I have a pretty good knowledge of this business model and am fairly confident I know of these folks and some others like them.
Do they have some good deals? Yea, sure from time to time. That said, in the past I have noticed that these types of models are attempting to sell based on the cash flow of the asset and a bit of high pressure sales. This tends to result in trying to pull a higher value for the asset than market value. A method that this type of model takes is providing all of the material and targeting the passive investor who will not do their own due diligence to an extent and you can see it in the sales pitch presentation like was posted.
In layman's terms, I would ensure you get your own appraisal and do not over pay for the home. I would even go look and see how much they paid for the home and how long ago. There is no magic equity in the market place. Bringing any needed repairs to the property only increases how close to market value the home comes, it does not set a new high. I would also bet, the repairs that were conducted were nothing major, so the price they paid for is much closer to the real market value and they are inflating the value to you.
And most importantly do your own financials. As was pointed out, at a glimpse the numbers already look a little inflated. You have to think a bit long term as well. If in fact they have an above market renter in there (they say rent at $1,800), (I am using the example from the site posted above) who is to say that tenant does not just walk away and you have to resort to market rent. That is, if that is even a real number and not some crazy pie in the sky assumption with no actual lease in place.
Also, as suggested, the expenses in reality will likely be far ahead of what they are projecting. For instance, they have an annual Maintenance Allowance of $54 per month, so that is $648 per year, not sure you can even turn the property over when the tenant leaves for that little money. Further, the Vacancy Factor of 5% is pretty aggressive. They list 5% or $90 per month, which is $1.080 per year or 60% of one month's rent. So to turn your unit over it will only take 18 days? Look great if you can do it, but I would not plan on it. Remember, you just budgeted only $648 to turn the property over and now you have to do it in 18 days or less.
I think the market interest rate they are using at 5% for an investment property is a bit aggressive too, some other folks can chime in if that is in the ball park. I would question just how finance ready these homes are. These are flips by the company selling the property, so flip underwriting for loans will apply. They are not going to simply grant magic equity.
Then there is the actual rental estimate, $1,800 per month for an $85,000 home? If that was the case, that market would have no inventory as all the local investors would buy all that inventory right up not to mention, prices would not be depressed. You can see this in their P&I illustration which is 1/3 of the rent. Let's also not forget, they are just going to 'give' you $20k in equity (ARV = $105k; Purchase Price = $85k), that is pretty nice of them.
For the record, Debt Service as they list it is not the proper definition of debt service, which is scary in its own right. Try and act sophisticated using a term, at least look the term up and make sure you have it right. Debt Service is the series of principal and interest payments, so if it is monthly, it simply your mortgage payment. You don't add your property expenses to it, those are debt, they are expenses. But hey, let's not split hairs.
Next let's pick on the 65% Cash on Cash Return. This is really what they are saying the yield for the investment is, provided all their numbers are true. Cash on Cash Return would need to include the gain or loss on sale of the asset to be considered a Cash on Cash Return or ROI. That said, so the yield on this investment is 65%!!!! Say that one more time 65%. For the record, the Risk Free Rate of Return for today's market is 1.5%. If these guys have assets that just print money like that, why the hell are they selling it, let alone selling and leaving so much opportunity on the table for equity and cash flow?? These guys would be the most profitable and most invested investment fund in the world if they can duplicate those levels of yield on a regular basis. Lookout Goldman Sachs and Fortress...here comes DPW!!!
So I hate to be a bit of a drag with the above sarcasm but hope it illustrates the point. The sales pitch here is that investing in real property, being a land lord is easy and with a little help from them, you can roll in the money. Yet, we have seen them on the cover of Forbes magazine and have not heard of them as one of top investment funds in the nation. That should be a little bit of a red flag itself.
What is that saying.....Quack like a Duck, Walk Like a Duck.....your just a sales pitch?