Turnkey: MemphisInvest vs. Norada vs. JWB?

Starting Out
10yFollow

Turnkey: MemphisInvest vs. Norada vs. JWB?

Vincent Park
Real Estate Investor · New York City, NY · Member since 2016 · 7 posts · 8 votes

I wanted to open up a forum discussion on which Turnkey company would be best for beginning investors. Clearly, all 3 companies seem to be reputable in the industry, and offer quite good returns on investment. I wanted to ask seasoned investors on their thoughts on which would be the best option for the criteria I am looking for:

- Minimal down payment (<$20K if possible, 20-25% down payment options)

- Minimal involvement in property management, and frequent updates on financials

- Areas with good appreciation potential

- Minimal tenant turnover / vacancy

- Good Cashflow (>$300/month) and ROI (12-15%+)

Let me know what your thoughts are, and perhaps some additional criteria that I should consider.

3Reply
124 views

Most Popular Reply

David Faulkner
Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
10y
Originally posted by @Dustin Cook:

Forgive me if my memory is wrong, but when I spoke with Memphis Invest about a year ago I think they told me that I should be prepared for their properties to appraise for less than the purchase price.

This is insane to me ... if the property appraises for less than the purchase price, that means that you are buying a property above fair market value and have NEGATIVE equity day one. What do your exit strategies then look like? How many years of $200-$300/mo positive cash flow (if that in reality) will it take you to claw back this negative equity just to get back to break even? And as discussed, there is no appreciation in these markets, that's why the cash flow appears to be so good. And what if it does not work out as rental as anticipated and advertised, what then? Well, then, you'll likely need to put more money in to make it ready for sale, in addition to the difference between what the house appraised for and what you purchased it for (assuming you could even sell it for appraised value), you'll need to add an extra 10% transaction fees to sell to your losses ... your down payment would be mostly if not all lost and you may even need to bring more cash to the closing table just to get out from under it.  Doesn't sound like a very sound investment to me. 

11Reply
See this reply in the discussion

76 Replies

Jump to latestLatest
  • Mark Senecal
    Specialist · Piscataway, NJ · Member since 2016 · 65 posts · 25 votes
    10y

    Vincent - Thanks for you post.  You have just asked a lot of the question I was having on turnkey investing.  Do any cities in particular appeal to you?

    Mark

    0Reply
  • Account Closed
    Entrepreneur · Frisco, TX · Member since 2015 · 88 posts · 44 votes
    10y

    I have been evaluating these companies, as well. Also, I have similar criteria to you. 

    Memphis Invest told me that you must use their financing lenders & put 25-35% down. Here's from a conversation with them: 

    "Properties in Memphis will start around $90k and go up to about $150k. Dallas properties will be from $130-180k. This is with renovation costs included. These properties are your typical 3bed/2bath houses. It takes about $40-50k to get started on your first property. This is if you go with a conventional loan. You are expected to down 25-35% and closing costs will be around $5k. You are required to go through one of our approved lenders."

    $40-50k on my first turnkey property, especially a single family, sounds quite unreasonable, so I'm still looking into Norada and JWB.

    4Reply
  • Daniel Foster
    Investor · Memphis, TN · Member since 2013 · 79 posts · 18 votes
    10y

    For what its worth, I purchased one house from Memphis Invest about 3 and a half years ago and it was a good experience.  I used it to get my feet wet in real estate investing.  I have since continued to purchase properties on my own, so I can keep what they were getting for a spread for myself.  As long as you go with someone reputable you should be fine, but the real money is in the purchase  The challenge is that when you purchase from a turn key provider you will have little to no equity in the deal.  That will likely be the case regardless of the turn key provider you choose.

    4Reply
  • Wes Brand
    Investor · San Francisco, CA · Member since 2016 · 314 posts · 153 votes
    10y

     Unreasonable why?

    1Reply
  • Vincent Park
    OP
    Real Estate Investor · New York City, NY · Member since 2016 · 7 posts · 8 votes
    10y

    Thanks for your responses all.

    I've spoken to all 3 companies, and here were some takeaways (come information may be incorrect, in which case please feel free to correct me):

    - Norada works more in the capacity of a turnkey broker. Hence, most operations are not performed in house, but instead, they work with local turnkey operations. JWB and Memphis Invest ("MI") seem to perform all work in house.

    - I did also learn that the lenders who work with MI typically require 25-35% down payment, but I will have to check by actually speaking with them.

    - The projected ROIs differ by company and location, but all typically range between 10 - 16%

    - All 3 companies seem legit in terms of reviews and client management.

    As I am looking for a very passive investment for my first property, I will most likely go between JWB or MI, as they both provide everything in house. I will try to decide based on neighborhood, required down payment, and level of property management.

    @Jonathan Fowler

    Do you currently live in Seoul? I'm from Korea, and I will be visiting late July - early August!

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Vincent Park  all excellent choices for TK purchase..

    one thing to note is that your requirement for high returns and your requirement for big appreciation those are oxymoron's in almost all markets.. you will get one or the other.

    you could have gotten both if you were buying in 2009 to 2011 .. but not today... at least not to the extent you may be hoping for.

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    2Reply
  • James Martin
    Property Management · Memphis, TN · Member since 2009 · 668 posts · 362 votes
    10y

    I would look into Memphis Turnkey as well.  They provide premium homes with management as well. 

    3Reply
  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    10y

    Hi Vincent -- I've been meaning to reply sooner, but here are some comments to your last post: 

    Norada is BOTH -- a turnkey provider and promoter.  What are you referring to "as in house operations?"  If you're referring to property management, then no it's not in-house, nor should it be.  Our company is market and company agnostic -- we are not married to any market, neighborhood, provider, property manager, etc.  We work with a large number of companies in every market we operate in.  Therefore, we can provide you with unbiased advise and recommendations that are based around your investment goals and criteria.

    We also vet our providers and gather feedback (and complaints) from investors on a regular basis.  That allows us to know who's providing good service and good product.

    I don't mean it as a "slam" but localized providers can only suggest and provide you with product in their own backyard.  that may fit your needs and goals, but it doesn't for all investors, all the time.  That's one of the advantages of operating nationwide and being market agnostic.

    Based on what we've heard that is true.  I'm guessing it's due to the purchase price set and appraisals not coming in at market.  You'll need to dig into that one further.

    If you're referring to the cash-on-cash returns then that's achievable.  That is not true for cap rates.  And yes, these will differ by market, and even neighborhood and property type.

    Important not to confuse passive with disengaged.  Big difference and point of confusion for some people.  I talk about his on several episodes of my Passive Real Estate Investing podcast:

    If that's your criteria then I suggest discussing that with the Investment Counselor you spoke with.  You'll want to take a step back and look at objective information on markets and neighborhoods (characteristics, demographics, rental trends, etc).

    Property management does not need to be vertically integrated.  It has it's pros and cons.  When separate from the rehabber/provider there is likely a more critical eye on the property and it's condition.  There is no repair speed advantage after the property is sold to you.  

    Finally, "required" down-payment should NEVER be dictated by anyone other than you and the lenders you're considering.  It's only a function of the lending terms offered by each lender.

    Continued success!

    6Reply
  • Account Closed
    Entrepreneur · Frisco, TX · Member since 2015 · 88 posts · 44 votes
    10y
    Originally posted by @Wes Brand:

     Unreasonable why?

    I think putting down $40k-50k isn't using enough leverage for an SFR. With that large of a down payment, I could consider small multi family or even commercial multi family.

    1Reply
  • Wes Brand
    Investor · San Francisco, CA · Member since 2016 · 314 posts · 153 votes
    10y
    Originally posted by @Account Closed:
    Originally posted by @Wes Brand:

     Unreasonable why?

    I think putting down $40k-50k isn't using enough leverage for an SFR. With that large of a down payment, I could consider small multi family or even commercial multi family.

     That doesn't make sense. Are you investing to spend as little as possible regardless of the returns?

    2Reply
  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    10y
    Originally posted by @Account Closed:
     

    I have been evaluating these companies, as well. Also, I have similar criteria to you. 

    Memphis Invest told me that you must use their financing lenders & put 25-35% down. Here's from a conversation with them:  

    "Properties in Memphis will start around $90k and go up to about $150k. Dallas properties will be from $130-180k. This is with renovation costs included. These properties are your typical 3bed/2bath houses. It takes about $40-50k to get started on your first property. This is if you go with a conventional loan. You are expected to down 25-35% and closing costs will be around $5k. You are required to go through one of our approved lenders." 

    $40-50k on my first turnkey property, especially a single family, sounds quite unreasonable, so I'm still looking into Norada and JWB.  

    Hey Jonathan -- By law, you are free to use any lender you choose and cannot be told which lender(s) you must use.  This is a form of steering and is illegal.

    Continued success!

    2Reply
  • Account Closed
    Entrepreneur · Frisco, TX · Member since 2015 · 88 posts · 44 votes
    10y
    Originally posted by @Wes Brand:
    Originally posted by @Account Closed:
    Originally posted by @Wes Brand:

     Unreasonable why?

    I think putting down $40k-50k isn't using enough leverage for an SFR. With that large of a down payment, I could consider small multi family or even commercial multi family.

     That doesn't make sense. Are you investing to spend as little as possible regardless of the returns?

     Wes, the properties I've been looking at, for example, have a purchase price of $75-100k. If I buy an $80k property, why should I expect to spend more than $20-22k ($16k down + closing & reserves)? 

    Even at 25% down, $50k should get you a property in the $175-195k range. 

    I notice that you are from SF, but if you are open to investing out-of-state, the costs can be dramatically lower. 

    Continued success!

    1Reply
  • Wes Brand
    Investor · San Francisco, CA · Member since 2016 · 314 posts · 153 votes
    10y
    Originally posted by @Account Closed:
    Originally posted by @Wes Brand:
    Originally posted by @Account Closed:
    Originally posted by @Wes Brand:

     Unreasonable why?

    I think putting down $40k-50k isn't using enough leverage for an SFR. With that large of a down payment, I could consider small multi family or even commercial multi family.

     That doesn't make sense. Are you investing to spend as little as possible regardless of the returns?

     Wes, the properties I've been looking at, for example, have a purchase price of $75-100k. If I buy an $80k property, why should I expect to spend more than $20-22k ($16k down + closing & reserves)? 

    Even at 25% down, $50k should get you a property in the $175-195k range. 

    I notice that you are from SF, but if you are open to investing out-of-state, the costs can be dramatically lower. 

    Continued success!

     Why are you so focused on costs? If I'm buying an 80k property that I expect will appreciate to 160k in a year and bring in 1500/mo rent in the meantime I'll take it any day even if I had to put in 40k up front to do it.

    0Reply
  • Allison Karrels
    Investor · Gainesville, VA · Member since 2014 · 118 posts · 76 votes
    10y

    I have 3 homes with MI - 25% down in each case (all bought last year).   They have a lot of lenders to choose from and the lenders I spoke with are all investor friendly and used to working with people up the 10 mortgage limit. 

    2 homes had a 2 year lease and are chugging along.  1 house had a 1 year lease that just expired April 30th.  The house was turned over and new renters with a 2 year lease moved in May 15th.  Communication around the turn over was excellent and the move out report and repair estimate was in line with a move out with only minor paint touch up/lawn maintenance/rekey/etc type expenses. 

    I don't think you will invest with MI for below $20,000, My 3 closing costs (down payment, closing costs & $2,500 escrow prepayment) were $24,000, $23,650 and $37,400.  My 2 Memphis houses are on the low end of their area and the last house was towards the low end for Houston.

    Hope that helps, good luck

    7Reply
  • Yoochul C.
    Financial Advisor · Glendora, CA · Member since 2015 · 209 posts · 94 votes
    10y

    Hey @Marco Santarelli,  just wanted to take this opportunity to say that i'm really enjoying your podcast.  I especially like that last one regarding reputation.  I may work with you in the future.  I'm buying in Atlanta now and may swing my way to Memphis next year.  You'll be hearing from me.

    Yooch

    4Reply
  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    10y

    Thanks for your feedback @Yoochul C.!

    I felt the topic was important enough to be a podcast episode.  :)

    Continued success!

    0Reply
  • Curt DavisBusiness Member
    Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
    10y

    @Allison Karrels

    Dont forget you purchased one from us last year :)  !!  

    Curt Davis - KAIZEN Realty538 Reviews
    WebsiteView Page
    1Reply
  • Andrey Y.
    Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
    10y
    Originally posted by @Jay Hinrichs:

    @Vincent Park  all excellent choices for TK purchase..

    one thing to note is that your requirement for high returns and your requirement for big appreciation those are oxymoron's in almost all markets.. you will get one or the other.

    you could have gotten both if you were buying in 2009 to 2011 .. but not today... at least not to the extent you may be hoping for.

    What about to state the same thing.. but figured someone smarter already beat me to it. Same thing like modifying a vehicle: cheap, fast, reliable, pick two. Choosing a contractor: cheap, quality work, works fast, pick two.

    0Reply
  • Andrey Y.
    Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
    10y
    Originally posted by @Account Closed:
    Originally posted by @Wes Brand:

     Unreasonable why?

    I think putting down $40k-50k isn't using enough leverage for an SFR. With that large of a down payment, I could consider small multi family or even commercial multi family.

    Commercial multifamily.. where? Don't buy in the ghetto.

    0Reply
  • Dustin Cook
    Investor · Los Angeles, CA · Member since 2015 · 73 posts · 44 votes
    10y

    Forgive me if my memory is wrong, but when I spoke with Memphis Invest about a year ago I think they told me that I should be prepared for their properties to appraise for less than the purchase price.

    1Reply
  • Henry J.
    Monterey Park, CA · Member since 2014 · 157 posts · 80 votes
    10y

    @Vincent Park

    Have you decided where you want to invest?  Or will you be deciding based on your criteria?  Do you have an end goal like # of units or total amount / return?  Before you buy, think about what you want to get out of the investment.  As @Jay Hinrichs said, it may not be the time to get cash flow and appreciation play now so you may need to go the non-turnkey route if that's what you're looking for.

    When I started looking into Memphis, I first found MI online and attended their event and reviewed their property proforma info.  After analyzing quite a few properties, I decided not to invest with them.  Other than the potential appraisal issue, I didn't like the return when I plug in with my own assumptions...

    I have not worked with Norada or JWB before so I can't comment on them.

    By the way, I think minimum down payment is 20% for investor loan.  You get slightly better interest rate if you put down 25%.  Closing cost varies because each state / city has different property tax rate and insurance premium - but I think people use roughly 4% based on $100K purchase price.

    Good luck!

    Henry

    1Reply
  • Allison Karrels
    Investor · Gainesville, VA · Member since 2014 · 118 posts · 76 votes
    10y

    @Vincent Park - Like @Curt Davis said I also bought one from Buy Memphis Now.  They are a nice option if you want the Memphis market but want a lower entry point (around that $20k mark you wanted).  Curt's team is smaller so your overall price will be less than the same house with MI would be.  Curt uses Premier Property management for the PM part which is the same PM as Memphis Invest.  

    1Reply
  • Ron B.
    Los Angeles, CA · Member since 2014 · 12 posts · 5 votes
    10y

    I agree with @Henry J.

    Please double-check the pro-forma numbers and use your own judgement. Sometimes the pro-forma numbers provided by TK companies can be optimistic and may not account for some of the expenses

    3Reply
  • Steve Endress
    Sheffield, IL · Member since 2012 · 85 posts · 27 votes
    10y

    @Vincent Park  I think you should add Memphis Turnkey and Alex Craig to your short list.   I've used them several years and find their company size to be the perfect mix.  Also, don't underestimate ease of accounting when you are talking about how smoothly your investment goes over time.  I have terrible things to say about Propertyware and great things to say about Buildium!

    2Reply
  • Jayson Trierweiler
    Carlsbad, CA · Member since 2015 · 27 posts · 4 votes
    10y

    What does JWB stand for? I've heard of the other two.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free