All Forum Posts by: Sean Kelly-Rand

@Eli Jean-Gilles - where do you want to live? Both because technically you should be living there to qualify and second others may have the same preference as well. 

The other bit is the taxes, NH likely has higher property taxes but no income tax (and theoretically easier to evict etc..). And closer to snowboarding...

Worcester is changing - I lived there years ago and didn't love it but have seen a lot of investment activity move there and it has solid backing from the universities and hospitals in the area. And the nightlife / options are improving. 

Or wait 12 months and see if you can get a Dorchester triple for $850K - I see prices sliding already and expect they will be at point where the math works in 12 months plus FHA is likely loosening requirements (PMI).

@Tyler Theuer I would just ask @Lien Vuong to find one for me (We've financed her clients and they crushed it on the projects she picked for them).  She found great deals in Roxbury on the JP border and Chelsea. 

Personally I had luck starting out picking a market that was one neighborhood over from where the action was - i.e. if you like Eastie, than look at Chelsea or Winthrop with the idea that the values spread out. 

Also there is a lot of permitted land for sale right now, so if you are willing to build ground up and take the time to go through the numbers you should be able to find value. 

If you need bridge/fixnflip or development financing feel free to reach out. 

@Randy Daniels, @Jerry Agbon is on point - Boston has a very high concentration of 2-4 unit multi's. Different than NYC/NJ as it's likely a higher proportion of the overall market. Not sure exactly what you are looking for here but it's certainly a market to check out (that said it's an expensive market!)

And to be clear - a lot of the Dorchester properties have been converted to condos (we've financed a bunch of conversions in the past few years). 

@Eliott Elias - 100% on point! We very much are still investing, however as debt. Our strategy is short-term private credit (senior loans 12mo at 11%-12% rates).  It's a good yield and provides downside protection. Agree sitting on cash isn't ideal (although I would encourage everyone to keep excess liquidity for for the unexpected).

@Jacob D. I agree with @Lien Vuong that if you go commercial (5yr fixed rate, 10yr term) you can get rates in the high-5's low 6's. 

I looked at purchasing a commercial office condo (not the favorite asset class today) and had quotes for 75% LTV at 5.8% and 5.4% for 65% leverage. If you are buying multifamily you can get lower rates especially if it's in a CRA area. (My brother is a debt broker so he scours the market of 50+ commercial banks for the best rates and you can find a good rate if you know the bank that want's to lend on that property or win your business as a client).

We're a non-bank lender (FixnFlip/Bridge) - our rates are 10.95%-11.95% for 12 months and that pretty much market these days (maybe even below market) - 9 months ago we were at 8.95% and even lower in some cases (rates have spiked in such a short time)! 

Feel free to reach out if I can give you more color.

@Timothy Lewman - agree on your points. It seems that if homes are well priced they are getting multiple offers. Issue with many sellers is expectations are adjusting too slowly so they are always one month behind the drops. I encourage my clients to "Drop Price, Move Product" - focus on the volume and don't dwell on any one house not hitting the expectations, it will average out.

@Scott Trench - I am with you, rates are going up. Not just on mortgages but across credit (i.e. no longer a cheap HELOC option), auto interest rates are up, personal loans are up, .. it's not just investors. Consumers are squeezed as well (will affect rents/and ability to purchase).

However it's not rates that worry me... its liquidity... availability of credit matters. I foresee major issues on the horizon when owners/developers need to refi and credit/loans are simply not available at any cost.

That was the big takeaway for me from the last financial crisis... there was no bid... that's the scary bit. Interest rates up/down 50bps-100bps one way or the other really don't matter that much as long as credit is still available... when it's not its time to get ready...

We expect we'll be able to raise the rates we charge on financing significantly by the end of the year as credit dries up.  

One idea (I'm personally considering) is to borrow today (at 5.5% 5yr fixed) and set aside the cash incase liquidity is simply not available a year or two from now when opportunities arise.

@Account Closed - it's a common issue. "Lending is easy... it's getting the money back that is the hard part" ...

Couple thoughts: Go to your lawyer - either you have a 1st/2nd lien or your don't. And it matters what state you are in (non-judicial states you can typically foreclose with a power of sale without going in front of a judge... NYC/NJ, etc... and it's a pain....).  

If you don't have a lien see if your lawyer made a UCC (Uniform Commercial Code) filing - basically you can take over the LLC versus taking over the property (but then you own the debts of the LLC).

If you don't have either it's a lawsuit and that takes as long as the court takes in that state and might not be worth the $50K (no idea on the metrics of the deal). Your goal is to win a judgement and secure over other assets as well. 

Going forward... if you are going to be a lender: ideally be a 1st lien holder (senior mortgage) only work with lawyers with experience in private lending, also file a UCC. If the lawyer is unfamiliar than it's the wrong guy for the job (could be a great lawyer but everyone has their own expertise). 

If it's a 2nd lien, make sure you are secured by more than one property, there is a UCC, and your overall LTV is under 70% and there is a clear exit.

We love the lending business (I went from owning rentals to starting a hardmoney lender/private lender) but it takes scale and time to do it right. And it's not for everyone (need to originate $50m/month to close $10m, and then need to collect 100+ payments a month...). Diversification is key as well. 

Happy to chat more, we love the lending business, but it's not for everyone.

@Account Closed - it's a common issue. "Lending is easy... it's getting the money back that is the hard part" ...

Couple thoughts: Go to your lawyer - either you have a 1st/2nd lien or your don't. And it matters what state you are in (non-judicial states you can typically foreclose with a power of sale without going in front of a judge... NYC/NJ, etc... and it's a pain....).  

If you don't have a lien see if your lawyer made a UCC (Uniform Commercial Code) filing - basically you can take over the LLC versus taking over the property (but then you own the debts of the LLC).

If you don't have either it's a lawsuit and that takes as long as the court takes in that state and might not be worth the $50K (no idea on the metrics of the deal). Your goal is to win a judgement and secure over other assets as well. 

Going forward... if you are going to be a lender: ideally be a 1st lien holder (senior mortgage) only work with lawyers with experience in private lending, also file a UCC. If the lawyer is unfamiliar than it's the wrong guy for the job (could be a great lawyer but everyone has their own expertise). 

If it's a 2nd lien, make sure you are secured by more than one property, there is a UCC, and your overall LTV is under 70% and there is a clear exit.

We love the lending business (I went from owning rentals to starting a hardmoney lender/private lender) but it takes scale and time to do it right. And it's not for everyone (need to originate $50m/month to close $10m, and then need to collect 100+ payments a month...). Diversification is key as well. 

Happy to chat more, we love the lending business, but it's not for everyone.

Redfin reports the value of US residential real estate has fallen $2.3 Trillion in the last two quarters…

And Columbia Trust (Pimco) is defaulting on office assets in major cities.

Let’s be clear though; defaults and falls in nominal values do not directly translate into buying opportunities. It will take years to work out the office defaults before a sale at a distressed value occurs. And most owners of residential properties aren’t willing to sell at today’s market clearing values. And, imho, in the non-boom towns (Boston included) it will take even longer to play out.

So despite the desire I don’t see most investors (myself included) jumping back in just yet.

Hunkering down for the long haul here at RD Advisors with the continued focus on capital preservation and yield generation through short-term private credit.

Thoughts?