All Forum Posts by: Jay Hinrichs

@David Jonsson

@Bill Gulley

David its called "case law" an attorney can tell you your all right but the dept. of corporate securities or the department of RE in your state might disagree.. then its a matter of who wants to spend what dollars fighting it.

I went through that in Oregon were my securities attorney told me my Note model was fine.. the department of corp securities said it was not.. It would have cost hundreds of thousands in legal fee's to prove our point. So for a 5k a fine and a promise to create a RE paper offering ( like a 506 but specific to Oregon we settled) I did not admit to wrong doing the state said fine just follow our rule and never do it again.

That adventure cost me 50k in legal fee's and a bunch of stress. And I had an opinon letter from my attorney when I started this Model that we were within the law.

@Wendell De Guzman

Wendell please take no offense however in looking at these properties I think you go the better of the bargain and who ever bought them will not think they made a good buy down the road.. Pretty rough looking stuff

@Deidra Hubenak

good advice... after 40 years I have finally figured out to spend money ahead of time for legal and tax advice as opposed to what I did in my early years which was just do it and hope for the best.

@Eric W.

Eric spoken like a true PDX PM were we have one of the strongest rental markets in the US>.. unless you have any REAL experience in the mid west or upper east C class properties you just cannot imagine how tough it is to manage these things. What this person is going through is no unique and actually is very common for out of area investors buying C class properties

I don't care who you have manage these things it could be JC himself the tenant base just does not allow for any kind of predictable returns.

Here in PDX were we have 1% vacancy factor and you put a rental in craigs list and get 20 responses in 2 hours with most of the folks 700 plus fico's that's just not reality in these markets.. So what you think you would do here in Oregon is not even close to reality in these markets.

There are those on this site pitching this Phili properties as good TK deals but as I say the risks are great

@Edward Sittler

Yes properties are categorized a,b,c,d and the Ghetto..

In major metro areas this is usually is well defined a long the purchase price or values... So if your in INdy and the house is 20k its going to be D.. If the same sq ft in a much nicer area is 150k its A... then you have all the rest.. Same with rent rates.. an SFR that will only rent for 500 bucks or so is on the bottom end and same sq ft that rents for 1500 is on the top end.

The differences of course are basically crime schools and class of tenant.

this all leads to how successful the project will be.

Stable tenant.. who is nice to the house feels safe in the home will stay and treat you well.

Unstable tenant, who needs their windows barred and who is really rough on the house. that leads to low financial performance

Of course this is general feedback and its not rocket science. However I have seen a lot of financial carnage with out of area investors trying to buy the cheapest home they can that looks best on paper only to find out they had bought a paper tiger.

@Jon Holdman

But Jon I think we go to the same barber ! No money down can and does happen but its not the norm, Nor do I think its wise for those with NO real cash reserves to be in the rehab business... It can work and that is great but if it goes bad it causes all sorts of stress on people,, as everyone is different when faced with a stressful situation.. These folks should spend time finding a money partner then doing the deals together to gain experience and have some financial wherewithal to fall back on if there is a hiccup.

@Michael Jobe @Wendell De Guzman

prior to the meltdown that scenario flew all the time I did about 2,000 of them over the years.. the take out was a resale or as Wendell describes a rate and term refi.. now there is some of that rate and term refi back in the market place but I will not EVER again base my loans on that as the exit strategy...

However I rarely do loans anymore I do all my deals as JV's so I have some control of the asset incase the person goes dark on me I can step right in without having to go through the OREO process and all the time and pain involved with that.

@Michael Jobe

For me personally I would pass.. I suggest this person bring on an equity partner, or a contractor partner that will do the work for a piece of the action.

If you look at it from a HML perspective your 100% financing someone. and say you are at 4 points and 12% , and the deal goes pear shaped.. the borrower walks as they have no skin in it and HML can't report to FICO. So there is no motivation to save the 750 Fico they have.

your money is tied up for 6 months or more.. the house gets vandalized because no one is watching it... And you spend the 4k you made in points on foreclosure cost tax's insurance,, plus lost opp. costs. And if the investor bought the property for 80k its not worth anymore than that as an OREO and probably less.

The other thing this investor could do is if they worked hard to get the deal tied up they could just bird dog it to someone who has the CCC to do the deal.

this is my personal view on things these days

@Ben Hughes

Ben I stand corrected 25k that means 10k profits maybe 15k.. that's huge for the mid west and south... pedestrian for west coast

@Ben Hughes

exploding Is relative in your market if a house exploded in value 5 to 15 k your jacked.. In CA a value explosion is 50 to 200k...

and remember in your market if a house explodes 5 to 10k that really does not mean anyting as sales cost will eat that up so in reality you just break even