Got your message will call you,

Land is the big money play in the US.. Thats were the fortunes are made and are going to be made and Frankly were I have made my biggest hits over the years. . I will send you over a link to a property we have in Oregon that is a rain maker and  the kind of deals we look at.

D Scott is looking to pull in the lending horns and concentrate in Oregon, there is a good market for new construction hard money loans here. We did not get over built with new construction and the bank owned homes have been absorbed…

Still short sales and bank owned used homes but the picky buyer wants something nice, like what your talking about on your high end retail flip……

My borrowers in Detroit had retired cops at their rehab jobs signing workers in and out, most thefts were inside jobs.

We just do not deal with this in Oregon, you would be amazed, no one fences a project no security houses left un locked even with the Heating and airconditioning units installed, those would be swiped in most parts of the country within hours of us leaving the site.

These are properties that I foreclosed on. most are pretty decent homes as I never loaned in the deep hood in the first place.

these are loans I made in 06 and 07 at the peak of the market and am selling at a loss like any other lender.

I do not buy them right now and resell them.  I am not a home flipper. we buy for long term hold. and I am not selling them for 5k I am getting 5k down and selling them for 30 to 60k depending on the house. I get 1k a month 0% interest so they pay off in 30 to 55 months. works for us as a lender because I never have to take these back, and I own them free and clear already written them down on the books.

Being a hard money lender in my day I would not say we are predators, and I for one never make a loan to Own. I always want to get paid back If I wanted to own the home I just do what I am doing now and go buy them.

hard money is meant for a short term. thats why the points and rates are so high, they are not intended for long term.

One thing with Hard Money is a good hard money lender is going to Know the TRUE value of the asset not the puffed up value that these are usually sold at accross the globe.

if you have true equity you should be able to get a hard money loan if it makes sense to the lender and if the rates and fee's work in your cash flow model usually they won't. And like I said they are usually only for 1 to 2 year terms with balloon payments.

Just like Banks us hard money guys got burned in 08 when our clients could not longer get refi's so exit strategy is important.

There is a lender in SoCal that I run some deals through he will give 8 year money at 10% interest with 4 points. thats about as long term and cheap I have seen hard money. but he only does SoCal and to experinced investors if your buying your first property he will not loan to you.

Yes, Section 8 houses are subject to annual inspection the tenant has to reqaulify as well as the property, The inspector will come out give you a punch list and on average at that will run you anywhere from next to nothing ( very rare to have a section 8 tenant that is spotless and a home that needs no work at all) to 2k to fix various items. The average that we budget for is 1k per house.

so you get the punch list fix the items get a reinspect and the property is good for the next year.  The tenant can also call HUD during the year term and report items that the HUD office will then come out and inspect and issue a corrective order.

If you do not fix the items or the items do not pass the inspection the house is dropped from the program and of course the tenant is off looking for another property.

Also Section 8 folks can and do loose their vouchers. The HUD office gets copies of their tax returns and if they made too much money they get dropped, and it can be mid lease term and the tenant will just walk away as they normally do not have the funds to stay in the property.

Nathan

I got to Chuckle you ask me if I own any properties in Detroit, and then when your asked ( have to hand it to you your honest) you admit to owning none. I put probably 10 million of my own money over the years into these properties in the form of hard money loans just in Detroit many many millions into other markets. Most of them worked but the ones that didnt were flame outs as I was lending when you could still get a rate and term refi and I was taken out very quickly. Its my clients that have lost 50% or bettor of their equity and their houses have been lost to the bank because they just could not keep rehabbing them.

So your just like the dozen's of wholesalers I lent to over the years really, you make the middle man profit up front at settlement have no skin in the game other than your word that you will take care of folks, and now when confronted you back into ( hey I never said the units would be full 100% occuppied and yes one should have a reserve account)

but your not unique very very few turn key operators actually own what they sell.  alot of them that I have done underwriting on have horrible credit No real cash and spend their dough as quick as they make it.

Just like Real Estate agents I have known over the years that rent and have no other assets.

Were as I own every single property that my investors choose to do with me.  Huge difference we have skin in the game all the way through the transaction. But again our investors give us equity in exhange for security and no cash calls. Its a win win for the true passive investor. Everyone of my investors already owns rentals they are sic of managing the managers and or managing the tenants and look at us as a vehicle to continue to make great cash flow and have the protection of a partner that has the financial capabiity to execute…. Its really apples and oranges vis a vi the safety for the investor. And of course before the equity split we do not pay anywhere near the 20% you claim as thats just not real if you factor in true costs.

And Detroit is not the only city that is like this. Every city in the mid west and most of the east coast has these same issues. Whether its Indy St. Luis Kansas City ( KC who post here says he is happy if only 20% of the homes on a block are boarded) memphis, Pittsburgh Chicago, ( some of my worst loans were there) cleveland. I have lent and invested in all but Pittsburg and Cleveland. Invest in the hood and your in trouble invest in the suburbs and your OK… Like Memphis is real popular, but you get into fairhaven or South haven where the Great Britian groups are working selling these crap houses to the unkowing Brits these folks are going to get screwed just as bad as investing in the worse part of Detroit.  The reason these companies work these hoods is the wholesalers buy the houses for 5k or so put lip stick on a pig for about 10k then the marketing companies sell them  as CASH FLOW TURN KEY RENTALS for 40 to 50k and 25 or so profit is split between these companies. And since they are all cash transactions there is metoring device to tell the unsuspecting investor that they just bought a property in a war zone . They get the same old bullshit story, the house is rehabbed and tenanted, And 6 months later when the tenant defaults or loses their voucher reality sets in.

Then of course on the west coast you have Oakland, Richmond in the Bay area…. Watts and Compton east LA for So cal. War zones and killing fields in each of these towns. I have never done any research but I wonder how many murders per year are in big Aussie citys like Sydney and Melbourne???  Each of the cities I mentioned have well over a hundred a year. Most gang and drug related, but they happen in the inner city which is the point Dennis is making.

One last comment on Detroit….. Dennis makes a very good point. I have buddies there that have moved to selling on land contracts only and do no renting. They sell the houses as is IE no heating and airconditioning elec appliances etc. They buy them for 1 to maybe 3k and then basically sell them to what are sub prime borrowers as is. for 10 to 20k each. 500 down 300 a month fully amortized. they do not put a dime into them. These buyers then go out and raid other houses for materials put theirs together and do fairly well. Although Scott tells me the default rate is about 60%, but that means 40% actually make it to pay you off. So depending on the deal you get all your money back within a year then have 300 a month cash flow for 8 to 10 years. I have sold probably 50 of my personal REO's in this manner. Its not too bad its trashed house you sell in trashed condition if you get it back it could be in better shape but certainly will not be any worse than when you sold it. THIS is what we CALL SWEAT EQUITY DEALS>  Lots of this goes on.

Lastly comments on Wayne county,   I could not agree more with Dennis its the most unorginized corrupt government body in the entire country, it can take deeds weeks to months to get recorded, I really do not know how title companys can even write title insurance there since the recordings take so long to become of public record. They need to issue gap insurance. And then do not get me going on the water bills and how they hold you up for that dough..

Aussies,,,,,, If anyone is listening, What I would do is form your own sydicates in AU. pool your money and go into the states with a company that employees its own acquasition team rehabbers and PM.  You should form groups of a few hundred of you raise 10 million then set up a company to do this. Even with the overhead your will probably do 12% like we do because you control all aspects and you take the inificincies out fo the scenerio and the theft and over charging. This is what we have done. Everyone in our deal is an owner from me to the Property manager to the rehabber to our investor. One big team with one goal THE PROPERTY SUCCEEDS. not just one or two of the vendors the property and when the property succeeds we all succeed pro rata to our investment.

If anyone is interested I do have some REO properties that I will sell for 5k down 0% interest payments 500 to 1000  month. in most of the major cities we are talking about. they will need work usually 5 to 10k. prices right at 15 to 30k total. you can own them in 30 months free and clear. Caveot they tough neihborhoods caution and stamina is required.

I also have some great product in Oregon. Where we can do some zero interst financing on properties right on the pacific ocean and a great recreational vehicle park right on the deschuttes river which is world famous for trout and steelhead and salmon.

I would be intersted in some Aussies comments i raised about the murder rates in AU. and if they would liek to buy reos with 5k down and 0% fully amortized financing.

let me know

Google Jay Hirnichs Portland Oregon. you will see Silverado funding come up thats my hard money company, I am not active in the mangement these days just retain ownership. Silverado group is my real estate holding company 10 mil plus in assets.
The Truewholesalehouses.com is our latest venture into the lower end single families with my fully managed program.
You can check on all of my state affiliations and licensing.   can't hide anything from Google

Nothing propriatory about how we do our deals.

what I have done is marry the lending business with the ownership of the asset. Then created a team that are ALL equity owners. from myself to the rehabbers to the Property managers, We do not front end load except to pay basic overhead then we defer our profit until the assets are sold down the line. Our investor will recieve about 65% of the net prceeds and we get the balance. We handle all running costs ( thats fixed and variable expenses in our lingo). Our investor gets paid day one and continues to be paid no matter the circumstance.

We can do this because we bring them into the average transaction at far less dollar investment than if they buy from the average turn key operator.

so in exhange for set cash flow and never having a cash call, they give up equity to us long term.

I can only do this model B/C my day to day cash flow comes from new construction here in Oregon and other investment vehicles that I have.

Just like the investor coming into our deals this is a long term passive income play for us and we are doing volume.

And of course it only works because we have some great pipelines for defaulted properties. I am leveraging my 37 years in the bizz my 20 years of hardmoney lending and all those contacts to buy some incredible deals.

The other major difference is I buy ALL the houses up front. I do not use investors money to close our deals. And I do not borrow to buy my deals so I am not having to add in Hard Money interium fee's into my deals. Like all the guys I lent to over the years.
So you limit the profit centers on particular asset purchase and the asset ends up going to our investor for quite a bit less than what they will buy it from anyone else given the monthly cash flows.

And or like you are talking about,  we are able to buy much better properties that we feel are going to have upside,

If you google my name you can check me out and get to my web sites etc….

I have been contacted by many AU and BG companies and by and large they just want too much money out of each deal to make our model work and or I could tell they were just marketing companies with no depth or breadth of the US market, just by what they were asking me to provide them.

Its certainly Caveot Emptor when working with these marketing companies. Not all are bad of course just like anything but some I talked to I could tell were hit and run artist.

Thankyou for bringing your candor to this audience….

Best,

Jay Hinrichs

Nathan I still own a few homes that I am letting go for tax's they are on Pinehurst st. I rehabbed them 2 times they got destroyed twice by the nice tenants. So that was 100k down the toilet…..   Good news is I can take that hit and keep going whats an Aussie going to do when they borrowed against their personal residence to invest in these very Dangerous investments.

Like I said I think a local person there can and will do good running these properties staying right on top of them excetra, Thats what we do,  In our markets.

We stay in each and every deal I keep ownership of the asset and my client is my partner I put my money where our reputation is we divulge what we make on each deal and we stay in till the end. Kind of like a triple net lease but not a triple net, I am the only one in the US that sets up the transactions this way, We pay for any vacancy we pay for maintenance, But we also do not give pie in the sky inducements of 20% returns.

makes a big difference my mate when your selling a property and you close and you get your flip fee which of course you deserve to make. but at the end of the day  your not paying one dime out of your pocket 2 years from now when things are not quite going as planned for the off shore investor.  Thats the difference we own them till the end along with our parnter investor. our program is white hot in the states for its safety, Aussies are not keen on it because its too foreign a concept and B/C like I posted before they are looking for that huge return number and are willing to risk the down side in hopes of big APR's.

My interest in this forum is just to bring the other side of the equation to the thought process. That :::::

1. There is no such thing as an arm chair investment in the States in low end rentals.

2. 20% Yeilds in these markets are not reality over time.

Like Dennis below has stated your first post is just so off base as to be laughable to a anyone with any experince at all in this asset class, and of course I have no doubt you will get some calls from those that for whatever reason will beleive your statements like they are fact B/C this is what they want to beleive.  Heck if they are only going to make 7 to 10% why buy US rentals at all, I think we all know there is absolutly no potential in the homes your selling for capital growth you have admitted that.

So at that I will sign off of this thread and let you the forum viewers decide if your right or Dennis is right.

My money is on Dennis for his candor even in his hometown and market.

KC

Owner occupied deals are happening all day long at 3% down FHA that is the majority of the sales just like High Income stated. I think your talking about non owner occ. or conventional deals and conventional deals on the west coast are those above the FHA limits, which are depending on the area 380k up.

in the mid west I am not sure what FHA maximums are but I think they are probably about 200k or so.  Its really a credit score issue you have under 620 and your not getting a loan. These big box banks as you call them ALL sell their loans to freddie and fannie with the big banks just servicing them. FHA then guarantees them. in the ole days you could get FHA loans in the mid to low 500 fico score.  Although Wells will sell you an REO of theirs with a 580 for owner occ.. 

The other issues is the banks really check income much closer than they used to. And I am not talking just lier loans. I did have 2 sale fales in Aug. here in Oregon and have not had that happen in years. One was owner occ FHA and the underwriter just prior to funding doubled checked income and cash reserves buyer fibbed about them loan died so did the deal. The buyer was left with no place to live. The lender did not get paid of course the agent bringing the buyer did not get paid, And my house did not close. I ended up renting it again.  Then I had a 4 plex that I owned not close as the underwriter got picky and demanded 50% down instead of 25% still cant figure that one out. But your right its happening.

What your describing is really a sub prime borrower , which runs very heavy to minority borrowers African american and Hispanic, and there is no question these buyers have been taken out of the retail market at a greater rate than non minorities, except the Nuvo riche' Chinees buyers of the west coast. Just look at any property in Cupertino CA. or Palo Alto CA. average price in excess of 1 mil and plenty of buyers.

For these reason's The % of homeownership east of the Rockies has plummeted in the big cities. Heck look at a city like Memphis 60% of all single families are rentals and this before the melt down. Other cities in the mid west and I am talking every single one of them the % of home ownership has plummeted especially in neighborhoods that are minority, Any one can check these stats.

As you stated I think homeownership for many has changed for the next decade and maybe as you state forever. its going to take a new generation coming into purchasing power that cares about their credit and can save 5k to buy a house in the mid west.
On the west coast were I  live you need to save 10 to 50k for FHA.

I know when I bought my first home in the late 70's you needed 10% down then a private lender ( hard money would give you a second for 10%) The banks at that time would only lend 80%.

You then had thrifts come into the market S and L's they were called and the sub prime was born in the mid to late 80's. Our area saw companies like Long Beach S and L there were thousands and they all got hammered in the late 80's to mid 90's with thousands going out of bizz.

We are just seeing a big replay only much worse than in those years. Its Deja Vu all over again

Just go to E bay and buy a used course on tax lien investing in the US for 50 dollars and have it mailed to you.

that will give you all the same info. this stuff has been talked about written about over and over and over through out economic cycles. these companies selling this info for these large investments are in the Info business period.

Trump is only in it because there are huge dollar returns selling info that cost them next to nothing to put together and then hire super slick presenters and get you all hyped up and you gladly part with your money.

Or go to Amazon and find a book there are many of them.

nicely done I agree with you 100% on your rehab process.