Being an LP in a multifamily deal means you are totally hands-off. You do the due diligence on the GPs (the operators of the deal) and the deal itself, choose the best operators with the best deals, and then you wire money into their deal. There are many, many different ways to invest in multifamily. My personal preference is development since I like being part of the process of increasing housing supply. As with anything in real estate, you do best when you find something you really enjoy. I *really* enjoy participating in building things. My current multifamily portfolio spans 15 addresses across 8 states, and 8 different operators. The multifamily properties range from just 32 units to 330 units. Each unit is a door. The next deal (Crossing 5 from BAM capital) that I'll add to my portfolio will be a mix of multifamily apartments, townhomes, fully serviced with pickleball courts, community center, etc, etc --- an entire community totaling 315 doors. The general parameters in multifamily development are frequently approximately four years to take dirt, build a community, lease it out, and sell it to a pension fund. The finished product is viewed by the pension fund a bit like a bond. If 5% income generated on capital (plus depreciation tax benefits and asset appreciation as rents grow) is deemed acceptable then a building generating $10 million of net operating income (NOI) each year would be worth $200 million. A typical development deal at the moment tries to build a building at a cost such that net operating income is around 7% of the total build cost. In other words built for significantly less than it can be sold for. Using the above numbers you would need to complete the building using under $143M to hit 7% NOI. In my case as an investor I generate massive cash flow by getting involved in a series of development deals: wire money in, four years later get more money back with the upside taxed as long-term capital gains, and the tax due only if I haven't generated sufficient deductions in prior years from other assets, and generally speaking I have more deductions than I need to zero out my income on paper each year. It's a conveyor belt of deals rather than holding assets long term for cash flow. Each development typically targets doubling the money you put in over those 4 years. Putting $1M into a single deal may seem like a lot, but it is less than 5% of my total portfolio, so it is an appropriate addition to it, and it will bring my total doors as an LP to over 2500. I currently have approximately $8M total invested in multifamily. Happy to connect with anyone that wants to learn more.
Austin ,
On the build to sell like your talking about how do you get cap gains and not ordinary income the building is being built to sell its inventory.. Just like when I built out my 90 home project here in Oregon its all ordinary income.. Unless of course the idea is build lease out and hold for at least a year or more then sell . But then your having to recapture the depreciation although I dont think you get depreciation for the whole investment only when the asset is put into service.. So I guess at C O ( Certificate of Occupany) is when the depreciation starts.. I dont know for sure but I am thinking I might be right I will have to check in with bam on the Crossing 5 deal .. thanks for mentioning that one.
Post: If you had $1M, how would you invest it?
#1 All Forums ContributorPosted - Real Estate Consultant
- Summerlin, NV
- Posts 44,059
- Votes 65,107
Quote from @Joe S.:
Quote from @Austin Fowler:
In my own case, I'll be putting the $1M in Crossing 5 from BAM capital. That's what I actually plan to do IRL. This is just the latest deal due diligence has been completed on, I've got no financial connection to the project. I like ground up multifamily development, and participating in such projects as an LP. Love addressing housing shortages. This will take me from 2200+ doors to 2500+ doors as an LP.
Can you expound on that a bit more, please?
I am in 2 BAM funds so I have about 500 or more doors as an LP :) BAM is a well run company and one of the syndicators that has done well the last 5 years compared to others that have tanked as we have read about.
Post: were is the real estate for sale tab on this site
#1 All Forums ContributorPosted - Real Estate Consultant
- Summerlin, NV
- Posts 44,059
- Votes 65,107
Quote from @James Wise:
Quote from @Jay Hinrichs:
Quote from @James Wise:
Quote from @Jay Hinrichs:
Quote from @James Wise:
Quote from @Jay Hinrichs:
@James Wise Jim there used to be a spot were people would advertise properties for sale.. were is that at on this site ??
I went to classified and all that is is advertisements for services or we buy your note or other types of requests.. I want to see actual real estate for sale. is that no long on this site ????
I dunno, I think they got rid of the property listings section. BP has been trying to figure out how to best use their marketplace/classifieds section for as long as I've been here. Always changing this or that. I just post my properties in the Classifieds.
I asked customer service how to make a change and they wrote back thank you for asking about a business membership which is not what I wanted must be AI or something.
U see on your post your name then below sale RE broker then nextg to that is the cities your serve.. I am simply trying to remove one of my cities in the spot you have Cleveland Dayton cinncinti Toledo etc..
To bad they dont have a regular haves and wants page were you can actually show the physical property like a MLS listing I got to think that would be huge for them.. But what do I know so any tips on how to help me remove one of my cities :) I
Go to My Profile then do the following.
Thank you not sure why they make it so hard to find this stuff I mean really for us 70 YO how are we going to know this ????? All done now though thank you.. Next thing I need to do is change my picture I wonder how one does that ?
You painted yourself blue too?
I was able to change my background picture on my own to a Arial view of my development. Now have to wait till my wife can help me with the profile picture I think we might be able to pull it off .. thanks for your help this morning. Lastly I wish on the area were you say your a RE Broker that we could put something custom there.. they dont have a tab for capital partner which is what I do.. So I took lender out and put consultant.. for my company I need a custom discription :)
Post: were is the real estate for sale tab on this site
#1 All Forums ContributorPosted - Real Estate Consultant
- Summerlin, NV
- Posts 44,059
- Votes 65,107
Quote from @James Wise:
Quote from @Jay Hinrichs:
Quote from @James Wise:
Quote from @Jay Hinrichs:
Quote from @James Wise:
Quote from @Jay Hinrichs:
@James Wise Jim there used to be a spot were people would advertise properties for sale.. were is that at on this site ??
I went to classified and all that is is advertisements for services or we buy your note or other types of requests.. I want to see actual real estate for sale. is that no long on this site ????
I dunno, I think they got rid of the property listings section. BP has been trying to figure out how to best use their marketplace/classifieds section for as long as I've been here. Always changing this or that. I just post my properties in the Classifieds.
I asked customer service how to make a change and they wrote back thank you for asking about a business membership which is not what I wanted must be AI or something.
U see on your post your name then below sale RE broker then nextg to that is the cities your serve.. I am simply trying to remove one of my cities in the spot you have Cleveland Dayton cinncinti Toledo etc..
To bad they dont have a regular haves and wants page were you can actually show the physical property like a MLS listing I got to think that would be huge for them.. But what do I know so any tips on how to help me remove one of my cities :) I
Go to My Profile then do the following.
Thank you not sure why they make it so hard to find this stuff I mean really for us 70 YO how are we going to know this ????? All done now though thank you.. Next thing I need to do is change my picture I wonder how one does that ?
You painted yourself blue too?
NO I have a really cool picture of my wife my banker and me at my 90 home subdivision in Oregon the bank did a front page article on us and the project for their monthly magazine I want to put that pic and replace this old one..I now have hair. :)
Post: were is the real estate for sale tab on this site
#1 All Forums ContributorPosted - Real Estate Consultant
- Summerlin, NV
- Posts 44,059
- Votes 65,107
Quote from @James Wise:
Quote from @Jay Hinrichs:
Quote from @James Wise:
Quote from @Jay Hinrichs:
@James Wise Jim there used to be a spot were people would advertise properties for sale.. were is that at on this site ??
I went to classified and all that is is advertisements for services or we buy your note or other types of requests.. I want to see actual real estate for sale. is that no long on this site ????
I dunno, I think they got rid of the property listings section. BP has been trying to figure out how to best use their marketplace/classifieds section for as long as I've been here. Always changing this or that. I just post my properties in the Classifieds.
I asked customer service how to make a change and they wrote back thank you for asking about a business membership which is not what I wanted must be AI or something.
U see on your post your name then below sale RE broker then nextg to that is the cities your serve.. I am simply trying to remove one of my cities in the spot you have Cleveland Dayton cinncinti Toledo etc..
To bad they dont have a regular haves and wants page were you can actually show the physical property like a MLS listing I got to think that would be huge for them.. But what do I know so any tips on how to help me remove one of my cities :) I
Go to My Profile then do the following.
Thank you not sure why they make it so hard to find this stuff I mean really for us 70 YO how are we going to know this ????? All done now though thank you.. Next thing I need to do is change my picture I wonder how one does that ?
Post: were is the real estate for sale tab on this site
#1 All Forums ContributorPosted - Real Estate Consultant
- Summerlin, NV
- Posts 44,059
- Votes 65,107
Quote from @James Wise:
Quote from @Jay Hinrichs:
@James Wise Jim there used to be a spot were people would advertise properties for sale.. were is that at on this site ??
I went to classified and all that is is advertisements for services or we buy your note or other types of requests.. I want to see actual real estate for sale. is that no long on this site ????
I dunno, I think they got rid of the property listings section. BP has been trying to figure out how to best use their marketplace/classifieds section for as long as I've been here. Always changing this or that. I just post my properties in the Classifieds.
I asked customer service how to make a change and they wrote back thank you for asking about a business membership which is not what I wanted must be AI or something.
U see on your post your name then below sale RE broker then nextg to that is the cities your serve.. I am simply trying to remove one of my cities in the spot you have Cleveland Dayton cinncinti Toledo etc..
To bad they dont have a regular haves and wants page were you can actually show the physical property like a MLS listing I got to think that would be huge for them.. But what do I know so any tips on how to help me remove one of my cities :) I