All Forum Posts by: Jay Hinrichs

@Erik Peterson 

  I have owned one.. it was 44 units under 7k of commercial I owned the whole building. It was not big enough for on site management.. so if your going to run this on your own think about logistics if you do not have an on site manager.. IE showing the units etc.

But mine was well located on the River in North Portland and my tenants were those that lived on houseboats... So I was full  I had nice units they were fully sheetrocked some with heat and a few had bathrooms and were doubles those I rented to car collectors.

150 a month for 10 by 20...   I ended up putting a condo plat on it and then selling off to the houseboat owners for 30k a unit.

I like the business.. but mine was what I would consider a class A  so I had little to no bad debt or collection issues.. and I only had a few I had to clean out when someone skipped on me. 

Friend of mine who owns thousands of doors in CA.. his motto is its a business and you should buy facilities were you have on site management.

@David Krulac 

  properties in the path of progress are some of the biggest RE plays in the industry.

What a freakin pitching performance by mad bum... great game KC was awesome but my boys pulled it out.....

@? Well we have short memories or limited investing time frame.. back in the 80s and 90s and up until the crash of 07 08 at least on the west coast neutral to negative was perfectly acceptable.. as price rise was a given for almost 20 years... at least in that market.

these things are really region specific... and of course in the markets that we know do not have historically or with any degree of optimism hopes of appreciation then of course why buy something that really will never go up and just pays for its self .. .except someone is paying for your equity over time in a way its just forced savings.

Then you have special circumstances like the go zone accelerated tax benefits that were available all along the Gulf after Katrina. When someone who qualified for the benefits bought one of these new constructions they could take accelerated depreciation of 50% of the cost of the improvements.. so if you had a 200k new build with a 30k lot you could write off 50% of 170k first year... So if you were in 40% tax bracket you saved 20 to 30k in tax to uncle sam and you had a cash neutral investment.. thousands of RE professionals myself included bought up a bunch of these in those years post Katrina... in that case neutral to a little negative was a great play.

Its not the rule itself its the effect it has on values in certain markets if investors use it as a guideline for what a good deal is and they back into price to pay for the property based on the rule.. then the values are just like multi family the properties are only worth what the cash flow they generate and unless rents rise.. these properties get pigeon holed at the value that is backed into using the 2% rule of thumb...

So the danger for out of area investors is they think 1% is Ok or 1.5% but the locals in the know won't touch anything under 2% or way higher.. so there is no exit strategy with these properties or hope of appreciation unless the rents rise.. which rents in these markets are fairly stable over time.

And of course the fact is 2% or better type properties are big dark holes that you poor money down unless you live right in the area and can manage and watch them like a hawk. Out of state or country people that buy them get killed and lose them daily they just get fed up and walk away.

I suspect it really depends on the area as well.. if your in one of the hot Texas markets you probably have a LOT of competition with your yellow letters.

If your in out of the way areas maybe not so much.

I just did a mail campaign last month in a very targeted area. I sent out 84 letters.. got 7 responses and bought 2 properties... both 50k plus deals.

My technique is to write a personal letter to each.. very business like.. I mail it from the town I am looking to buy in.. So post mark is local.. the phone number to call is a local prefix and its is answered live.  My rep will be to their door that day or next at latest.

so

1. local post mark

2. personal letter hand signed very professional it gets opened.

3. local phone number

4. answer live

5. be to the property to meet with owner the day we get call or next

6. make offer close in 30 days or less.

Seems like a lot of work for 2 deals in 4 months and a lot of work.. how much does it cost to send out 7k pieces I would suspect a buck a piece or so ?

Now maybe these were screaming deals and its worth it...

Curious do you answer the phone live or do you let it get picked up then return the call?

marketing is nothing except consistency.. Do you think in 4 months of time scouting other wholesalers and MLS low balls auction sites etc could you have picked up 2 deals?

@Gary Dezoysa 

  This a good post but based on your post your very very naïve. To think you can move in and live right next to your section 8 homes..

there was a very famous Austrialian case... In the early days the spuiekers were hammering AU investors with same thing in Detroit 25k houses 800 rent.. So this nice Aussie decides to buy 4 on a street.. ( those aussies are all cashed up) He then decided to spend his vacation time in Detroit personally working on his assets and living in one of them. Well being a fish out of water.. He got in an argument with one of his tenants over something silly. And of course even though we both speak English we still can't understand each other. And he was promptly shot and killed... End of the dream for him. This made national news and TV in AU..

You just don't know what you don't know about these types of homes.. just because on paper they say they will rent its about collecting the rent.

And the OP who said the Voucher is the Golden ticket and the Voucher holder knows it and there is competition among rehabbers for those golden tickets.. IN many markets the rehab is much nicer to draw hud tenants into these low end places.. Just the opposite of thinking you can do the minimum... But remember fully half the inventory that is available for the next set of land lords to give it a try comes from failed landlords who gave up the dream of 25k houses for 635 to 900 rents...

One thing I agree with is if your going to do this move there .. But live in a neighborhood that is appropriate to you and simply drive in during the middle of the day to these areas.

@Tony Baczynski 

  I am sure you will be inundated with how to spend your hard earned money.

careful of IBT tax on retirement funds.

Every major city will have some prominent HML and most of them will broker funds like this for their clients. You can start there gain some experience .

Just remember to do some of your own DD with each loan presented there are a lot of brokers out there and like anything real estate related there are good and bad.. I always recommend to loan as close to were you live as possible so you can do your own drive bys and get a feel for the asset and your equity protection.

I have 30 years under my belt at HML so kind of been around the block if you would like to discuss off line feel free to reach out.. Best of luck

@Joshua McGinnis 

 not only a home inspection before you buy.. but when your doing a rehab.. and your remote and trusting others.. then you need a course of construction inspections.. Much can be covered up that you would never know about until you had to fix it down the road.. the out fit doing it can't be there every minute watching the subs...