All Forum Posts by: V.G Jason

thanks for the explanation, I was confused as applied to single properties, but I think what you're saying is that you take money from investors and invest it in a portfolio of SFHs. you don't say "i need $X for a down payment for house A, and i'll pay you back strictly out of the cash flow of house A." instead, you invest the aggregated funds. is that accurate?

and you said most investors don't want a monthly payment - so when do they exit? say, 5 years - and they get their principal back plus the interest?

That's correct, investor funds are pooled and used buy a portfolio of assets. A Stairway 8% savings account isn't an investment that you exit. It's where you put cash that is not currently committed to a better deal. People use it as such. Maybe someone builds up their balance to $50k-$100k then makes a significant drawdown to purchase an asset. Maybe someone uses it as a place to store funds set aside for a rainy day. It's a tool. And a tool that comes with total access to all of the details of all the assets that back the fund, education on how to acquire similar assets, and all the infrastructure and legals to enable you to build a similar pool of clients and raise capital for yourself.

If you are interested in learning more, or leveraging the infrastructure I have built, please message me.

What? It's not an investment that you exit? It's for a rainy day fund or a significant draw down to buy an asset--that's an exit, no?

If your investors all wanted their money back today, what's stopping them?

Nothing stops all investors withdrawing all their money at once. I have sufficient cash, credit, and liquid stocks to satisfy such an event without selling a single house. Fractional reserve banking has existed for over 350 years. It's a sound business model I didn't invent.

You're not a bank. Fractional reserve banking doesn't apply for you. I think that's what you're missing here.

How much of the investors initial capital covers the 33 houses you bought?

Fractional reserve banking is a mathematical technique, any business can make use of it. Currently I have a total client balance of $1.2M. The equity in my 33 SFR rentals as calculated using the appraisals obtained at time of purchase is $1.87M. It will have grown substantially since time of purchase. I have $150k cash in bank, $350k unused credit, and $800k in liquid stocks. Plus another $300k equity in my primary home, and all the usual incidentals such as cars etc. that are all collectively used to secure client funds. Not to mention I have a $625k W-2. Trust me, I run my business very conservatively. In comparison to my income and assets, the business is at a test stage. I have done my market research, bought 15 REI Nation properties, 12 SDIRA wealth properties, and 6 properties directly through a real estate agent. While I'm happy with the performance of the 33 properties overall, the REI Nation properties of the best performers and where I will focus expansion future.

That wouldn't hold in court. Good luck saying I was using fractional reserves, therefore, I was short liquidity when my investors wanted all their money back & thanks for understanding why you're not kept whole.

I bolded the $150k in bank, I assume the bank for your investors that you're paying back to not personal bank. I bolded the $1.2m, this is where it's all off. You need to keep these investments private, too.

I don't care about $800k liquid stocks--that's personal. $350k in unused credit--that's still a loan. You'd be loaning to pay off a loan? $300k equity in primary home--that's personal. $625k in W2---that's personal.

You're comingling your investor funds and your personal funds. This is an issue, too. You're basically stating I'll keep my investors whole on the 1.2mil by extracting from my personal account, I'm not sure if you fully understand the law here. I'd delete this posts and clean up the act.

As mentioned many times, this has all gone through a securities lawyer, so the legality is not in question. It is important you understand that when you borrow money my way you back it with everything you've got. You don't get to separate out an entity and say only that entity is liable to repay. If you did, you could let that entity go bankrupt and potentially hurt investors without being on the hook yourself.

The terms and conditions are on this thread. Investors know where they stand if there is a liquidity issue, they get paid more interest until the issue is resolved. In 20 years of operation I've never need to activate the penalty interest clause. Feel free to DM me if you'd like to delve deeper.

That is why you do create an entity. You can't combine an investment account with customer liability into your personal account. Your securities lawyer probably wasn't told that aspect. He probably just said, sure you can raise funds to buy houses and pay a monthly distribution. Not yeah go for it, and let's back it with your personal stuff. Or the law firm is completely incompetent and inept.

0 Votes

Quote from @Leo R.:

@Engelo Rumora sorry to hear you were affected by the FTX debacle.

This is an interesting topic, and I think it's especially interesting on a real estate-focused platform like BP...

The reason being: in my mind, real estate and crypto are opposites in so many ways. For instance, they're opposites in terms of liquidity, physicality, age of the business model, volatility, etc., etc. ...and, my impression is that they're also opposites in terms of the mindsets of the investors (e.g.; many RE investors have comparatively longer time horizons, and I would assume that most RE investors have a lower tolerance for risk).

I'm a RE investor, and don't have any crypto, but I have plenty of friends who hold a lot of crypto, and we've discussed crypto endlessly...

At the risk of sounding like a luddite, even after years of discussions and reading countless articles, I still don't feel like I have a good understanding of crypto. ...and frankly, I'm skeptical of people who claim to have a thorough understanding of it (yet, there are no shortage of self-proclaimed "experts" who describe crypto with the confidence of someone predicting a sunrise!)

...RE, on the other hand, is comparatively simple to me--I can wrap my mind around what makes a property valuable, what factors affect the market, the advantages/disadvantages of various RE investment strategies, etc.

Don't get me wrong--I'm not trying to knock crypto. I've long said that my crypto friends will probably have the last laugh when we're all 80, and they have quadruple my net worth from cyrpto investments. Plus, it's not like RE isn't also getting hit right now--many people holding RE will probably take a significant hit to their net worth this year. ...but, at the end of the day, I don't feel like I have a thorough enough understanding of crypto to go in on it at any significant level... ...but, it will be interesting to watch it evolve in the coming years!

Crypto or bitcoin, which do you not understand?

It's a shame this happened, but it's happened many a time before. If you didn't have your stuff in a cold storage, it's your fault at this point. It'll happen again.

0 Votes

Toledo, Ohio

Quote from @Chris Martin:

I don't see much movement over the past three decades or more. Nothing alarming at least. After the GR homeownership dropped in every age bracket, but each age bracket is within the 30+ year norms. I was a little surprised that the 25 and younger bracket was above 20% in 2006 timeframe. I'm not that surprised this age bracket is almost at 20% again. Percentage wise, the under 25 YO group is most volatile, but again the overall picture is "normal". Having trouble with the 'at' thing...

@V.G Jason

Who cares about history?

That doesn't mean anything about what will happen. Stop using backdated trends to determine the future. There's one common theme here, your dollar will be worth less. If you agree with that, you'll get on the same page.

The rate of which assets will go up, will be significantly higher than the rate your dollar yields. If that gap keeps widening, what allocation of your daily dollar now has to provide basic necessities? I don't know an exact number, but I'd say safely a higher allocation. If you have a higher allocation to basic necessities, you have a lesser allocation to disposable & savings. Do you get why as this process accumulates you will have primarily a renter nation?

People have less money to save/hold for assets, while assets are widening from the value of a dollar. They're chasing a moving goal post, but keep getting tripped up.

0 Votes

Quote from @James Hamling:

Quote from @V.G Jason:

Questions are how long do we stay at this high rate environment(relatively speaking to last 15 years)?

And how quickly, if at all, do we do decelerate it? Those things are going to make hard assets boom.

I think rates being high stay till top of 2024, start decelerating mid 2024 at this current point in time. Buying a house next year at 10% will likely take till 2026-2027 for me to make sense to refi. The economy's job market reports is kind of disengaging; almost 90% of jobs are non-white collar worker jobs including about 15-20% that are temp jobs. If holiday season doesn't go okay for all industries, but airlines, I presume Q1-Q2 will be suffocating.

By economic and finance norms, 5.5T% - 6.5% is a "healthy norm", so keep that in mind. It does not matter how long or how low into SUB-normal realm things got, 5.5-6.5 IS "normal".

Things look to be getting on track to land back at "normal" a lot faster then any anticipated, many indicating may land there and hover back in normal within coming 12 months.

How long do we sit at "normal", well I hope a very long time, at least 7 years, because the economy NEEDS stability and all the swings are NOT good for any kind of stability, which is needed to get things on track to get anywhere near to parity in housing demand. And fact is NEVER in history has the economy done well when housing was in any kind of struggle. A good economy requires a good housing economy, and significant shortage is NOT healthy.

But, do I see years of stability coming, NO. Hell, at this point I'd jump for joy with just 1 quarter of boring stability. We have not had stability sustained for years now, pick your chaos factor, there is too many to list. The silver lining is things have come VERY resilient to chaos, far more then years past, because were all used to it now, we get over things in light speed now compared to historical norms.

By economic & financial norms-- you're absolutely correct. But by the average investor, look here for your case studies or look at the average joe in a different asset class, they'll tell you 5.5-6.5 is high. So it's normal, but it's not expectation. There's a difference and if it's not meeting expectations, that's when the market reacts harshly.

As for stability, I think we take it 1 year at at time. Political uncertainty will be more directional than any other input that comes across and we're going to remain on course or change in approximately two years.

0 Votes

Dallas, Texas

Quote from @Austin Fowler:

Quote from @V.G Jason:

Quote from @Austin Fowler:

Quote from @V.G Jason:

What's the language for the investors? Do they have a minimum period for hold, or a time period they must withdraw ahead of time(like if they want to be paid end of Q1, they must state that by end of Q4). When's the exit period? You're literally just a run on from being wiped. Yes banks can do that, but they also got FDIC insurance behind that'll get involved and a lot more. You have houses you'd have to liquidate.

Are your investors aware you're reserving 20% of total funds, have they seen the balance sheet?

With house prices dropping & rates increasing, I'm quite confident if they'd get a look they may hit the withdraw button. Now hopefully you don't have anything capex wise happen too especially in this Panhandle area with weather coming in. Otherwise, your investors will wipe your 20% reserves out and you'll be force to liquidate the houses to get proceeds over. Your strategy has a lot of holes in it, you're basically leveraged 80% on illiquid assets that are coming down as rates are going up, and hoping you can see it through it with nobody asking for money basically? If you do, you'll do well. I don't think significantly well to bare this risk, but that's your call.

As for the language for investors, below is the 1-page summary of the 61-page PPM. No minimum hold time. If you want to put money in one day and take it out the next, that's fine by me. A single day of interest is cheap to pay and I'm happy to build relationships with clients simple by providing good service. No specific exit period. This is a savings account service. Yes, my investors are aware I run a fractional reserve investment bank that is ultimately personally guaranteed only by my worldwide assets. But these assets are substantial and sufficient to provide a meaningful level of safety. To be very clear, I can afford to cash out (through cash, credit, and stocks) all of my investors without selling a single house.

As for rates, all of my mortgages are 30-year fixed. The inflationary environment we live is has so far put upward pressure on rents. And yes, I share much more than my balance sheet with investors. W-2s, tax returns, the lot. My net worth is multiples my total debt obligation to clients, I run my business conservatively.

-----------------------

Account Terms and Conditions

Maximum balance: $1.5M

The borrower agrees to provide a bank account service to the lender paying 8% per annum, with interest calculated and credited daily at midnight PST via balance(t+1) = balance(t) * (1.08)^(1/365). The account shall operate according to the following terms and conditions. Some of these conditions can lead to the account switching to a penalty interest rate of 25% per annum.

1) The funds in the account are secured with full recourse to the worldwide assets of the borrower, no matter how indirect the ownership structure is, no exceptions.

2) Deposits and withdrawals can only be made electronically to ensure unambiguous dates of transactions and secure transfers.

3) The lender can initiate a deposit by performing an electronic transfer to the borrower's account.

4) The date of deposit will be the date of receipt of funds listed on the borrower's bank statement.

5) If the received deposit would take the lender's account balance over the maximum balance, this deposit shall be returned in full within 7 days during which no interest will accrue on these funds. Failure to do so will result in the lender's account switching to the penalty interest rate and the deposit posting to the lender's account 7 days after receipt until the excess deposit is returned.

6) The lender can initiate a withdrawal at any time by sending an email requesting funds. Interest shall continue to accrue until these funds are sent. The funds must be sent within 7 days of the email requesting withdrawal. Failure to do so will result in the lender's account switching to the penalty interest rate until the funds are sent.

7) Transactions, interest, and current balance shall be provided via an online portal.

8) There shall be no fees or transaction limits associated with the account.

9) The borrower has the right to close the account at any time by sending all owed funds.

10) Even in the event of death or incapacitation of the borrower, this contract gives the lender full recourse to the borrower's estate, even after transfer to other beneficiaries of the estate, without exception or limitation.

so this is one they can exit. why would you say differently?

My experience of how an investor uses the accounts that they don't close the account. That's what I mean by not exiting. Investors use the account as they would use any other savings account. The balance fluctuates, and the average of all the fluctuations across all of the clients equals a constant from my end.

You offer a savings account for investors, that isn't backed 1:1. You're definition of 1:1 is lines of credit, personal income, personal equities, and personal home equity. Go talk to a lawyer, you need to re-arrange this asap.

1 Vote

Quote from @Austin Fowler:

Quote from @V.G Jason:

Quote from @Austin Fowler:

Quote from @V.G Jason:

Quote from @Austin Fowler:

Quote from @Nicholas L.:

@Austin Fowler

and you said most investors don't want a monthly payment - so when do they exit? say, 5 years - and they get their principal back plus the interest?

What? It's not an investment that you exit? It's for a rainy day fund or a significant draw down to buy an asset--that's an exit, no?

If your investors all wanted their money back today, what's stopping them?

You're not a bank. Fractional reserve banking doesn't apply for you. I think that's what you're missing here.

How much of the investors initial capital covers the 33 houses you bought?

1 Vote

Quote from @Kevin Nieves:

Quote from @V.G Jason:

Anyone looking to refinance in 24 months is likely going to hit a similar rate, maybe 1% less, than they are getting today. Fed funds still has more to go, and good luck guessing how long it sits there for. It's not going from 4.5-5%(when it gets there) to 2.0% in 6 months.

Once that realization hits market sellers, and the comps in Q2-Q3 '23 show this Q4 '22 & Q1 '23 sale information, prices will adjust. That may take 3 months once they see it, or 6 months, nobody knows. But long hold at high fed funds + poor comps will do the trick.

Thanks Jason! You are right, there may be no change in the next couple of months. I wanted to be on the safe side and get advice from people that are already doing it. Thanks for the reassurance, really appreciate it!

People say buy the house, marry the rate or something along those lines. I say buy the house, if it makes sense, whenever. That way you're never having to re-fi, or never having to do something. And always put yourself in position to where you always have cash.

1 Vote

Philadelphia, Pennsylvania

Yes, it'd make 1+1+1 not equal 3 but significantly more.

0 Votes

Denver, Colorado

Also, take into account the 2008 housing crisis made lending to builders/developers post-crisis a thing to be wary of. That shorted the housing market from what should've been developed.

0 Votes

Tucson, Arizona

Quote from @Malcomb Stapel:

@Luciano Suehara there are lots of properties you can buy that have negative cashflow (most of them in fact). Why wouldn't you just keep looking and offering in a way that targeted positive cashflow?

As for those saying buy for appreciation. Well, before you go that route, just educate yourself on market history. You won't have to go back more than about 13-14 years. Or just take a look at what's happening now.

Past market appreciation doesn't mean future appreciation. You want to go where the puck is going, not where it's been per Wayne Gretzky.

3 Votes

Dallas, Texas

All Forum Posts by: V.G Jason

V.G Jason has started 15 posts and replied 3180 times.

Post: Property 8, 100% financed

Post: FTX Disaster! What Next?

Post: JPMorgan is about to spend $1 billion, hundreds of homes to rent

Post: Housing crash deniers ???

Post: Property 8, 100% financed

Post: Property 8, 100% financed

Post: New to investing, need advice

Post: Being an agent and a flipper

Post: When did the economy stop pushing for home ownership?

Post: Buying rental with negative cashflow for the first 3 years

V.G Jason has started 15 posts and replied 3180 times.

Biggerpockets Logo Post: Property 8, 100% financed

Biggerpockets Logo Post: FTX Disaster! What Next?

Biggerpockets Logo Post: JPMorgan is about to spend $1 billion, hundreds of homes to rent

Biggerpockets Logo Post: Housing crash deniers ???

Biggerpockets Logo Post: Property 8, 100% financed

Biggerpockets Logo Post: Property 8, 100% financed

Biggerpockets Logo Post: New to investing, need advice

Biggerpockets Logo Post: Being an agent and a flipper

Biggerpockets Logo Post: When did the economy stop pushing for home ownership?

Biggerpockets Logo Post: Buying rental with negative cashflow for the first 3 years

Post: Property 8, 100% financed

Post: FTX Disaster! What Next?

Post: JPMorgan is about to spend $1 billion, hundreds of homes to rent

Post: Housing crash deniers ???

Post: Property 8, 100% financed

Post: Property 8, 100% financed

Post: New to investing, need advice

Post: Being an agent and a flipper

Post: When did the economy stop pushing for home ownership?

Post: Buying rental with negative cashflow for the first 3 years