All Forum Posts by: Jay Hinrichs

@Brian Mathews 

  hows the market there in Starkville that might just be a nice under the radar city for investors?

@?  if they are close to you.. it will save you roughly 20 to 30% in annual cash flow.

No management fee  no first month placement fee and no mark ups on repairs and or excessive repairs.

It also depends on what asset class your playing in.... and if they are in town or out of town.

For me personally my A stuff in Madison MS I can manage myself no problem  My C  in Indy MS AL GA all needs local management other wise tenants would kill you far worse than the cost of PM

@Paul Choate 

  another point Paul is if you do sell the homes.. and even if they are free and clear and the tenant leaves. they will either sell or give away the MH or give it back to you for nothing because it does not pay to move the home.. My park in Vancouver WA. had 44 spaces and 11 MH's came with the deal.. over a course of time the tenants ( usually elderly) passed away the Heirs would try to sell some did most did not and they just did not want to pay space rent anymore and gave us the homes that we then resold on contract.

Also you can have veto power over the tenant in the MH if its a rental or not allow any of the units to be rented. Your an attorney so you will know if this will fly in OK it did in Oregon and Washington were my parks are.

@Paul Choate 

  Sounds like a great deal I have owned 2 parks with private water and sewer.. At least here in Oregon this is very serious stuff.. And you would want to make sure you walk right into the county health department and have a chat with the head honcho.. Make sure your water system is approved . ( ours we have to monitor monthly) and that your on site septic system is good to go... Make sure you have a reputable septic company go out and give it a thorough examination prior to closing. Have a well company do a flow test and test the water for any nasty's.   If that all checks out fine then I think you got your self a winner as long as tenant base is manageable. One of my parks it was a breeze another park I had was lower end and it was management intensive from a lot of angles.

Lastly what I would do is not own any of the MH.. Sell them on contract and then charge a space rent.. you can back into your total rent. Much better to have someone owner occ the MH's so you don't have to maintain them and you should get a touch better type of tenant. rehab on old MH is a ***** parts are not off the shelf etc etc. As the tenants pay off the MH you can then slowly raise rent as well B/C they now own them and there is no place to take them you have a captive audience.  However even if lets say you wanted for one of the homes and space 300 month total.. If you charge that for space rent and sell the home for 2k and 50 bucks a month until paid.. you will still save money big time on maintenance over the course of the years.. The joy of owning a park is your only maintaining the park not the homes as well.  Hope these comments are well received and good luck on it.

@Nat C. 

Glad you got to the bottom of it. now you have a scope of work get a few bids take the best one and be done with it.  As us pilots like to say that's just another one for your experience bucket.

@Michael Evans 

 Frankly would not think anyone would consider this viable for 1700 dollar profit who cares about a 32% return when its on such a small number.. IF your making 32% on 500 or a million dollars then that's spectacular. I would bet that the bigger flippers on this site easily hit that 32% number cash on cash and much better and certainly home builders that have bank financing for vertical probably hit 100% or more I know I do. ..

Just the hassle factor of getting a loan would not be worth many peoples time for this small amount of money.  The new home flipping that I was familiar with was people would just flip there EM contract for a 5 to 20k premium much like bird dog wholesalers do right now... they would never take title the buyer would be an owner occ who wanted to get into the home to live.. And a builder may or may not go along with that.. in the day they did, as they did not care who closed, and I know builders that sell out subdivision in Texas and other markets in the south will do semi pre sold wholesale deals and probably would not care if there was a change in borrower/ buyer as long as it closed or they got the EM.  I know in my market there were folks doing this on existing inventory getting nice folks with credit to put it up and then doing the deals much money was lost with that model and the sponsor got in pretty hot water over the whole deal.

I suspect the builders are pulling permits without presales.. presales are nice but if you waited on all your lots to presale it would be hard to keep continuity and deal flow. of the 18 homes I currently have under construction I presold 4, 10 went into contract during the construction phase ( a lot of times buyers want to see the house framed and know they are going to have a house and then want to pick finish's) and 2 sold within 2 weeks of C00 and two are on the market one not completed one just got COO Friday.

So bottom line doubt you will have many takers for this investors could not get enough credit and scale to make it worth there while in my opinion

@Account Closed 

 the danger in Sub 2 is to the original seller  IE the person buying it defaults especially if they have then  sold it with a  wrap or  sold it on land contract or lease option and then those people default. Your right the buyer of the Sub 2 has no real exposure unless there is a pattern of defaults or fraud.

For those in the bizz that have the ability to pay off a sub 2 if it gets called that's one thing. But for those using it as a cash flow strategy to make the delta between the original note and the wrap or new sale, those folks usually do not have the kind of wherewithal or ability to pay off the original loan if it gets called. The seller in a Sub too is entering a risky deal for them its not about us the investor buying it its about he seller putting them selves in a precarious situation. As the original note as we all know stays with them and their credit.

In Portlandia I personally created my rental portfolio from 2002 to 2008 using sub 2 exclusively and most were in foreclosure ( before the foreclosure rescue laws changed). and generally I did not buy anything that did not have at least 20% equity. So I would say I had close to 10 million in Sub two debt.. If the odd one got called no problem paying it off.. But if everyone of them got called it would have been and issue for sure. And a liquidation.

Data point I only had one get called and that was because it was a local credit union and the borrower went in and told his loan officer that he sold the property to me.. We paid it off.

So then you take the original seller and if they can't get control of the property in the case of a default of the next parties in interest, and these next parties squat in the house,  they may not have the money to make the payments their credit gets trashed by no fault of their own the middleman like you said can't go to Sub 2 jail they just bail .. And in a state like Texas  Mississippi and others that have dual action foreclosure rules they could very well end up with a judgment against them for a deficiency within 6 short months or less. Foreclosures in those states happen in 60 days... Then chancery court for the judgment 30 days hence .. Now the bene has to establish a deficiency through current appraisal but that's not hard as many of these deals are under water to start or the house has major issues and is underwater for those reasons. I have gotten many judgements from my borrowers in those states, Not that they were worth anything but they last for 10 years and I know who they are and I have an Accurant account so I can find them 7 to 9 years down the line when they have forgotten about me !!! 

@Jon Holdman 

 in our market Portlandia sewer scope is SOP .. Only time you would not do this of course if its a court house steps type buy. 

I just sold one of my homes I built 3 years ago in a subdivision that was built 6 years ago and has no street tree's.. and this buyer is scoping the sewer, I think that's a little over kill .

when I was buying all my rentals in the south and south east if the home was older say 20 years or more. And it was a full type of reno  IE had been foreclosure vacant etc. I did not bother with a scope I just replaced the line.. We could get new lines put in for 1200 dollars and now your good for 20 plus years.. Root intrusion being the culprit most of the time.

@Account Closed 

 still no call back going on day 5...

@Account Closed 

  personal relationship is in my mind one of the better ways to go. Also lend to those that are in the business with long and successful track record. One off TDs newbie borrowers etc can be trouble.

Funds have probably stabilized now.. but there were issues of course during the GFC like Rick mentioned..

One reason I personally never did a fund is the pressure to put the funds out is pretty intense you bringing money in promising 8 to 12% and then you need to go make the loans so as the operator your cost are higher because of drag on the funds  IE time it takes to bring them in and then close the first deals.

There was some spectacular failures of those HML here in Oregon that ran those kind of funds. As an example I am just now closing on 16 lots that my bank has the collateral assignment from just this kind of HML who's client a developer went under... And so did the HML and his fund .. So in my mind single note single property single investor is more manageable in a default scenario.

TD investing is not something that people can just jump into with out knowing what they are doing or some pretty good guidance.. However as you will learn many who have done well in RE will gravitate to this form of investing for the ease and passiveness of it.. Just need to be able to choose wisely