Feedback on Turn Key RE Companies
Rental Property Investor · Cherry Hill, NJ · Member since 2015 · 626 posts · 495 votes
Feedback on Turn Key RE Companies
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes@Account Closed I hear ya about cradle to grave... you partner with them to the end or at least as long as your in business.
I was one of the first into the Turn Key space along with a few others I entered in 2002 ish.
95% of those that were in the space then are gone...
And 10 years from now 95% of those that are in it will be off and doing other things just the way RE works...
54 Replies
- Investor · Trabuco Canyon, CA · Member since 2015 · 40 posts · 35 votes11y
Hi Joe,
I've met and have been working with Marco at Norada for a few weeks and I've been very impressed thus far. He is very sharp and very connected. I'm hoping to close on my first deal with Marco soon.
You can check out his podcast as well...they are well done. Check him out at "Passive Real Estate Investing".
Thanks,
Gil
- Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes11y
From my understanding Home Union does not actually own or directly sell turnkey properties. They work with a network of sellers and then resell them to the end buyer.
Second City Real Estate4.821 Reviews - Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes11y
Hi @Joe Martella,
Welcome to BiggerPockets!
Aside from our conversation, and for the sake of adding to this thread, it is my understanding (from our clients and internet articles) that Home Union charges a minimum 1 percent "asset-management fee".
It's something I've never understood because the logistics are quite simple and the services that should be provided should be part of their value add.
We've never charged our investors a fee, and never will.
Continued success!
- Redwood City, CA · Member since 2014 · 83 posts · 19 votes11y
Hi,
I wasn't going to reply as you were asking other investors for their experience with our HomeUnion, but since other people have mentioned things that aren't quite right or misrepresenting HomeUnion, I thought I should chime in.
Brie has it right, HomeUnion is not a turnkey provider. We never take ownership of a property nor do we profit from the rehab of properties. We let our investors take that advantage. However, we offer turn key services. In fact, most of the properties we have sold aren't turn key properties at all, rather properties that were sourced from any and all channels, including the MLS that we've identified as good investments. We do occasionally act as a reseller for turnkey providers, but that's the exception, not the rule.
We do indeed charge an asset management fee which covers among other things:
- Ongoing property management
- Payment of all expenses
- Ongoing market intelligence
- Bi-annual property inspections (i.e. every 6 months)
- Investment portfolio reviews
- Insurance monitoring
- Performance reports
- Etc.
You can see the full scope via this video on our web site (PM me and I'll send you the link).
As far as I know, all turnkey providers do charge property management fees which cover only a small subset of the services covered by our asset management fees.
- Flipper/Rehabber · Brooklyn, NY · Member since 2015 · 41 posts · 19 votes11y
Hey Joe,
I have been investing in out of state RE for over 6 months now and I own 2 properties. I have spoken to both Marco and to HomeUnion extensively. To me the difference is that HomeUnion is much more hands on. I have done one deal with them so far and I am happy with the results. They keep on changing there structure and now they do charge that 1% fee which includes property management and all of the other things Scott mentioned. Its a heck of a deal if you ask me and so far they have done well by me. They now also charge a 3.5% acquisition fee which was not there when I did my first deal. They also work with a lot more properties now and some that need work. My first deal was turnkey so I had no acquisition fee and no fixing up costs so I was happy with the built in equity I got on that. Now I have to see if I can still find something similar with there new setup.
Marco is more of a connector like Gil said. He will help you find what you are looking for based on your criteria and then set you up with one of the turnkey providers he is connected with. His job really ends there from what I know and then you deal with the turnkey providers, property managers after that.
- 11yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Account Closed
just curious does this mean that Home Union is licensed PM in each market you work in?
if your charging your clients on going management fee' s I know in most states you would need to be a RE broker with a PM endorsement... If your truly managing the assets as you state.
However that notwithstanding I am sure who ever is actually do the on the ground work needs to get paid.. and if it all totals 10% or so that's market rate no problem there.
As an owner though I personally would not let anyone pay my mortgage etc.. Just because in this day and age with the way credit is if there is a snafu its the owners credit that gets dinged... I would always want my mortgage payments auto deducted from my personal accounts.
3.5% is a basic fee... I am sure there has to be other compensation from the seller pretty hard to make any money and run an org on only 3.5% referrals fee's.
but at the end of the day if the buyers think they are getting value and they have a good experience that's what its all about... regardless if they go direct , do it themselves, buy through a Norada, or Home Union or any of the other myriad of marketers out their.
- Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes11y
Hi @Shai Neubauer:
Good to see you on BP.
A few corrections and clarification is in order:
We are much more involved in the entire purchase process then described. We do not simply "connect" or "set you up" with our local partners and other turnkey providers. We take a very hands on approach and are much more of an advisor in every transaction. (This may have been apparent to you with the hours Michael Ristau spent with you on the phone.)
We provide ongoing consulting after the sale free of charge.
It should also be noted that we are a turnkey provider with our own acquisitions and renovations.
Alison, our role does not end after the sale. We stay in contact with our clients and local team including property managers to follow up on the transaction after the investment is made. We survey and keep track of everybody's performance and use our leverage to correct any issues, if any.
Last but not least, I fail to see why any investor should be charged an extra 3.5% transaction fee in addition to a ongoing 1% "management fee". That should be the investors profit!
If you do the math on that 3.5% and the ongoing 1% fee, that really adds up each year and lowers your cashflow and overall rate of return.
In 11 1/2 years I've never come across a turnkey provider or reseller that charged fees on top of the purchase price and management fee by the local property.
Continued success!
- 11yCurt DavisBusiness MemberFlipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
There are a lot of affiliate companies out there that charge their client what you might call a buyers premium and then they also charge the TK provider a fee as well so they get to double dip on both sides. I have never understood why someone would allow themselves to be charged a buyers premium as when you hire a realtor to help you buy a home they get paid by the seller. Just a thought.
Curt Davis - KAIZEN Realty538 Reviews - Flipper/Rehabber · Brooklyn, NY · Member since 2015 · 41 posts · 19 votes11y
Apologies Marco on the misrepresentation. I have not done a deal with you guys as of yet but yes I think I do recall you mentioning ongoing consulting "after the sale". I did not mean to suggest that this was not the case, from my experience you set me up with a turnkey provider and they really took care of the rest and I didn't really have any further questions for you. Maybe this is because I didn't do a deal as im sure if I had you would have been there with support.
Regarding HomeUnion, I don't think its fair to categorize that 1% fee as something that is extra or out of the ordinary. I hope you understand that HU will take over the PM and there will be no additional PM fees on top of the 1%. Obviously with your turnkey providers there is a similar "property management" fee attached to the deal and so is the case with every turnkey property. HU is actually providing more for this 1% fee on top of just the property management:
- Ongoing property management
- Payment of all expenses
- Ongoing market intelligence
- Bi-annual property inspections (i.e. every 6 months)
- Investment portfolio reviews
- Insurance monitoring
- Performance reports
- Etc.
They have done for me nearly all of the above besides for inspections ($450 fee alone) because I own the property for just 2 months so far.
As far as the 3.5% acquisition fee I would tend to agree with you. This seems to be like a new thing that was not in place for my first deal and they only told me about this a week ago. Built-in-equity is a huge part of my criteria for these properties and like you said to add in 3.5% to each deal would be eating away at my profits. I hope they change this, they seem to be in transition and I hope they can find something that sticks long term.
- Flipper/Rehabber · Brooklyn, NY · Member since 2015 · 41 posts · 19 votes11y
Originally posted by @Curt Davis:
There are a lot of affiliate companies out there that charge their client what you might call a buyers premium and then they also charge the TK provider a fee as well so they get to double dip on both sides. I have never understood why someone would allow themselves to be charged a buyers premium as when you hire a realtor to help you buy a home they get paid by the seller. Just a thought.
In HomeUnions case they are offering a lot more properties not just from turnkey so they are not always getting paid from the TK providers.
For Norada, Marco can reply to this as im sure he is getting compensated through the TK providers.
- Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes11y
The ONLY compensation our company receives is from the sale of the property, similar to a selling broker's commission.
That has been the only compensation over the last 11.5 years. People ask this from time to time and I wish I could tell them there were other sources but that's just not the case.
Thanks for asking!
- Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes11y
@Marco Santarelli Thanks for sharing your business model. Would you say you are representing the buyer or the seller in these transactions? Gracias.
- Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes11y
Originally posted by @Matt R.:
@Marco Santarelli Thanks for sharing your business model. Would you say you are representing the buyer or the seller in these transactions? Gracias.
ALWAYS the buyer. They are our client. Their goals, strategy, and criteria always come first.
We are completely agnostic to the market, our service providers, lenders, etc. We have many options across the board so we match the investors needs.
- Redwood City, CA · Member since 2014 · 83 posts · 19 votes11y
Originally posted by @Jay Hinrichs:
@Account Closed
We have licensed RE Brokers and PMs in the majority of our markets. In others, we contract with licensed third party PMs. Either way, the asset management fee covers those expenses and when we're using a third party PM, we make sure they are providing the best service possible. If they don't, we don't partner with them for long.
Our goals are to maximize our client's returns, protect our client's assets and providing 100% transparency through the entire process.
If our client's aren't successful, we won't be in business very long. So their success and strong returns are paramount to us.
Our platform definitely isn't for everyone, but for people that want a good return with as little ongoing work as possible, we're a pretty good fit.
just curious does this mean that Home Union is licensed PM in each market you work in?
if your charging your clients on going management fee' s I know in most states you would need to be a RE broker with a PM endorsement... If your truly managing the assets as you state.
However that notwithstanding I am sure who ever is actually do the on the ground work needs to get paid.. and if it all totals 10% or so that's market rate no problem there.
As an owner though I personally would not let anyone pay my mortgage etc.. Just because in this day and age with the way credit is if there is a snafu its the owners credit that gets dinged... I would always want my mortgage payments auto deducted from my personal accounts.
3.5% is a basic fee... I am sure there has to be other compensation from the seller pretty hard to make any money and run an org on only 3.5% referrals fee's.
but at the end of the day if the buyers think they are getting value and they have a good experience that's what its all about... regardless if they go direct , do it themselves, buy through a Norada, or Home Union or any of the other myriad of marketers out their.
- Rental Property Investor · Cherry Hill, NJ · Member since 2015 · 626 posts · 495 votes11y
@Marco Santarelli; @Shai Neubauer; @Curt Davis; @Jay Hinrichs, et al.
Thank you for all of your statements and opinions. I have spoken to both companies for a period of time. I greatly appreciate and value everyone's input. Recognizing these business models are significantly different and are on both sides of the pendulum, I needed to come to BP and get some outside input. I know that both companies are on here and am fine with them seeing my inquiry. Both companies should have pride in their business models and stand behind them when challenged; especially, when it is dealing with first time investors. I am going to lay out my understanding of both TK companies since we have both companies represented in this thread.
Home Union
I dealt with Gary Nguyen and have spoken to him a couple of times and read the literature he provided. I understood, but didn't like the 3 1/2% acquisition fee. I know the concept behind the premium, but for other than pointing me to the property (98% of their properties are on the MLS, or its equivalent), what was I getting for my money. In addition, there was a 1 1/2% property management fee. Although I am new to the out-of-state RE investing, I have done my homework, and know that the standard PM fee is 8%-10% (12% on the very, very high side) of rents collected. I asked what exactly I was getting for the 1 1/2% fee and there wasn't any standard answer. Home Union has a wide breadth of areas they offer TK properties. I couldn't get confirmation that they had offices in each area. What I gathered was that they charge you the 1 1/2% to manage the property managers, so there are other fees associated. I also was told the 3 1/2% fee and property management fees are not negotiable. I welcome Home Union to explain this. So yes, the 3 1/2% and the 1 1/2% can be deal killers where the first year or so you are paying off your acquisition costs before realizing a return. Keep in mind, this is in addition to closing costs.
Norada Real Estate:
I spoke with Marco several times as well. I had to ask him every question in the book. I received, what appeared to be straight answers and grilled him on his fee structure. Someone on here mentioned that Marco puts you in contact with people, and that, in my opinion is somewhat correct. Yes, he points you to a property, but most of his properties are not on the MLS and no premium or property management fee. Norada will set you up with their contacts, but there are no direct charges to the investor.
So given the two completely opposite business models, I needed BP participants input to help me with my decision. Posts like this are needed for investors like me and @Gil Estupinan.
- Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes11y
@Marco Santarelli Thanks! I see you recently you offered this TK property. It was sold a couple months ago for 20k. How would you explain to the buyer the now 200% mark up? It certainly does not look like a 47k rehab. Gracias.
- Investor · Dallas, TX · Member since 2013 · 619 posts · 128 votes11y
@Joe Martella why are you limiting yourself to the 2 providers? Go to the turnkey reviews website and research all the providers that have customer reviews to start with. You will find a few turnkey providers who source the property, rehab it, and provide property management a one stop shop if you will instead of dealing with different companies. They know their specific area/city well and would be your boots on the ground.
- Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes11y
Originally posted by @Matt R.:
Thanks! I see you recently you offered this TK property. It was sold a couple months ago for 20k. How would you explain to the buyer the now 200% mark up? It certainly does not look like a 47k rehab. Gracias.
Hi Matt:
Simple answer -- the $20k was probably the acquisition cost as a distressed property requiring a lot of rehab. The scope of work on a heavy renovation can run between $20k to $30k. The other thing many investors miss out on are ALL the other costs associated with rehabbing properties: Interest on hard money, lender points, selling commissions, title insurance, closing costs (x2), profit margin (hopefully), and occasionally miscellaneous costs and budget overruns.
It can look deceiving at first glance to think that there is a large margin but that's not always the case. Ask any rehabber here on BP about the actual NET profit margins they make while taking on 100% of the risk in doing so. They don't always pan out.
Continued success!
- Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes11y
@Matt R. -- I forgot to mention that these are also priced at or below market value in order for them to appraise for investor financing.
Please let me know if you have any other questions.
- Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes11y
Originally posted by @Joe Martella:
Thank you for all of your statements and opinions. I have spoken to both companies for a period of time. I greatly appreciate and value everyone's input. Recognizing these business models are significantly different and are on both sides of the pendulum, I needed to come to BP and get some outside input. I know that both companies are on here and am fine with them seeing my inquiry. Both companies should have pride in their business models and stand behind them when challenged; especially, when it is dealing with first time investors. I am going to lay out my understanding of both TK companies since we have both companies represented in this thread.
Norada Real Estate Investments:
I spoke with Marco several times as well. I had to ask him every question in the book. I received, what appeared to be straight answers and grilled him on his fee structure. Someone on here mentioned that Marco puts you in contact with people, and that, in my opinion is somewhat correct. Yes, he points you to a property, but most of his properties are not on the MLS and no premium or property management fee. Norada will set you up with their contacts, but there are no direct charges to the investor.
So given the two completely opposite business models, I needed BP participants input to help me with my decision. Posts like this are needed for investors like me and @Account Closed.
That's a decent summary Joe!
Remember, introducing our clients to our nationwide network happens as part of our hand-holding purchase process, not in place of it. We're always involved.
- Real Estate Agent · Madison, WI · Member since 2015 · 328 posts · 88 votes11y
Originally posted by @Gautam Venkatesan:
@Joe Martella why are you limiting yourself to the 2 providers? Go to the turnkey reviews website and research all the providers that have customer reviews to start with. You will find a few turnkey providers who source the property, rehab it, and provide property management a one stop shop if you will instead of dealing with different companies. They know their specific area/city well and would be your boots on the ground.
Gautam makes a good point. Norada and and Home Union are middle men who will introduce you to providers they think are suitable for your needs and they deserve to be paid for that service.
@Jay Hinrichs's turnkey-reviews.com has the providers themselves. Middle men can help vet the providers but you still need to vet the middle men.
- Rental Property Investor · Rio Rancho, NM · Member since 2013 · 314 posts · 816 votes11y
I'm a little late to the party, but I bought 3 turnkeys this year through Norada in Atlanta and Birmingham. Overall, my experience was pleasant, but that doesn't mean it was hassle-free. I still did all of the market/neighborhood/home research and addressed any and all issues that I could find.
Like I tell other investors interested in turnkeys - don't treat turnkeys any differently than you would any other acquisition. There are bad turnkey properties and there are good ones. Just like with everything else.
If you have any specific questions about my experience, feel free to reach out to me directly.
- Residential Real Estate Agent, Investor and Mentor · Birmingham, AL · Member since 2013 · 257 posts · 61 votes11y
I have experience with both firms. The Home Union experience was not very pleasant and they wasted a lot of my time as a vendor. Working with Norada on the other hand has been a great experience. They are true professionals and will lead you in the right direction. Feel free to reach out if you need any details off line.
- 11yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@J Benoit I had the same experience with Home Union.
- Birmingham, AL · Member since 2013 · 149 posts · 44 votes11y
Just to clarify this thread regarding HomeUnion, I am the exclusive broker for them in Alabama. I have a dual brokerage which means HomeUnion AL, LLC and my other brokerage Real Equity, Inc are both located at the same office here in Birmingham as required by the Alabama Real Estate Commission.
HomeUnion hires ILM's (Independent Location Manager) in each market they are in. This is a licensed real estate agent employed with a salary by HomeUnion along with benefits, etc. The ILM is responsible for sourcing properties on the HomeUnion platform and engaging the HomeUnion team and buyers. The ILM provides the local market knowledge and expertise in the markets currently served. For us, that includes Birmingham and Huntsville. The ILM is exclusively dedicated to HomeUnion and can not accept any other commissionable opportunities.
Our ILM here is Jim Thornton, who consistently has 75-100 properties in inventory between Birmingham and Huntsville on the HomeUnion platform mostly in the A/B class areas (they do not offer their buyers C class properties). He is on track to sell 10 properties per month.
I have seen their platform and have been out to Irvine, CA to meet with their team back in June (they have also come to our Birmingham offices as well). Their offices and staff were impressive and definitely a large scale operation. I met everyone from the CEO down to the contract coordinators. They truly have it together and have made a significant investment in Birmingham and Huntsville.
HomeUnion's due diligence with their target markets they select and service is quite extensive. The screening process for selecting a broker, turnkey provider, and hiring an ILM is rigorous. It took us about 6-8 months to get everything set up.
As @Account Closed mentioned, HomeUnion is not a turn key provider in the true sense but I would say it is more of a hybrid model. When a property closes, the buyer contracts with our partner REI Associates, LLC which provides these turn key services in Alabama. They have the renovation crews along with project managers that manage day to day renovations, documentation, inspections, warranties, etc. Since buyers are purchasing in the A/B class areas, renovations are minimal and most of the time, REI is in and out in under two weeks.
Local wholesalers or turnkey providers simply can not go bring properties direct to HomeUnion. When those properties are offered, they have to go through the contracted local turnkey provider. Here, REI would need to purchase and turnkey it. Once completed, the ILM will evaluate it and if it meets the criteria, it is then offered to HomeUnion buyers. If not, REI will either keep it in inventory as a rental or retail it.
REI along HomeUnion AL/Real Equity are located in the same offices.
Initially, their goal was to use a local property management company but after conducting their due diligence and interviews with several of them, it was determined that they would bring management in house.
We are coming up on a year with them and feedback from their buyers have been exemplary and extremely positive. Although it did take a while for them to get set up with us, I am quite pleased with the relationship and look forward to working with HomeUnion for many years to come.
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