All Forum Posts by: Jay Hinrichs

@Marco Santarelli 

  did you also make the investor whole?... or just resell and they lost what sounded like many thousands of dollars following your sales advice  ? I mean at the end of the day companies like yours or Ali Boones or Mike Darrigo the investor is counting on you vetting the TK company AND the PM.. Not just make a commission and be down the road why your investors suffer this is not the first Norada investor I have heard from that is in the same boat.. And then you get on line and say its all the PM's fault and there out of business .... But again its not necessarily you its the Business model of low end out of state rentals... Very risky those.. But those that sell them just sell the oh CA or WA is so expensive go out of state for cash flow sales pitch...   ... But its good you at least resold the problem properties to another investor.. Hope they do better.. I think the fact is no property manger can be superman if the properties itself is a dog which it sounds like reading that 8 page thread on Will's investments that duplex's by and large in Indy and especially ones under 100k are D s and prone to ongoing issues according to Mike D'Ariggo .. Unlike buying plex's on the west coast that actually perform.. Or some of the duplex 4 plex opps in Chicago that do really well... Also anyone reading this if your offered a rental guarantee run as fast as you can... The rental insurance went out of business from what I understand maybe there is a new underwriter If your buying a solid property there should be no need for rental guarantee or rental insurance on this topic Chris Clothier and I agree.. There is one thing to give a month or two of gap rent as a closing bonus but those company's offering a year or two.. those deals are marked up way over value.

are they sourcing the house that you pay cash for.. then you pay them to rehab?

if so that is something you want to use extreme caution on...

AS a HML when I had properties I could not drive too.. I hired my own inspector.. WE did these at draws.. YOu should have your own inspector do weekly inspections for quality of work and get a scope of work before they start and make sure they do whats on the scope.

Always good to have your inspector that YOU pay for.

@Linda Quinton 

  we may all speak English but we don't speak the same language... like our con men or crooks are just that con men and crooks they are not Spruikers.

States have specific laws regarding when an onsite manger is required. I know Oregon does.  One client I sold an 80 unit to... has on site management he pays for and his off site PM manages that manager and charges 4%

Sad commentary on the state of our rental stock in those areas.. I don't think people that have lived there and are investing from out of state can really grasp the reality .

its one who is not on BP to my knowledge but one of the largest there

@Eric Baum 

agree on Chicago... I have a fairly sizable investment there... when I say duplex four plex I am using a West coast duplex or four flex... or specifically here in Portlandia.. were we do not have SFR's generally as rentals.. they exisit but not nearly to the extent they do in other markets.. prior to the crash less than 6% of standing SFR's in the entire 2 mil Portland metro market were rentals.. that number has grown to about 10%... So in our market and this is the same in much of the west coast if your a renter your in a Apartment of some kind. Be it a shabby low end duplex or four plex or a very nicely placed one in my city of Lake Oswego...or a downtown condo project that got converted to apartments.

We have a 1% vacancy factor in PDX... so its really more like Manhatton or New York city as it is in Palo A lot or San Jose  or SF... the mid west is just another beast.. and I agree with you on duplex four plex in mid west areas that are super cheap..

The Chicago multis are in a much different category and price point as the rents per side are 1200 and up...

OK I have to go make some money so I can afford to be a builder and a land lord.

Have a great day.

@Eric Baum 

for those reasons I think a first time investor using a mortgage slot ( not paying cash) should look at nice duplex 4 plex the risk of having a 100% vacancy is less.. and those properties sell for accepted cap rates within their market.. Not inflated values that tend to happen in SFR's and especially through marketing companies that are pitching for Turn Key.

The fact is so many want to get started in this business thinking they need to be a buy and hold investor and if in fact they would have started close to home were they can manage the asset easily.. Many of them would have done much better and or have not lost a bunch.

I can't tell you how many e mails I get from Out of country and CA buy and hold investors who just want out. they though they wanted buy and hold they were gong to start with one or two. it goes OK first year but from the first tenant turn over and forward they soon realize this is not going they way they inteneded it.. And like you said if you keep acquiring and make a business out of it.. you can mitigate that... Not to pick on Memphis but I have one client who e mailed me.. They have 3 rentasl they bought from a Top flight Turn Key in Memphis.. first year was fine as stated then the turn over then the bad renters then. So now 3 years later. One house is boarded.. One house they tried to sell owner contract to get out of it.. And the buyer is ripping the rents so they need to foreclose.. And the last one the Hud tenant just got kicked off of section 8 and the house is vacant and needs a full turn over... They have run out of their cash reserves and what reserves they have are paying the mortgages on the 3 properties to protect their 800 credit score.. When trying to market the properties as we know if a house is not perfect the only buyer is wholesaler so they are getting offers at 50% less than they paid for them from the very people that sold them the properties or other wholesalers in the market place.. This is a very real and common scenario. Had this person used that same amount of capital in CA. they could have easily bought a duplex or 4 plex.. And could have for sure bought one in PHX and VEgas.. and probably not be in this wipe out scenario.. that's the stuff that bothers me seeing good hardworking people buy into a dream when they really have no business being landlords in the first place. at least not landlords in Renter dominated mid west markets... those that are successful in those markets scale and want to create a business. those that buy a few and think ( well I don't know what they think) I think its 50/50 over a 5 year period whether they take a loss of capital and potential foreclosure for lack of production of the asset.

Eric your experienced where do you think all this inventory comes from... It surely is not the poor subprime homeowner who lost their home most of that inventory has been cycled.. these homes come from Landlords that failed.. and many do.. No one talks about the failure rate of landlords out of state... Its only Blue Sky which in my mind leads folks into a false sense of security...

Last point is out of state folks can mitigate this buy buying at the top end of the market the issues as described above are generally 1000 and under rents... move up to 1200 to 1500 rents that tend to be market rents and success rate is far better.. as your renter demographic goes up exponentially.

@Eric Baum 

  Kind of like hiring a fishing guide when your new to the water.. you pay 500 a day for them to take you to the fish show you what they are biting on.. etc etc... once you have some experience you can recreate it on your own...

I think out of state investing has to be done with the mind set that one is going to scale it.. One or two out of state rentals is not going to do much for you in the cash flow markets. If you happen to choose poorly your going to have a bleeder and wish you never did it.. Even if you do well you locked up significant capital for a very modest gain and a huge risk.

I think most of the folks that think they need to go to cheaper markets if they just stepped back and looked at small multi in their own markets they will see they can achieve the same results with far less risk's and properties that are sold on the open market as opposed to in heavy turn key markets were you have two values.. the value that one has to pay from a Turn Key company and the value that you would pay off the street from someone who bought from a turn key company a few years ago and needs to exit.. they will in most instances never sell for what they have in them..( and that is systemic of the market not necessarily turn key) as in these heavy rental markets those in the Know and someone like you will back into the cash flow numbers and that sets value.. the ARV that are bandied about are in my mind fictional at best.

many I do try to call them back and see what kind of deals they are looking for or to refer them to others.. 99% of the time they don't answer live.. and less than 50% of the time do they return the call... Not sure if they are overwhelmed with calls or shocked that they got one.. I know on NOD's in the PDX metro area the trustor will receive 20 to 50 letters or more during the course of their foreclosures.