i know roy. he manages some of my properties and probably 50 of my father's.
i'm always open minded about new things. it's not that i'm uninformed, i'm just unimpressed. from my experience, these turnkey models blow up. maybe you guys are the one magical unicorn that somehow won't. i hope so. because if not, then a lot of people will be screwed.
i fully support the idea of paying off rentals as soon as possible. that's how i run my business. but in order for them to be good investments, you have to buy them right. and paying way over retail for a turnkey because it's pretty is simply not a sustainable model. it just isn't. the facts of many previous attempts have brought that to light, but your marketing won't go into that...
i have no beef with any of you. nothing that you guys are doing affects me. it only helps me when i get to buy remodeled homes out of foreclosure when it fails. i have bought several from former turnkey guys.
but sometimes the marketing hype turns into frou-frou fluff pieces & i think somebody needs to give contrary advice, especially someone who has nothing to sell/gain by voicing their opinion. i have helped friends in california and other states avoid LOSING $ by telling them to avoid very similar business models.
anyway...back to business...i have houses to buy...and this silliness doesn't further that goal.
I'll chime in on Frayser as I get a lot of newer investors contacting me with thoughts of making a killing with a $30-$40k house. It's all about the management from my somewhat short experience there. I have two primary PM's for 38127. One is Mid South and I haven't had late rent payments, turnover or anything but standard maintenance issues that you would expect. I work with another PM who manages a few houses in that area that I transferred to them and I have had several issues and I am getting to the point where I will ask Mid South if they will take over one that is vacant now.
Like Alex stated, it's not an area he is fond of. He focuses on higher quality homes and he does well. I would definitely use him for the Bartlett area, as an example but not Frayser. So whethere you buy turnkey or not, find the PM who already has a presence/excels in the parts of Memphis you plan to own in. Not every PM can manage every part of town well, at least that's my belief.
ok, agree to disagree. I would still like to see the home that you get $650 and we get $1,050. Seriously, just trying to help. As for the sustainability, we have been in business since 2007 and Memphis Invest, Memphis Cash Flow and Mid South Best Home Rentals have been in business longer. Those companies have not imploded and still continue to grow too. The only investors that have imploded where the $0 down investor that Jay Hinrichs always talks about. I was in on the tail end of that and did not do that many, but all of mine were done that way and those are my least profitable homes. The skin in the game investors are doing as expected.
I do find it misinformed you tell people to avoid a model that you directly have no experience or talked to individuals using TK and succeeding.
@David Hutson since you are in this thread and you are actively involved in investing in "C" class areas, do you see a scenario where your TK purchase through Mid South Home Buyers would implode? I couldn't knowing Terry's TK business. Do you see a value in buying a TK property with 10k profit built in? All of a sudden I just realized, I have turned into an affiliate for these guys.
@Eric Pinter the reality is about 50% of all your foreclosures in the mid west are from failed landlords regardless of how they acquired the homes.
I like to say that in the turn key model which can work well in all cities one just wants to buy at the top end.. leave the lower end for the locals who know it can self manage and have lots of them.
Many of the turn key companies as you pointed out learned this pre 08 and have really stepped up their game and areas they invest in... and or resell in.
Since we are starting to get deep in this, I want to mention I have received the standard referral fees from Mid South that they offer to everyone on their website, and while I'm not trying to promote them in this thread, I want to let everyone know I like their model and it's what I do in CA for my houses.
That being said, I do have 5 houses with them, I don't focus on the Frayser area. I am ok purchasing there if the houses are newly rehabbed directly through Mid South or if I get a really good deal on their homes from their clients who want to sell, and they have been difficult to find. I closed on 2 a month ago that are Mid South homes where an out of country investor purchased the homes 2-3 years ago and now wants to invest somewhere else. I got them at a discounted price and they have great tenants. I had the homes inspected and looked at the tenant's payment history and I wish I could have bought more.
The newly rehabbed houses I have purchased from Mid South have been appraised at purchase for a few thousand more than what I paid. So I make a little equity, which is nice but not what I'm after with their homes. I'm primarily looking for the cash flow and a quality home that won't need major repairs for 5-10 years. By then I'll be retired from the military and living out there and can do most of the repairs myself.
I am guessing that Mid South will rehab/sell 280 homes this year from talking with them. They have been doing 200+ for many years. So as to Alex's question, I'd have to guess that they will be able to continue for several more years as I continue to see homes up for auction/foreclosed on/investors tired of dealing with homes that they have neglected to maintain to mention a few ways they find homes. I actually think @Alex Craig's company- Memphis Turnkey, Memphis Invest, Rent to Reward and the handful of other quality companies that do turnkey that I didn't mention will continue to thrive since there are so many homes available. Each of the turnkey companies out there have their own niche and focus. That's how they continue to grow. I may be wrong but I don't think I am and that's why I will continue to buy there. (Hopefully I'll retire in a few years, buy a 40' RV and maybe move out there and open my own turnkey company. Then I can sell homes while driving around the country. At least it sounds like a good dream.)
So, in conclusion, no one turnkey company is right for everyone. I talk to at a handful investors each week from here who reach out to me and they are looking for homes but no one company in Memphis, or wherever you choose to invest, will be what every investor is looking for. If you have taken the time to read this far then do yourself a favor, if you are an investor or a wanna be (future) investor, and determine what it is you want from an investment, at least some basic goals. Ie, I'd like to make $250 per month from a turnkey home. I have $20k to put down and I'd like a 15 year loan but may need a 30 year loan if I want the $250/mo cashflow or I want to pay the loan paid off in 10 years so that I can collect $400 a month cashflow once the mortgage is paid off or I'd like ??% cash on cash return knowing the higher the return the larger the down payment or older the home will probably be. There is soooo much more, so take it one step at a time, talk with all of the people on here who are willing to volunteer some time to talk with you, read the posts, attend REIA meetings, talk to the companies where you want to invest and then, the most important step, take action with the company in the location that best suits your style of investing once you have done your research. Good luck.
I have to say after visiting Memphis, meeting with a few turnkey companies, talking to more than a few people on B.P., getting unbiased opinions from a couple of local people, then meeting Terry Kerr of Midsouth Home Buyers and his team and Alex Craig of Memphis Turnkey Properties and his team I feel both companies (although they may differ) have great systems in place. Haven't heard any negative information on either company, both are expanding and I believe they'll both be around for the forseable future and that'a just a couple of reasons I chose to invest with both of them.
I don't know much about turnkey providers but on the subject of "they over rehab and their prices/rents are inflated".. how can you find this to be a negative?
These lower class neighborhoods are stuck in a spiral of mediocrity - if the houses are "worth", in Eric Pinter's words, only 50k and 600 rent then no one is going to fix them and the neighborhood just gets worse and worse.
Turnkey providers and rehabbers are the only reason some of these neighborhoods are being brought back and that investing in them makes sense. So my point is.. they are basically creating the market with the volume they do, whether you think it's right or not.
I just took over a house in a very average neighborhood in Memphis. All of the comps in the upper bracket are from turnkey companies, some from Alex's company. If it weren't for those, there would be zero incentive to put any money into this house, none. But because there is a pocket of "over rehabbed" and "over priced" houses that were sold on the street, it allows me to contribute instead of just dumping it to a slumlord.
I see that as a long term positive both on a personal financial level and for the community. If they only had a handful of houses it would be insignificant but the TK guys have dozens.
@Patrick Desjardins those are exceedingly good points.. turn key companies are market makers.. and without them the values would be far lower and the neighborhoods would end up looking like many of the worst areas of Detroit.. TK is the savior of these cities.. And those folks from the West and East coast and off shore that bought these homes are virtually single handedly responsible for the values in these areas..
And if you think of the trickle down effect.. you have the TK company you have the rehabbers they hire the Home Depot or Lowe's they owe their stock price to these companies .. the amount of money spent there Is just huge.
And given the tenant base it will never change... you will have a constant cycle and supply of these homes.. Each of these bigger companies have done 1 plus deals some multiple thousands in fairly close proximity to each other.. So that's your stabilizing influence in the area.
As stated I shudder to think of what these areas would be like without Turn Key companies working them.. It would not be pretty.
Jumped back on this thread to see if Eric was going to share the property that he only get $650 to $700 in rent on a street we advertise $1,100. I did not see it and reminded me of this scene. I am not trying to be pushy, but what we are getting is real, so maybe there is something in the form of a case study between land lording the same way for the past 20 years and being innovative and changing with the times.
As the CEO of a turnkey outfit in Birmingham, AL, I suppose most of what I want to add has been said by @Alex Craig and others. Yes, there are definitely some shady TK providers, but condemning the niche because of this is a little like refusing to ever invest in mutual funds because you got stuck with a non-fiduciary financial advisor that screwed you. If you don't do your research and demand the information you need upfront (aka: what is the appraisal value of this home or do you get a commission if I invest in this fund?) then you're making an uneducated investment decision, which is never a good idea.
If you're looking at TK, any provider worth their salt will provide you with a current appraisal showing that the property is worth at least what you would pay. They should be able and willing to provide exact figures for things like maintenance, vacancy and average lease term and move out costs, and they should OFFER to show you how the ROI calc works. If it's like pulling teeth trying to get this very basic information, then that outfit is not for you, simple as that. All the information about your investment should be on the table and if it isn't laid out upfront, your provider should be able to respond quickly and helpfully to your requests for more information. It really is not that difficult to suss out the good from the bad in TK, but it does require that you educate yourself and have a firm understanding of what you're looking at and what questions you should ask.
BP is a great resource for both investors and providers alike and, as has been said, no one TK company will be the right fit for everyone. The personal relationship with your provider is just as important -more so even - as whether or not your property is in a flashy RE town. If you're looking at TK for the first time or just wanting to diversify into other markets, ask around, ask providers for client referrals so you can ask your own questions, talk to the providers and judge for yourself if they are the type of people you want to do business with. Going by whatever advertised ROI looks the best without close inspection is never a good idea. Numbers can be massaged and inflated - you need to know what ingredients went into the recipe to know whether or not you want to eat it.
Anyway, it looks like a lot of the finer points have already been made here, just thought I'd throw my two TK cents into the fray.
All the best to you all, investors, providers, and skeptics alike!
@David Hutson - I can tell you as a long-time BP user, I appreciate what you wrote above. You are a client of Mid-South so you can speak from experience, but you also stated you have received referrals. In my book, that gives you more credibility because unlike other posters, you were up front. Two things that are super annoying on here: 1. Not disclosing the fact that you get paid referrals from a company and we all know that happens constantly on this site. 2. Jumping in on forums that have nothing to do with your company and promoting yourself, which is happening all the time. Alex Craig and I were just discussing this the other day.
While I appreciate my companies name being mentioned on here, @Juan Calvo was not asking about me or any other cities. He asked about Mid-South and as a fellow business owner here in Memphis, I can tell you that they are an excellent company and Terry Kerr has a great reputation as investor and business owner. You simply cannot be in this business as long as he has without operating from a point of integrity. So, Juan, if you are looking for info. on Mid-South, I would think you have verified that they are a solid, stand-up company who is very focused on their particular areas and niche and they do it very well.
@Eric Pinter , you have a ton of experience and lots of alphabet designations behind your name, which means you have worked very hard. Through my years as a business person I have fought hard against learning this lesson, but once I did it has paid off. I used to think that with my experience I knew more than most other business persons and investors. And I may have been right in many cases. But when I figured out I could always learn from others by paying attention to the details of their stories, I became a much better entrepreneur and real estate investor.
If I posted that someone was getting roughly 180% of the rent I was getting on the same street, I would stop using the verbiage "legitimate rent" and take a look at what they were doing. If I saw that they were simply eliminating deferred maintenance and providing a cleaner version of what I was providing...it might be worth making a few adjustments. Of course, you may decide you like getting $650 in rent when others are renting the same houses on 2-year leases for $1050. And that high rent may not be sustainable, who knows? But it just may be worth checking into and seeing if maybe there is a lesson to be learned there and an operation or two to be improved.
@Patrick Desjardins - solid points.
It always good to watch your work. Your video marketing rocks! Keep Building...
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@Eric Pinter , you said this a few posts back: "it only helps me when i get to buy remodeled homes out of foreclosure when it fails. i have bought several from former turnkey guys."
That's kind of an inflammatory statement so can I ask you for more details? Who were the turnkey companies and what were the specifics of the situations? As someone who is considering this type of investment I would be very interested in scenarios where it failed that badly.
I would also be interested in the specifics of homes where you think one of the TK guys on this thread inflated the appraisal and/or rent. You said there were examples on the same street and/or neighborhood; that's a very specific statement so backing it up should be easy for you. It would be tremendously helpful to be able to look at the properties in question and see what the differences and similarities are.
Thanks all who have posted so much in this thread. It has evolved from a question about one company to a thoughtful discussion of the model in general.
@Lee Rutty , since this thread is a few months old, and these people are so aggressive, i don't really feel like rehashing this nonsense. but if you want to get a quick glance into how the turnkey model can go badly wrong, here are a couple of links. again, i don't know any of the previous posters personally. as an attorney, i am not trying to make a prediction on their success or failure, nor am i trying to allege any wrongdoing by anyone or any entity. my only goal is to provide a counter argument to what i feel is an overly optimistic hype machine.
my primary point is this: beware of anyone offering you any type of "guaranteed" or "stable" returns. as with any investment, do your own due diligence, and think things through. as for me, i am not comfortable with the turnkey model and would not invest with anyone in that manner, especially if i were out of state. I QUESTION THE ENTIRE MODEL, NOT THE INDIVIDUALS INVOLVED.
i've never tried to insert links into a forum post, so if they don't work or get blocked, just message me.
money in the bank securities dept cease & desist
as for specific properties, just look at the website and do your own due diligence. you may draw similar conclusions to me, or you may not.
here is a website i found advertising the turnkey model in little rock. i don't know who owns it, nor do i care. http://littlerockturnkey.com/listing/
go to www.arcountydata.com and look at pulaski county, and/or just google the addresses to get more information.
***to anyone who may get upset at this post, i do not plan to follow future comments or replies, and i do not plan to make any more replies since it is a waste of my very valuable time.***
Just wanted to give everyone an update, I have 4 properties through them and was in the process of buying another one through them. Until about maybe 6 months ago I would say I was pretty happy. Until then I had just one tenant move out after a year and they did about 800 in damage...which actually Midsouth was nice enough to split with me. I had one lady file for Bankruptcy and I was receiving two months of her rent from the bankruptcy court. Since about 6 months ago I have had a few more problems. Another tenant moved out without them knowing. So when they went into the house he had cause about $3500 in damage and was 2 month behind on rent. I did have his $1025 deposit but unfortunately the rest I will have to hope I get through collections. Seems unlikely though since he is a truck driver and hard to track down. Also I stopped receiving my bankruptcy check from the lady that had filed for bankruptcy. I also seem to have a problems constantly with the houses, I think I have had the HVAC repair man come out at least 5 to 6 times and just this morning I had a $524 bill for a pipe breaking.
Don't get me wrong I think the Property management team is great. They are fast to respond and always explain everything to me. Maybe I have just gotten unlucky, not sure if anyone else has had any issues. I have had the homes just about 2 years and the first year was great. The returns where just as advertised. But within the last year I have had many issues. I would love to buy some more. But at this point I am going to wait and see if things get better before I purchase another one.
If anyone has any questions please feel free to message me.
I had my first rental with MSHB for 5 month and then received and email that tenant didn't pay a few times?? and needs to be evicted, meanwhile I did receive all rental payments but last ... I called PM and it turned out that my tenant was late with payment on month 3 and didn't pay for months 4 and 5 so I am trying to figure out who paid me for month 4 now and how come I didn't know about all this situation all this time. Forgot to mention, that I was in Memphis touring properties with them, selecting my 2nd one on on month 4 (August) ... no one told me a thing.. I am still trying to figure out what exactly happened while evicting this tenant ..
Any ideas or past experience??
@Ekaterina Stepanova Did you get this situation resolved?
I'm going to tour with Mid South in a couple of weeks. Some of these postings are giving me cold feet.
Hi @Zorina Beleiciks,
Well, tenant is evicted, repairs are underway, property is being marketed .. I'm sure you will enjoy the tour, MSHB are very nice people. One thing is true: no matter who is your PM, no one will take care of your property like you would, so I'd suggest watch your investment like a HAWK! ) its true thought, check on it at least once a month!
I mean, besides reports. Make a call, send an email. Just my advice.
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