All Forum Posts by: Jay Hinrichs

@Sharad M. 

  I get your point.... however to be fair  you live it and work it and manage it all.  your not investing 5 states away and trusting others to secure your outcome.

I totally agree that if you live in these markets and want to build up a large portfolio over time of cash flow rentals and its your business it can work very well for the owner operator or small group of local investors..

the danger zone is  buying 1 or 2 or 3 of these homes far from were you live and thinking that this is a long term wealth strategy...

If I lived in your market I would do exactly what your doing and build a business around it.

I think the issue comes from out of state investors that get lulled into thinking that this type of investing is all done for them.. Everything is going to run as the promotional material states etc etc.. when the reality is far different than the dream in many cases not all but in a heck of a lot... I have first hand experience at this lending to 400 plus LA based investors over the years... I have heard the horror stories and to do the work outs... Saw people crushed emotionally and financially thinking they could buy low end homes.. The first 5 years of my HML in this space I really did not have a clue as I got paid off every 90 to 120 days and never really had contact with the client after that they now had a country wide loan . But when it crashed in 08 and I got stuck with 200 non performing loans in the Mid west I got a PHD in how dangerous this can be for out of state investors... And all from the front lines... literally banging on doors.

This is when I personally came to the conclusion that this investing in 500 to 800 dollar rentals in the mid west was a locals game... and really not appropriate for out of state folks especially inner city and rough demographics... The reality is were do all these SFRs come from today.. they come from investors who gave up... Why do investors sell houses they paid 80k for for 20k today... happens everyday every turn key company in the USA is buying their inventory from these failed landlords...

Obviously many will do fine and think I don't know what I am talking about.. But many TK companies are here today and gone tomorrow and leave their clients high and dry.

I can think of only a handful of TK companies that are more than 7 to 10 years old. So there is no history to go on to say whats going to happen with these properties.  

@Aaron Mazzrillo 

  Aaron do you sell any properties to people that live in Cleveland and want to buy in LA? Or people that live in any other mid west or east coast city that want to come to LA area and invest in cash flow rentals????  Probably few and far between.

So why is it that So many LA based and West coast based investor need to go out east to invest? 

One reason I can think of is there is not enough demand in these towns locally to keep up with all the inventory there is... And or West coast folks will pay more than locals will if the locals pay the same amount as out of state there would be no need for WEST coast based marketing companies hawking these properties.. The locals would have it all bought up.

From my experience the only out of state investors that come to the west coast are usually big players looking for A grade investments and knowing that CA offers a real chance at appreciation. Although here in PDX we get quite a few Californians buying simply because it is much closer price point somewhat cheaper but cash flow is not any better... Average rental here would return 4 to 6% MAX...

However the fix and flip retail and new construction is booming here.... Again much larger price points than mid west we can't buy lots for less than 100k in most instances...

@Joel Owens 

  What Joel said !!!!!  and many others on this thread...buy cheap and chances of financial failure are pretty great  over time... buy nice or top of the line things will run better and you will probably get some appreciation.. in todays market the only profit that is going to be made is on appreciation.. forget about 100 200 or 300 a month cash flow.. Unless you have the wherewithal to buy 20 to 100 of these what's the point risk far outweighs reward.

Go for better props that will hold value or go up substantially... Its the bases of all wealth on the Left coast.. cash flow only hold your position... Appreciation is how you make money and again unless you can get large scale small cash flow in low end markets will kill you over time  IT just will

different take on turn key... due diligence as suggest above would be wise

@Mike McKinzie 

  and based on your stellar portfolio you have more votes to post than anyone on BP your a rock star !!!!!!!!!!!!!

@Mike McKinzie 

  there you go you and I totally agree on this....

The DANGER zone is 30 to 50k rental that rents for 700 HUD... that is the danger zone.

Or the 70 to 90k TK that rents for 800  same deal...

Your in a completely different class. I own 11 homes in Madison MS that I bought go zone.. paid 175 to 225k a piece for them brand new for the accelerated tax benefits being an accountant I am sure your familiar ,,, those all rent for 1200 to 1600 and I manage them myself no need for PM these are all white collar no section 8.

Your portfolio is not what Most TK companies sell... And those that buy these low end rentals if they live in the community they can make them work. but out of state forget about it  is my opinon.

@Mike D'Arrigo 

  Your product although  TK or I think you sell turn key is some of the nicer stock you will see in the space from my experience of investing or lending since 2002  in... Detroit , Chicago, Memphis , Indy, Jackson, Birmingham, Charlotte, Atlanta and Orlando.. with a few dabbles in Fort Myers... Oh and lately Texas been funding a few deals there. I just got a lot of negative feedback from TExas landlords over the years  Foundation issues and Property tax's  but Texas is booming no one can deny that... I think the play there is to forget buy and hold buy and RETAIL  find the hot neighborhoods buy and do a retail rehab and sell... I am familiar with a few that are doing really well. Along with New construction on in fill in Austin... those would be what I would be doing in Texas.

@Mike McKinzie 

AS you well know owning and managing 350 homes is HUGE JOB and from my perspective not a fun one... I only lend money now.. so I never hear about the 3 T's or any of that stuff anymore and it does not matter if you have PM you still need to engage them answer there e mails their cash calls etc etc....and being very selective were my funds go and who they go to ( lots of experience at lending ) I mitigate my down side pretty well these days.. ( now in all fairness I got killed along with a lot of other lenders back in 07 and 08) so it was not all wine and roses.:) but now with the values reset and HML or private lenders being able to set their terms better I think the risk reward is far better than owning with much less work... I think many investors when they get some serious cash saved up will gravitate to lending... And doing deals.. as opposed to owning sfr's... Just a lot of work... and a lot of the work just is not that fun.. then take where mine were at, All mid west and south east Memphis to Atlanta we were spread over C and B... you just get tired of getting reports of break ins condenser theft.. move outs trashed units... evictions etc etc... Although Atlanta treated us VERY VERY well... We double our money there.. And that was because we beat the hedge funds to the draw picked up 50 or so then sold to the hedge funds before prices peaked.

If I was going to get back into the rental game I would only buy A class triple net lease or West coast apartments were vacancy rates are non existent and management is truly professional not just someone managing 200 doors who may or may not be in bizz next year..And the tenant base is far and away different than what you get in the mid west with sub 800 dollar rents on SFRs... Now if your SFR's are 1000 plus things changes drastically but so does cash flow as those houses cost much more.. It really depends on the asset. But buying 30 to 50k homes in the mid west with 700 rents is just a lot of work IT JUST IS based on my personal in the field first hand experience.. Heck I even moved to the South for almost a year and was in it everyday... But hey that's just me...

@Zoran M. 

last thing I want is more rentals out of state.. I sold my 350 SFR's in Oct one the happiest days of my life along with selling the boat and the Airplane.. WEll the airplane was a tough one.

My point is there are performing assets in every market especially multi family.. Were you can get tax returns review leases and get a inspection report that is truly 3rd party and an appraisal if your financing.

As I stated The Aussies got so taken advantage of from Marketing companies and shady TK companies that the ones left in business won't put their clients into anything that is not already rented as well as rehabbed etc...

And of course every one kind of dances over the MASSIVE theft issues in these areas.. People on the west coast that can afford to buy these homes don't live in those kind of neighborhoods ( like the original poster says Beverly Hills  I don't think they are cage their condenser units there or barring up the doors and windows  LOL.

I can pretty much 100% state this as fact.. Most of the folks that venture into buying TK out of state that is lower end C and D class will not achieve anywhere near the returns that are stated on the marketing materials. and would in fact do much better investing with a very reputable hard money lender in LA or Bay Area over time.... Like Norris group and other premiere lenders that take in private money and pay 7 to 10% returns.. those are real they are semi liquid and far safer than trying it on your own.. And are truly passive.

@Mike McKinzie 

  Exactly Mike why buy something with no history... especially multi family deals. there are thousands of them up and running.. why the need to buy SO CALLED turn Key.. Its really just a rehabbed vacant unit with no history to back up the performance claims..