All Forum Posts by: Jeff Petsche

With the new passing of a bill called the Financial Choice Act, which scales back or eliminates many of the post-crisis banking rules under Dodd Frank, I wanted to know what other BP members thought about this topic, and how they feel this will impact real estate as a whole, and specifically in their markets.

Many argue the Choice Act would leave the U.S. economy vulnerable to another financial crisis, and I don't think they are wrong. Loosing guidelines with lending laws is what got us into trouble back in 2008-2009, and yet it appears we could be headed there again.

Being a CA real estate Broker and looking at investing OOS for long term buy/hold properties (Small multi-family communities up to 15 units and/or possibly SFRs) for positive cash flow, I don't feel certain markets where I'm looking to invest (Ohio, Indiana, Oklahoma, Utah, Tennessee) will be as impacted when the SHIFT and DOWNSWING hits, as it will in BOOM/BUST states like CA, NV, AZ and FL.

Thoughts?

Here is the an article on this topic:  http://www.npr.org/2017/06/08/532036374/house-passes-bill-aimed-at-reversing-dodd-frank-financial-regulations

@Aaron Mazzrillo Thanks for the comment and words of wisdom Aaron. Maybe to some degree I have limited beliefs as to what is and isn't possible in CA, and as a real estate Broker here in CA I do have access to resources and I have relationships in place that I don't have in other markets.

Outside of a "transactional based business" like retail, wholesaling or flipping, do you really believe SoCal is a smart place to invest for long term buy/hold with positive cash flow?  I'm just not seeing the numbers working in our favor, and if you do come across that below market property with a motivated seller, the right play TODAY seems to be either wholesale it or flip it, not REHAB/HOLD/RENT because the rent/value ratios are ridiculously low, and with a SHIFT COMING, you could easily lose 15-20+% of equity (or more) in the next 2-5 years here in CA.

Anybody who thinks this appreciation UPSWING can last forever is falling into the false sense of security like before or not reading the news. With the House approving a bill, dubbed which scales back or eliminates many of the post-crisis banking rules under Dodd Frank, things are about to get "stupid" again and many feel  the Choice Act would leave the U.S. economy vulnerable to another financial crisis. (http://www.npr.org/2017/06/08/532036374/house-passes-bill-aimed-at-reversing-dodd-frank-financial-regulations)

I'd rather not be investing in BOOM/BUST states right now! Even when this financial crisis hits, and it will, I'd rather be in states where the impact is not nearly as severe.

@Ralph R. Thanks for the comment Ralph. It's much appreciated and yes I know the REI game is about patience and perseverance. My personality is constantly challenged with patients. I seem to want results "yesterday", so I struggle with that in my day-to-day life. My business coach and I are working on that!

You are the 4th person who has mentioned that building relationships with PM companies is key, so I'm starting that process now.

Thanks again and good luck in your REI journey.

@Jay Bhatt Thank you very much for your comment and it's great to know that I'm not going crazy and not alone. I would love to talk by phone if you are open to that conversation. I promise I won't take more than 20-30 minutes of your valuable time.

I'll be sending you a connection and email.

@Jay Hinrichs thanks for the advise and I'll start vetting the PMs in the few markets I'm looking into and follow the steps you suggested.

Thanks for your input/advise and I look forward to posting some success stories sooner rather than later.

@Ian Walsh I would love to invest in my local market for many reasons. Unfortunately our average sales price is $675,000. Buy/Hold just does not pencil in my market (as least not for numbers I want).

You'd be lucky if you got .05 rent/value ratios and in many cases it's .03. A $420,000 purchase might get you $2,100/month rent (.05 rent/value).

I've even looked in high desert markets (90 minute drive time) where you can get a property for the mid $100's, but the rents still don't pencil.

I've been a RE Broker in CA for 14 years and in my opinion those who invest here are playing the "speculation" game on equity, not cash flow. Or, they are wholesalers looking to make a quick dollar, or flippers, but not buy/hold.  

There is a tri-plex in Laguna Beach listed for $7.4M. Yes I said TRI-PLEX, not a 250+ unit apartment complex. Who in their right mind would EVER pay such a ridiculous price for 3 units!!!

@Rebecca G. Thanks for the comment and I'm not "disagreeing" with Jay or anybody for that matter with regards to REHAB from a distance can be risky if you don't have the right team on the ground. However, with buying from a TK provider, aren't you already buying at "retail" prices with REHAB done, tenants in place along with PM company ready to manage? Or is that not always the case with TK? If it is the case, then the BRRRR strategy does not work with going TK.

When going TK, from what I've been reading and told by TK providers I've talked to, you don't have the option to REFI out the property at ARV because you are already buying the property at ARV or very close to it. Our goals are to be into holding rental properties with as little (or none) of our own capital as possible.

Unlike some investors who want to be 100% passive and going TK works for them, I don't. Working within REI/my RE retail business here in CA is what I'm going to be doing 100% of the time, so if I need to be in markets to visit some projects then so be it.

I have connected with many investors here on BP who are having tons of success from a distance with BRRRR properties, but they 100% have to have the right teams in place.

I've also talked to a few who own over 30 properties in varies markets and have never stepped foot in the states they invest in, which I think is CRAZY. I for one have no intentions to just sit here in CA and not meet the people I am working with in our markets or have an idea of what the properties and neighborhoods look like, etc. I plan on getting on the plane and getting my own boots on the ground when we identify the market(s).

@Jay Hinrichs and @Todd Dexheimer thanks for the comments. 

Jay, for what it's worth, I'm not sitting in my CA office just "pulling strings" as you mentioned. I'm trying to make some initial connections, get information about the markets I'm interested in, discuss my strategy with the local experts to see if it is even possible in that specific market and if all sounds promising, then I will be setting up meetings, get on the plane and start buying properties. 

This is my 100% focus and my business moving forward, besides my small retail business here in CA,  which organically happens through referrals, so I plan on spending whatever rime is necessary in the market(s) I invest. 

I just spent a week in AZ for this very reason, so traveling to the local markets is not an issue at all. I fly for free, so that's not an issue either. But I'm not going to a random market without doing some research first and hopefully having a few boots on the ground to meet with. These markets aren't just a 60 minute drive away for me, so it needs to make sense and plan out the trip. 

In the beginning as I get things up and running, I can see myself in various markets half a month if necessary. 

I have a great support structure here and a passive retirement income from the police department, so I can be gone for weeks at a time to build this business OOS, and everything here still gets handled. 

@Ali Boone We are wanting to implement the BRRRR strategy, so Ideally we are looking for "off market" deferred maintenance properties to REHAB and then get it in rent ready condition.

I think James Wise is correct in his comments about most agents are more willing to work with the "retail buyer" who is willing to pay "retail" pricing NOW, which is not our play here, so I can see why some agent see it as a waste of their time. It's sad, but true because I would hope they would want to build a relationship with an investor who could possibly buy 100's of properties through them over several years, if the relationship and market continue to make sense.

To me it's about LONG TERM RELATIONSHIPS and VOLUME. Not just us looking to buy a ONE OFF property here and there! 

In the end, we will work with the right agents OOS and they will be glad they took a chance on us.

@James Wise Thanks for the comment and in NO WAY did I come across in the manner in which you described. Because we all work for the same umbrella company, the conversations were very professional and respectful in every way.

I think it's the latter of your comment. I think these agents are either talking themselves out of the fact that there are deals out there to be made, you just have to look under a lot of rocks to find them. I know some have given into the fact that the areas are saturated and too competitive to have a chance at the numbers we are trying to hit, or they just don't have the experience working with OOS buyers who are not paying retail prices.

I know a few of the agents refused to write low offers because they were worried about insulting the seller/listing agent and damaging their reputation. I respect it, but they are just not the fit for me and my partner.