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Jim Klinge
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701 Palomar Airport Road, Suite 300
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Category Archive: ‘Real Estate Investing’

‘Total Loss to Investors’

Watch out for those investment groups – hat tip Richard!

A federal complaint accuses an Irvine real estate firm and its executives of siphoning off proceeds from a house-flipping venture financed largely from investors’ retirement savings funds.

Hoplon Financial Group and its two top executives — Hoplon founder and Chief Executive Daniel Benjamin Vazquez Sr., 56, of Orange County and Hoplon Chief Operating Officer Gilbert Fluetsch, 52, of Escondido — are accused of numerous securities violations in a U.S. Securities & Exchange Commission complaint filed Friday, Jan. 12.

Vazquez and Fluetsch couldn’t be reached for comment. Nor could Hoplon Financial Group be reached at the phone number posted on its website.

“Our goal is to protect our clients’ assets and safeguard what they have worked hard to build,” Hoplon’s LinkedIn page says.

According to the SEC complaint, filed in federal court in Santa Ana, Vazquez and his companies pitched their services to investors found through cold-calling and asking them to roll over their 401(k) retirement accounts into individual retirement accounts handled by brokers he was associated with.

Twenty-seven investors put up $2.18 million from 2011 to 2014 after Vazquez and Fluetsch promised their money would be used to purchase and renovate homes in a venture called the New Economic Opportunities Fund LLC, or NEON.

“In reality, they were draining most of the money from NEON’s accounts for their own purposes,” the complaint contends.

NEON purchased eight Southern California properties in 2012 and 2013, spending more than $767,000 on repairs. Subsequent sales generated $917,322 in profits, all of which were diverted to Hoplon.

“As of today, NEON has no known assets. All funds in its bank accounts have been depleted, and it holds no properties in its name,” the complaint said.

Under terms of the offering, Hoplon, Vazquez and Fluetsch were entitled to $188,197 in compensation for managing NEON, but diverted $968,436 to Hoplon and themselves.

In addition, the complaint said, NEON funds were used to pay Hoplon expenses, to cover payments for luxury cars Hoplon purchased or leased for Vazquez’ and Fluetsch’s use, and to cover such personal expenses as sports club memberships.

The complaint said $59,000 in NEON funds were diverted to pay for property improvements on Vazquez’ home and $6,500 more was spent on work performed on Fluetsch’s house.

Hoplon, Vazquez and Fluetsch “misused substantial amounts of NEON funds, resulting in a total loss to investors,” the complaint said.

Link to Article

Posted by on Jan 18, 2018 in Jim's Take on the Market, Real Estate Investing | 2 comments

Buying A Flipped Home

With the lack of new homes available, the flipped homes have become a substitute for buyers who don’t want to do any repairs or improvements.

Here are four good questions:

Question #1: Have the Renovations Been Permitted?

Question #2: Were the Sub Contractors Licensed, Bonded ,and Insured?

Question #3: Can I See the Before Photos?

Question #4: Do the Windows Have a Double-Lifetime Warranty?

A good article on the details:

Click to article

Posted by on Jan 12, 2018 in Jim's Take on the Market, Real Estate Investing, Thinking of Buying?, Tips, Advice & Links | 8 comments

Vacancy Rates

Buy rental properties! San Diego’s vacancy rate is also 2.9%, same as L.A.


https://calmatters.org/articles/frequently-asked-california-housing-crisis-questions-answered/

Posted by on Nov 16, 2017 in Jim's Take on the Market, Real Estate Investing | 0 comments

Cliffhanger

Hat tip to daytrip for sending this in – the price is now down to $699,000:

Homes near this Chapel Drive neighborhood fetch about $1.5 million, and Crowell priced this property as such. She figures it will cost $300,000 to stabilize the hill that got washed away during February’s rains, $250,000 to fully upgrade the 2,385-square-foot home and leave $100,000 left over for profit. “That’s the going price in this neighborhood,” she said. “The house is still near the best schools.”

The couple selling the house is in their 90s and were forced to move out of the home they’ve lived in since 1968 this winter. While the property underneath the home is shaky, Crowell said the four-bedroom, three-bathroom home is in really good shape.”

As of Monday, Crowell said she had at least 10 inquiries on the home. She said she felt supremely confident she’d sell it — and soon. But she fully recognized that anywhere else in the country, a Realtor who asked for nearly $1 million for a home sitting precariously on a landslide and “you’d be nuts.”

http://www.ktvu.com/news/red-tagged-lafayette-home-teetering-on-landslide-sparks-bidding-war-starting-at-850k

https://www.zillow.com/homedetails/21-Chapel-Dr-Lafayette-CA-94549/18468498_zpid/

Posted by on Oct 18, 2017 in Jim's Take on the Market, Real Estate Investing | 2 comments

Hurricane Flippers

Hat tip to Richard for sending this in:

LINK

An excerpt:

Addressing a real estate conference in flood-ravaged Houston this month, longtime investor Ray Sasser detailed his strategy: buy up to 50 flooded homes at deep discounts, then fix and flip them for a hefty profit.

Sasser first followed that game plan after Tropical Storm Allison flooded the city in 2001. He bought homes for 30 to 40 percent of their pre-storm value, spent another 15 percent on repairs, and sold many a year later – at full value.

The quick recovery surprised him, he said.

“This can’t be true,” he recalled thinking at the time.

The bet that home prices in hard-hit Houston neighborhoods will fully recover after Hurricane Harvey could be riskier, Sasser and local economists said. But a rush of investors eager to snap up flooded homes reflects broader confidence in the resilience of Houston’s unique metropolitan economy.

While the region’s unchecked development has come under fire for exacerbating flooding, it also reflects its core strength: A rare combination of rich job opportunities and low cost of living, driving explosive population growth in America’s energy capital.

The surging demand has sustained home prices through four major floods since 2001 and a historic oil price crash starting in 2014. Though Harvey caused far more damage than previous storms, investors such as Sasser see plenty of opportunity in the region’s estimated 268,000 flooded homes.

Tara Waggoner, the Houston market manager for brokerage and online listings firm Redfin, said the firm’s local agents were getting about four times the number of calls they usually get from investors. They ranged from individuals looking to buy one flooded house to groups of ten or more pooling their money for a home-buying spree, she said.

“You have people with millions of dollars to work with,” she said in an interview days after the storm. “They want to go in, pay cash, get the discount and fix it up to sell.”

Read full article here:

LINK

Posted by on Sep 22, 2017 in Flips, Frenzy, Jim's Take on the Market, Real Estate Investing | 3 comments

Renters On The Rise

My takeaways:

  1. Rents should be under intense pressure over the next few years.
  2. Growth of U.S. households since this blog began = about 8 million!
  3. The affluent are winning.

Hat tip to Kerry for sending this in!

LINK

Ten years after the U.S. housing market crashed, some things have gotten worse instead of better.

More U.S. households are headed by renters than at any point since at least 1965, according to new analysis of Census Bureau data by the Pew Research Center, a nonprofit think tank in Washington, D.C. “The total number of households in the United States grew by 7.6 million between 2006 and 2016,” it found. “But over the same period, the number of households headed by owners remained relatively flat, in part because of the lingering effects of the housing crisis.” And the rise in renters is significant, even accounting for the growth in the population over the last half-century.

The number of households owning their home has fallen since the peak of the U.S. property bubble in 2006, Pew found, while the percentage of households renting rose to nearly 37% last year from just over 31% in 2006. The 2016 rate is slightly less than the 37% in 1965. “Certain demographic groups ­— such as young adults, nonwhites and the lesser educated — have historically been more likely to rent than others,” Pew found. “However, rental rates have also increased among some groups that have traditionally been less likely to rent, including whites and middle-aged adults.”

Adults younger than 35 continue to be the most likely of all age groups to rent. In 2016, 65% of all households headed by people younger than 35 were renting, up from 57% a decade earlier. Last year, 41% of households headed by someone aged 35 to 44 were renting, up from 31% of all households in 2006. Rental households headed by someone aged 45 to 64 rose to 22% of all households in 2006 from 28% in 2016. But among baby boomers and the oldest Americans — those 65 or older — the rental rate remained steady at around 20%.

One reason so many people are renting: Only 45% of renters on average can afford the payments on a median-priced home in their area, according to a report on the state of housing from Harvard University’s Joint Center for Housing Studies released last June. Buying a house is even more out of reach for renters in expensive markets such as the West Coast, the Northeast and Florida. In these parts of the country, as few as 10% of renters could afford the mortgage payments if they bought a home, the report found. Economists recommend spending no more than 30% of gross income on housing.

LINK

Posted by on Jul 20, 2017 in Jim's Take on the Market, Market Conditions, Real Estate Investing | 3 comments