035 Hard Money Lending, Development, Land Sales and More With Jay Hinrichs

On this episode of the InvestFourMore Real Estate Podcast I interview Jay Hinrichs. Jay has had a busy and exciting life and had a number of real estate businesses and adventures. Jay started out in the real estate world as a n agent when he was 18. He worked primarily on land deals, but then moved into the lending business and owned his own mortgage company. He has also developed subdivisions, bought and developed timber land, been a hard money lender, owned over 350 rental properties at one time and much more. Listen in to hear his amazing journey and some great advice he has for real estate agents and investors.

How did Jay Hinrichs get started in real estate?

Jay grew up in an environment similar to mine with a father who was in real estate. Like me, Jay wanted nothing to do with real estate when he was growing up, but he ended working with his father as a real estate agent when he was just 18. After seeing a few commission checks after selling land deals, he knew he was in the right business and he would keep going with the real estate business. Jay was a successful real estate agent for years, but saw opportunity in lending.

How did Jay get involved in the mortgage business?

Jay and his father had worked with a mortgage guy in California for many years. This lender was getting older and wanted out of the business, and was considering just letting it go. Jay stepped in and said he would take over the company and continue lending to investors. Jay eventually turned the company into a 50 million dollar business and was bought out by a much larger mortgage company. After Jay was bought out of the mortgage business he saw an opportunity in the timber business in Oregon thanks to the contacts he had made selling land earlier in his career. He and his partner specialized in buying plots of timber land, clearing the timber and then selling the lots for home sites. This was one of Jay’s most fun and profitable business ventures!

How did Jay get involved in developing subdivisions?

After timber prices dropped Jay decided to part ways with his partner and try something new. He had experience developing small parcels of land in the forest, but he wanted to develop larger subdivisions. When he started to develop land he saw a need for buildable lots and few builders developed themselves. He ended up developing hundreds of lots in the North West and selling them to builders.

If Jay had not done enough already, after developing land for sometime he saw a glaring opportunity in the Midwest. Jay had grown up on the West Coast and was used to very high home prices with little cash flow for rental properties. Jay visited the Midwest and saw the huge opportunity for cash flowing rentals. Jay did not buy up every property he could, but he did help Californians buy Midwest homes as turn-key rentals. Turn-key rentals are all over the place now, but this was before the housing crisis. Jay was a hard money lender and would give short-term loans to investors, who would then refinance with long-term loans and pay off Jay.

How did Jay get into serious trouble during the housing crisis?

Jay was very successful with hard money lending for many years, but the housing crisis hit in the mid 2000’s, which did not destroy Jay’s business itself. What hurt Jay, was the lending guidelines changed for investors and the Californian investors could no longer refinance the properties they were buying. That meant Jay had millions of dollars he had lent on short-term loans that investors could no longer pay off. Jay ended up taking a big hit on the money he could collect and ended up owning about half the houses he had lent on.

Jay managed to make it through that mess without owing anyone any money, declaring bankruptcy or having to negotiate his debt down. He did lose a chunk of his net worth in the process.

What is Jay up to now?

Jay still lends money to investors, but for fix and flips and he is very picky about who he works with. Jay also builds homes, since the new lending guidelines made it very tough for many builders to get financing. I think Jay is also enjoying life and his airplane, which he loves to fly. Be sure to listen to this episode as Jay has a great story and some really good advice for investors as well. You can find Jay on Bigger Pockets.