Turnkey: MemphisInvest vs. Norada vs. JWB?

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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.

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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. 

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  • Ann Howell
    Investor · Houston, TX · Member since 2014 · 128 posts · 87 votes
    10y
    Originally posted by @Nithin K.:

    I am evaluating these turnkey companies as well and plus some more. I am yet to have my first call with MemphisInvest, they have a lead time of a week or so to set up a call apparently.

    Norada gave me mixed signals, the properties seemed overpriced for the market. Make sure you ask them their definition of A, B and C neighborhoods. Plus there are pros and cons of them not being local to the market.

    JWB - they haven't yet shown me any offerings or real numbers, but some past case studies based on which I ran some cash on cash return calculations myself. They do not meet the range what we keep hearing here as 'good' for investment. I am yet to understand what is their USP, what keeps them going. They also strictly need you to use their own property management and if you sell your property, you do need to use them as your broker. Also things like they get to keep the tenants late fee. Take a look at the copy of their property management agreement at their website.

    Anyway there is one thing I can tell you, all these companies show returns based off of different calculations and they also differ in what they include and exclude in their math. If you want to compare apples to apples, make sure you have your own excel spreadsheet.

    Please DM if you want more info.

    I also had a general question to the group, When you all do cash on cash return calculations, the 200-300 cash flow that you say- is that including or excluding the principal you are paying on your loan?

    Do you also consider the tax savings, to meet the 200-300 cash flow?

    BP's calculator does not use these two to meet the cash on cash return, so far as I understand.

     I do not know anything about JWB.  But I would NEVER buy a turnkey property from a company that required me to use their PM and to use them as a realtor if I wanted to sell.  After the purchase, the property is yours and you should be free to make changes if needed.  We have purchased from two turnkey companies. The first one was a disaster at first and we fired them as PM within two months of purchase.  The second has been a much better partner.  Our successful relationship has been with Memphis Invest. We have two properties from them and they are managing them.

    3Reply
  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    10y
    Originally posted by @Alex Franks:

    Marco How are you ? Did not realize you had a podcast as well. Seems to be the new it things for all the folks. Going to send you an email the first round of the new construction rentals in SC they flew off the shelf. 36 being built 10 at time and half  under contract already.

    Look forward to speaking some time soon.  We did pick up another 252 lots in Charlotte

    Hey Alex -- Yes, let me know about your new-construction.  Please email me offline.

    Continued success!

    0Reply
  • Alex Franks
    Rock Hill, SC · Member since 2015 · 1k+ posts · 597 votes
    10y
    Originally posted by @Marco Santarelli:
    Originally posted by @Alex Franks:

    Marco How are you ? Did not realize you had a podcast as well. Seems to be the new it things for all the folks. Going to send you an email the first round of the new construction rentals in SC they flew off the shelf. 36 being built 10 at time and half  under contract already.

    Look forward to speaking some time soon.  We did pick up another 252 lots in Charlotte

    Hey Alex -- Yes, let me know about your new-construction.  Please email me offline.

    Continued success!

    Marco you got mail LOL hope all is well

    Alex

    0Reply
  • Gregg CohenBusiness Member
    Rental Property Investor · Jacksonville, FL · Member since 2011 · 143 posts · 136 votes
    10y

    Hi @Nithin K., 

    I'm glad you're doing your due diligence on MI, Norada and JWB.  3 solid companies.  I'm the CEO at JWB and I just wanted to clear up some misconceptions from earlier posts.  JWB doesn't require our clients to use our in-house property management team.  We have a standard, 1 year property management agreement in place with our clients that gets renewed each year.  However, we let prospective clients know early on in our discussions that one of the big reasons that clients choose us in our property management services so it is very unusual for a client to purchase without having us do the management.

    We also don't require our clients to use JWB at the point that they want to sell their assets.  We are a resource to help them with the liquidation of their portfolio but they are free to sell however they would choose.

    Hope this helps! 

    Thanks,

    Gregg

    904-677-6777
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    3Reply
  • Walter W.
    Investor · Seattle, WA · Member since 2013 · 68 posts · 16 votes
    10y

    I am a JWB client. @Gregg Cohen and his Team have done a great job. 

    1Reply
  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    10y
    Originally posted by @Adrian Stamer:

    Originally posted by @Ron B.:

    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

     Quoted for emphasis.  

    How many times can this get re-quoted?!

    It's important to make sure you have vacancy and maintenance budgeted in your pro-forma.  Over it time you will be paying for the normal expenses.  They are not optional.

    We suggest investors have a reserve account (operating capital) to handle the occasional capital expense such as HVAC or roof replacement.  These 10 to 30 year major expenses can come up and need to be factored in for a longer-term buy-and-hold.  This is real estate, and it will happen.

    Continued success!

    0Reply
  • Clayton MobleyPro Member
    Birmingham, AL · Member since 2014 · 875 posts · 947 votes
    10y
    Originally posted by @Ron B.:

    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

    @Ron B This is a very important point. Industry standard is to omit some really important expenses in the property jacket cover sheet which can make returns look more favorable than they are. You really have to learn what the numbers mean and how exactly they fit together to generate returns. That's why we offer our potential clients interactive spreadsheets that show exactly how cash flow and ROI are calculated for both cash and financed investments. It allows them to see how different factors influence the bottom line and serves as a great educational tool no matter where they invest.

    Long story short: never take numbers at face value and always check to see if things like vacancy and maintenance costs used in the ROI calc are really tracked and updated regularly or if they are estimates.

    0Reply
  • Chris ClothierBusiness Member
    Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
    10y

    @Vincent Park - I know I expressed this to you when you and I spoke last, but I wanted to re-iterate it here for any of the other readers.  JWB is an excellent company.  I truly value masterminding with the owners and have spent a lot of time over the last 6-7 years with them talking best practices.  

    They are definitely one of the better companies in this space and I would recommend them to anyone asking me for a referral.  If you are not a good fit for their company they will help you find the right company for you rather than try and force a sale, which is definitely one of the standards I use to decide if I am going to refer investors to a turnkey company.  They are some of the good guys for sure.

    I wouldn't downplay my company to build them up...don't get me wrong :) however, you are zeroing in on very high-quality options all the way around and I wanted you to know from me that I think you would be pleased with the service and opportunity you would get from JWB.  

    You have my cell so be sure and reach back out if I can help as you continue on your path and develop your plan for building a passive property portfolio.  

    All The Best ~

    Podcast Guest on Show #224
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  • Jeff Howard
    Ladera Ranch, CA · Member since 2016 · 34 posts · 7 votes
    10y

    @Allison Karrels

    Hi Allison,

    I am narrowing down my turnkey options as well.  I have been doing a lot of research and educating myself, but this is the first time I have heard of a $2500 escrow prepayment.  What is covered in that payment and is that standard to expect that for most turnkey companies?

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

    Its just the normal earnest money deposit you place in escrow prior to closing.  It goes toward your closing costs.  Sorry the way I phrased that it might have been confusing.

    1Reply
  • Gregg CohenBusiness Member
    Rental Property Investor · Jacksonville, FL · Member since 2011 · 143 posts · 136 votes
    10y

    @Chris Clothier - Thanks for the support Chris!  You can't get much better than the Clothier family and their organization.  They have truly pioneered and perfected the turnkey business model.  Looking forward to meeting up with you soon!

    -Gregg

    904-677-6777
    Gregg Cohen, Not Your Avg Investor Show4.5231 Reviews
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  • Don VanPatten
    Investor · San Jose, CA · Member since 2016 · 1 post · 2 votes
    10y

    When I spoke to MI in the past 30 days I was told they like investors to have greater than 25% available for financing as often the appraisers do not always give them "full credit" for the improvements they make to the property. I came away with the perception that one should be prepared to have up to 40% available for down and closing. If you check out their profroma on various properties they list a low appraisal and high appraisal value that reflects this risk.

    2Reply
  • Abdul Azeez
    Real Estate Investor · Monroe Township, NJ · Member since 2016 · 468 posts · 85 votes
    10y

    I left several messages with Buy Memphis Now but they have not had the courtesy to return my call. this only makes me think what the experience will be after purchase. get disappointing.

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

    Abdul, I apologize for not reaching out to you sooner. I know our office manager spoke with you and asked you to schedule a time through our websites scheduling system for a call.  Send me a pm and lets connect directly. 

    Curt Davis - KAIZEN Realty538 Reviews
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    0Reply
  • Bob Rooks
    Investor · Kailua, HI · Member since 2016 · 3 posts · 2 votes
    9y
    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 consistent with my recent experience. They do offer, however, a "worst case scenario" guarantee when they quote you a price. So there's some protection when the appraisal comes in. But with both my MI properties, I had to bring an extra $7 to $10k to the table due to the low appraisal.  They explained that they price based on the income method rather than the comparable sales method that an appraiser will use. 

    This is a key differentiator with JWB, which clearly states that their pricing is based on MARKET value.   I'm looking in Jacksonville for my next properties.  That said, I've had only AWESOME experience with MI.  Their customer service is top notch, closing was easy, they are constantly in touch, and Property Management is first rate.  They had tenants in place before we closed so these have cash-flowed since day 1. Strongly recommend you get your own inspection, though, and insist that the seller address all findings before closing.

    0Reply
  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    9y

    @Bob Rooks -- I agree that MI's customer service is top notch.  However, at the end of the day you need to consider the returns on your investment as part of the complete picture.  So if you're happy with your returns based on your increased down-payment then congratulations.

    I'm an advocate of buying at or below market value.  The reason for that is that you can always find the returns you seek, along with good management, without having to pay more than market value.

    Just my two cents as we have properties in those markets too.

    Continued success!

    3Reply
  • John M.
    Philadelphia, PA · Member since 2017 · 38 posts · 8 votes
    8y

    @Bob Rooks In my view you must have equity day 1..buying property above appraisal for some 8% future cash flow...does not seems to be great idea.

    @Marco Santarelli I 100% agree with your advice on buying below market value.

    0Reply
  • John M.
    Philadelphia, PA · Member since 2017 · 38 posts · 8 votes
    8y

    I wonder if there is any business relationship or cross marketing tie up b/w JWB and MI?

    0Reply
  • John M.
    Philadelphia, PA · Member since 2017 · 38 posts · 8 votes
    8y

    I am also looking for a reputable and honest turn key provider....seems this sector is not well organized..no big player. Hence investors are ready to pay premium ..above appraisal value to MI.  

    0Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    8y
    Vincent Park great way to get started and what I did. Those companies have been around a while. I am lease familiar with JWB. Just make sure you stay away from class d or c properties under 70k.
    0Reply
  • Patricia Vildozo
    Brier, WA · Member since 2013 · 29 posts · 4 votes
    8y
    Great information here ! . I’m a newbie and I just finished my second flip , it was a great experience, but for now I’m taking a break from it. I would like to explore other strategies like turn key. However, it seems that I’m missing something , how do you guys get your money out of the deals when appreciation is slow? Do you do 1031?
    0Reply
  • Tom Ott
    Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes
    8y
    Originally posted by @John M.:

    I am also looking for a reputable and honest turn key provider....seems this sector is not well organized..no big player. Hence investors are ready to pay premium ..above appraisal value to MI.  

    I agree. There are many people out there who throw around the word Turnkey and sometimes they are just talking about a home on the MLS that looks nice! Not the same thing at all!

    I would suggest looking at:

    The Best Types of Markets for Profitable Turnkey Properties

    and

    What to Ask When Working With a Turnkey Provider

    0Reply
  • Matthew Lucas
    Ashburn, VA · Member since 2015 · 2 posts · 4 votes
    8y

    I have worked with JWB for since 2015 I think and have 10 properties under their management.  My wife and I live in a HCOL area and having decent paying jobs so turnkey was the best option for us at the time.  Yes you will always make more buying on your own if you can handle rehab and tenant screening, but doesn't fit everyone's lifestyle.  I did a lot of research and calling to all the various companies out there even found one affiliated with someone under indictment you never know who is out there.  Out of all of them Memphis  Invest and JWB were by far the most professional and best reputation.  Nothing against Chris Clothier but I liked the Jacksonville market better at the time.  

    JWB has been very professional, responsive, and fair.  We haven't had any major issues and the ones that came up like flooring having issues 6 months after purchase they took care of right away.  Most our rentals (except the Section 8) last about 2 years and some more than that, which really cuts down on the turnover costs.  The rehabs they do are solid and smart using vinyl plank flooring for main areas instead of carpet, etc.  Any time we have a question or concern they immediately get back to us and clear it up.  They also work with you and the other vendors - mortgage, insurance, etc..  I'd recommend flying down to meet with them to really get a feel for their operation - great people, motivated, and friendly.

    If anyone has questions I'll do my best to answer.

    3Reply
  • Gregg CohenBusiness Member
    Rental Property Investor · Jacksonville, FL · Member since 2011 · 143 posts · 136 votes
    6y

    Hi @John M. - Just wanted to answer your question directly about the working relationship between JWB and Memphis Invest / REI Nation. There is so financial obligation or incentive for either of us to speak so highly of each other. There are no referral fees or cross-promotions. It is just based on mutual respect!

    904-677-6777
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