My turkey disaster

Buying & Selling Real Estate
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My turkey disaster

Will Spruill
Seattle, WA · Member since 2013 · 70 posts · 33 votes

I bought two turnkey rental duplex units in Indianapolis last year that came with a one year rent guarantee. The rent protection was thru AON and was paid for by the advertiser that markets turn key homes.

Out of the four units I own, I’ve had to use the rent protection policy on three of the units; yes 3 out of 4 in less than a year. Two of the claims were processed pretty smooth. The third claim was denied due to the turn key/sellers placing a tenant that was a felon. This voided the policy for that tenant and I’m out quite a large sum of money; no rent since August and court date is not till the end of this month.

The AON policy is great, just make sure your tenants meet all of the criteria. I’m pretty sure that AON will not insure me when the policy expires. I can thank the turn key seller/property managers for this.

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Account Closed
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
12y

Wow, I just found this thread and feel compelled to comment. I also invest in Indy and have done through @Mike D'Arrigo and Pinnacle investing. I have 6 homes so far and have had one really bad experience. So let me tell you the difference between Will's story and mine. I bought a package of 4 already rented homes through Mike. It was a sale from another investor who also managed those properties through his PM company. The first thing Mike ever told me when I started was 1. No Duplexes, 2. Nothing in Center Township. That kept me away from the D class properties.

In this property set of 4 there were 2 excellent properties and two average properties based on the numbers. I examined the rent rolls and saw that one tenant on the average properties was often late. I asked the current PM about it and they said she always caught up. I was skeptical but thought the worst I would have to do is replace the tenant. Well this tenant didnt pay and when I put an eviction notice she left but totally trashed the place in the meantime. My lesson was learned. But the PM company I used was quick and efficient in the eviction process which was good to know. Of course I told Mike about the issue. Now in no way can I say he was responsible for that particular tenant. It was not him that selected the PM that placed her. But he totally took the problem to heart. He spent countless hours screening contractors and finally found me one that would do it at almost half the price of the other bids. He supervised the contractor, coordinated with the PM company and stayed totally engaged until the property was fixed and a new tenant was in place. That was my definition of good turnkey service.

Yes it cost me several thousands in repair and lost rent. But still over the year I made money on my portfolio. I learned some important lessons in due diligence and I tested the mettle of people I am doing business with. Not a pleasant experience but actually going through it gave me confidence to scale up the investments because I have seen what is most likely the worst case scenario already. And I saw first hand the value of diversification. As a result I will probably add some B class higher end properties to my portfolio to balance the risk. I have implemented a stringent screening criteria for tenants and my due diligence list grows stronger after every purchase. Its a process and some learning is to be expected. It did not turn me off from the business model and in many ways made me more comfortable as an investor.

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  • Chris ClothierBusiness Member
    Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
    12y

    @William Hochstedler

    "I've posted it before, but property management is just a series of opportunities to drop the ball. IPM seems unusually good at seizing these opportunities ;)"

    That was funny!

    Here are the 5 quality of life issues. (typing too fast when I hit "6")

    - Electrical
    - Plumbing
    - Heating
    - Air
    - Roof

    These are issues that are going to effect a tenant and that a property management company CANNOT wait on when addressing. It is important that they handle them quickly not only for the tenant satisfaction, but also out of responsibility of managing the value of that owners asset.

    Podcast Guest on Show #224
    REI Nation4.576 Reviews
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  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    12y

    UPDATE:

    It's been several months since there was activity on this thread, so I thought I'd post a quick update to help close the circle.

    I've gone ahead and helped William sell his property at no cost to him. The new investor has taken over the property, and we've helped him place a new property management company which has leased the property to new qualified tenants. He is happy with his new purchase, and Will is relieved with the sale and separation from IPM. I was glad to be able to help Will after all the drama with those unqualified tenants and ongoing issues.

    As @Chris Clothier will tell you, qualifying and screening the right tenants from the beginning can and will avoid issues right from the start.


    @Andrew Syrios @Alan Depauw @William Hochstedler

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  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    12y
    Originally posted by @William Hochstedler:

    Even though the props were delivered in good condition, where was the guidance from @Marco Santarelli or the PM company on rents? It is both the responsibility of the TK provider and the PM to provide this kind of guidance.

    I'm very impressed by how level headed the players are. I've posted it before, but property management is just a series of opportunities to drop the ball. IPM seems unusually good at seizing these opportunities ;)

    Hi William -- If you read through the entire thread you'll discover that IPM placed tenants that we completely unqualified. They've actually told me that their agent did not pull any kind of background check, and in some cases did not even collect a security deposit. They simply placed warm bodies into Will's property. The employee responsible was eventually let go, but the problem festered and eventually got worse.

    I jokingly say, "You live and die by your property manager."

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  • Chuck B.
    Investor · Louisville, KY · Member since 2011 · 279 posts · 248 votes
    11y

    I'm a year late to the game but I noticed that IndyPM.com is now a real estate site and it looks like the original group is out of business (or more likely, changed their name again). Buyer beware.  

    Best,

     - Chuck

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  • Will Spruill
    OP
    Seattle, WA · Member since 2013 · 70 posts · 33 votes
    10y

    Hey everyone thought I would check back in after being off the site for a while.My "Turkey" disaster is done and I'm having much better luck in the REI game.Lots of lessons learned along the way that will make me a much better investor for the future.

    I’ve had great success after researching and working with a seasoned property management group.The turn-key or “turkey” in my case seems to be a make money fast gimmick; now I’m sure there are some good turn-key companies that stand by their product and offer more services than a quick sell and good-bye.

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    10y

    Will, glad to hear that is turning around for you. Curious to know who your PM is.

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