All Topics / Overseas Deals / America’s two largest private equity firms launch their foreign national loan programs

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  • Profile photo of Troy McErvaleTroy McErvale
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    In November, America's two largest private equity firms launched their mortgage rental property program – and whilst they are not specifically for foreign national owners, foreign national owners are certainly eligible. A very exciting time. The banks can't see the opportunity obviously, but the brains at the wealthiest US funds can.

    Profile photo of jayhinrichsjayhinrichs
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    Troy,,

    One is blackstone, I have had in depth conversations with them… They are looking for experinced operators who have mid (25)  large (500) home portfolios. I would be highly surprised if they would loan money to owners that live half a world away from the asset and solely rely on third party PM's ….. For US companies that can raise up to the bar they set it will be a nice niche for Blackstone.   I would think the play for any aussie and I see it coming quickly as the Aussie marketing guys are pretty quick to jump on whats new..

    The aussies will want to parnter with a reputable US operater Kind of like what Nigel is doing with his commerical deals.  And set up partnerships to buy SFR's  Blackstone requires the homes already be bought rehabbed and tenanted before they will loan so what they are doing is refinancing the deals.. So the OZ who is all cashed up can bring in the up front cash… The US operator can aquire rehab rent. then Blackstone refi's the US company and does its due diligence on the US operator who just happens to have a bunch of OZ investors as limited partners.  Something like that is what will happen would be my guess. 

    I talked with one outfit in FLA who closed with blackstone on 40 some properties bout 2.5 mil  they got it done but said it was very very difficult to get through all the hoops and due diligence Blackstone did.. And I know these guys they are top shelf… So if you think some spruiker with an idea to corner the market on low end slum lord Detroit or KC or any of the other really cheap areas is going to walk in and borrow funds just not going to happen…. But that all said those that align themselve with the real deal.. Guys in the US that can stand up to full FBI background Checks provide TAX returns showing they acutally make money, Have great credit.. ANd credentials  ( like any good fund manager) the you will stand a great chance of locking up some financing that heretofore has not been avaliable.

    Now here is the other question why do you think blackstone is going into the debt side of this when they just bought 200k homes in the US… Well because being the bank in the long run makes more money than owning the asset.. And a heck of a lot easier.. these guys are sharp and know which side of the RE equation they should be on… thats my opinion being the bank in the US rental market is sOooo much less stress than being the land lord and handling all the drama that comes with tenants.

    All spelling errors are intentional  this website is wonky on my puter an spell check does not work

    JLH

    Profile photo of EngeloRumoraEngeloRumora
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    Hey Jay,

    isn't Blackstone's loan product similar to what you and Peak offer?

    Thanks

    EngeloRumora | Ohio Cashflow
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    Profile photo of FreckleFreckle
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    jayhinrichs wrote:

    Now here is the other question why do you think blackstone is going into the debt side of this when they just bought 200k homes in the US… Well because being the bank in the long run makes more money than owning the asset.. And a heck of a lot easier.. these guys are sharp and know which side of the RE equation they should be on… thats my opinion being the bank in the US rental market is sOooo much less stress than being the land lord and handling all the drama that comes with tenants.

    All spelling errors are intentional  this website is wonky on my puter an spell check does not work

    JLH

    Blackstone have always been in the 'debt' business. Their business model is to buy assets (at almost any price) restructure the debt then flog off that asset to the 'greater fool' side of the market. They don't work alone. Often in conjunction with other very powerful entities like Duetch Bank GSB, JPM, etc etc. They are so powerful as a syndicate that they simply revalue these dodgey assets and then IPO or flog them back to the market. Think Hilton Hotels (a dog if ever I saw one) and a few tech companies that escape me at the moment.

    Anyone jumping into bed with Blackstone should understand that they are more than likely being setup as the greater fool. Unless you are a powerful financial entity you are not on their side of the game.

    The GFC should have taught many the real lessons of commerce. Holding hands with Wall St is a dangerous game.

    Profile photo of jayhinrichsjayhinrichs
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    engelo,,,

    NO blackstone is looking for people like you that live and breath the business own the assets and live in the community.. Also ones that are well funded and have assets credit etc etc.

    What Peak and I do is simply private money financing based on equity only and we can't do 2 million dollar deals we just lend to Mom and pops one at a time.. thats our niche. And or us and I can't speak for Peak  we basically only fund deals that come from trusted marketing and rehab suppliers.. AS well as we cherry pick   red line and many other aspects of being choosy on what we lend on.. what we lend on Is 100% subject to if   " I PERSONALLY LIKE IT" not based on anything else… Peak use's algorythem tool to establish what they will lend on.. There are deals they will do that I would not touch.. then I do deals they don't like… at the end of the day I would say between Peak and My company we are doing the majority of 3rd party non recourse financing in the south and south east  and FLA  were I have a pretty big presense.  And still at the end of the day we are just little guys My last conversation with JP last summer was that he was funding 10 deals or so a month  and he is probably doing more than that these days.. I do 10 to 20  which is a nice deal flow for us.  AND JUST FOR THE RECORD WE LOVE AUSSIE BORROWERS  Once we get properly set up they are just great to work with.  We do everything through ACH type bank transactions and just like we have talked about here the AUSSIES love auto mated banking.

    Profile photo of jayhinrichsjayhinrichs
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    Freckle,

    what blackstone is doing is a departure from buying SFR's by the thousands then packaging up the lease payments to sell as securities.

    this is a different traunch for them this is true third party lending on their part.. they are lending funds that they raise through funds on wall st.. then create mortage backed securites and then they make the up fornt points and spreads plus mangement fee's on the fund.

    Profile photo of EngeloRumoraEngeloRumora
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    Thanks Jay,

    So how would I approach Blackstone and get funding?

    Would they lend on 1 deal or it has to be much more.

    I see it posted every where but its promoted in a different way and it doesn't look like the promoters are targeting rehabbers but more "mom and dad" investors?????

    Thanks mate

    EngeloRumora | Ohio Cashflow
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    "Make a PASSION an OBSESSION and you'll never work a day in your life"

    Profile photo of jayhinrichsjayhinrichs
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    call them…  Like I said my conversations with the head underswriter and with someone who actually closed with them was that they were looking for operators not individuals… Would be interesting if you got a different take on it

    from what I understood they are looking for guys like you that make a living out of running these kind of assets.. the big question will be will they loan on C and D  or will have to be nicer newer type product.. IE 1990 newer  3 and 2  etc etc.  let us know how you make out.

    As you know I have no interest in building another rental portfolio I am going to stay on the lending side and short term mezz financing side.. And then just build new construction which we can throttle up when its good like it is now and throttle back if it slows down..

    JLH

    Profile photo of EngeloRumoraEngeloRumora
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    Ill give them a call sometime this week and see what the deal is.

    I see Tim Herriage posting about it on Linkedin all the time and that's why I though it was  "mum and dad" stuff.

    Thanks mate

    EngeloRumora | Ohio Cashflow
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    Profile photo of EngeloRumoraEngeloRumora
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    Read the "Wolf of Wall Street" books a while back when no one knew about him.

    It sure is crazy.

    Leo is fricken awesome.

    EngeloRumora | Ohio Cashflow
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    "Make a PASSION an OBSESSION and you'll never work a day in your life"

    Profile photo of FreckleFreckle
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    engelorumora wrote:

    Leo is fricken awesome.

    Probably the best I've ever seen him… legend.

    Profile photo of FreckleFreckle
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    I luved the bit right at the end when he's in Auckland to give a sales spiel to the masses who all think they're the next legend in sales….

    He asks, "sell me this pen". Not one of them has a clue and the camera pans across the room and you can see it's another bunch of suckers being mugged while thinking they're on the road to success.

    Reminds me a lot of property seminars.

    Profile photo of FreckleFreckle
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    jayhinrichs wrote:
    Freckle,

    what blackstone is doing is a departure from buying SFR's by the thousands then packaging up the lease payments to sell as securities.

    this is a different traunch for them this is true third party lending on their part.. they are lending funds that they raise through funds on wall st.. then create mortage backed securites and then they make the up fornt points and spreads plus mangement fee's on the fund.

    Yes that's their model for the property rental play (at the moment), however, their end goal usually spins out to a repackaged portfolio that along with a few other big players is made to look like the ducks guts and sold at way over val to a desperate market looking for yield.

    The reality is that Blackstone has a poor performing portfolio by PI standards. 50% vacancy rate and a large percentage of what is let has numerous problems. These guys have the smarts and resources to make the market believe what they have is worth buying when in fact it's a dogs breakfast by any stretch. It's what Wall St does I'm afraid.

    Their lending arm seems to me to be another lever to juice the market in their favor. What's the bet they'll start to package up tranches of properties next to flog off to the many dumb investors who think they've missed the bus.

    Blackstone have a knack of dressing up old mutton as lamb, screwing a good margin out of it along the way before flogging an exhausted asset to the avid investor.

    Watching 'Wolf of Wall Street'  at the moment.. insane stuff ..

    Profile photo of jayhinrichsjayhinrichs
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    tim has moved into mentor guru mode   Not sure he is hawking properties like he used to

    Profile photo of EngeloRumoraEngeloRumora
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    Sure is :)

    EngeloRumora | Ohio Cashflow
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    Profile photo of EngeloRumoraEngeloRumora
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    haha

    Worst seminar I have ever been to is Rich Dad Poor Dad here in KC.

    I felt a bit sick cause I couldn't believe how hard they were pushing the sale.

    Sad to see cause the books are ok.

    EngeloRumora | Ohio Cashflow
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    "Make a PASSION an OBSESSION and you'll never work a day in your life"

    Profile photo of EngeloRumoraEngeloRumora
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    ok,

    I think they are still moving quiet a few. Just in Texas tho.

    I met one guy that works for him at a conference in Cincinnati.

    Cool guy. I think his name is Ryan.

    They are just wholesaling now as I believe he got stuck with a lot of properties being rehabbed when the US went belly up. Homevestors

    Thanks

    EngeloRumora | Ohio Cashflow
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    "Make a PASSION an OBSESSION and you'll never work a day in your life"

    Profile photo of BoughtWithEquityBoughtWithEquity
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    I can't pretend to well educated in high finance or the high jinx of wall street but I thoroughly understand how to find, repair, rent and turn properties.  Blackstone and the other hedge funds have run headfirst into what I said all along….residential single family home investing is a Mom & Pop business.  Now that they have purchased 100,000s of homes across the US, they are fast realizing this.  The tenants stink and they are at least 6 months or more behind in processing what they have even bought.  It's the problem with having billions of dollars that you HAVE to invest.  They probably will process these properties into some sort of derivative and get out that way…but, in the interim, they are searching for a solution.  They can't rent and manage these properties…..and DUH…..wonder why?  They want good credit tenants……good luck with that one!  Anyone with good credit is buying…they aren't renting.  The reasons for their failure is partially why my model is producing such great results.  We offer affordable housing with all utilities included and could care a less about credit scores.  We treat people like people…..not numbers and, in doing so, produce pretty incredible results.  The problem with wall street is that it has never been in touch with main street…..and those are the people that create our profits in real estate.  An MBA is a great tool…..but the hedge funds are finding that their pro forma predicting 100% returns in 5 years is likely to be a loser….unless they can keep buying at the same rate they have been which boosted our atlanta market almost 20% last year.  I watched some of what they bought and just shook my head.  Jay, Engel and I will all be around in 4 years when much of what they bought comes back to the street.

    All of this might make for a Wolf sequel!  For those of us who know how to do this….there has never been a better time to invest in real estate…..just have a model that works!

    Profile photo of EngeloRumoraEngeloRumora
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    Thanks boughtwithequity,

    Currently seeing many properties come back on the market here in KC that were bought by unsuspecting foreign investors.

    Its sad to see it happen.

    As you said it is likely to be the same with the hedge funds although they are much more picky with what they buy now.

    Thanks

    EngeloRumora | Ohio Cashflow
    http://ohiocashflow.com/
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    "Make a PASSION an OBSESSION and you'll never work a day in your life"

    Profile photo of jayhinrichsjayhinrichs
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    Of course I know

    the inner workings of Rich dad poor dad I have meet their exec. team that works out of Florida.. they are all about $. The presenters that present the product will pay 20 to 30k for an hour on the podium,, AND they have to buy the lunch  another 15k or so…. So its a 40k cost for the promotor so for sure Rich dad is hammering on you to buy from them other wise they will not be happy and won't repeat.. Repeat bizz is important to rich dad.. its just another form of the Guru seminar circuit here in the US…

    I have banked some of the Vendors that use them for their marketing.

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