Difficulty selling rental properties at loan amount
Real Estate Consultant · Memphis, TN · Member since 2015 · 70 posts · 82 votes
Difficulty selling rental properties at loan amount
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Chris ClothierBusiness Member
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votesI was not involved in the sale of these properties, but have sat back and watched this thread for the better part of a day and what fascinates me is how easy it is to get the result you want from other people. The thing that makes BP so great is that you can get unfiltered advice and usually from people that, besides a picture, are anonymous strangers. That is also the bad part. Due to no filter and anonymity, sometimes the comments are just thrown out there without any real thought about facts and details. It is unfortunate, that after @K. Marie Poe stopped asking questions, no one really picked up where she left off. It was obvious that things did not add up from the original post to where the thread took off.
This is not about should you buy Turnkey or not. This is about the basics. This is about buying smart and being honest here on BP with all of the details and sharing ALL of the pertinent data if you truly want the users to help you. @Jay Hinrichs, you're getting a couple of votes or that last post, but as much as I like you, I'm not one of them. You make a lot of assumptions in your response and you castigate @Curt Davis when he is the only poster on here actually trying to help Sabrina achieve her original question. He is the only one being honest about her options and solutions and the realities of her situation. Yet, you knock him for his honesty about what it would take to sell to a turnkey company and then you knock him for his honesty about the value of her properties and the fact that blaming will not get her closer to her goal.
I would think that many of the smart investors and commentators on here would really want all of the data and details before really coming to a conclusion. Big props to @Michael Lauther for his straight forward and pragmatic comments about buying midwest turnkey properties and the way you have to be brutally honest with yourself if you are going to be successful.
As for Turnkey, who cares about that debate? No one is going to change their minds on this and that is ok. As for your comment @Cal C., I own a turnkey company and I will gladly share this thread. For most of us running reputable companies, we love having these types of threads shared because they really help to define the good and the bad in both turnkey companies and investors.
Here are a few facts that were left out that are easy to know if you are familiar with Memphis. Why they were left out of the original post, I have no idea, but when put into context, a lot of commentators may feel differently.
1. There was an AFFILIATE company out of Los Angeles who worked very hard to get Memphis companies to sell properties to their clients. First red flag - They charged people money to be a part of their group and then those people would get access to their turnkey properties. Second red flag - They pushed the no-money out of pocket investing, positive cash flow, sit on the couch and collect mentality so any investor coming through them was set up for failure from the beginning. Jay, you have harped on this topic and here is a real life example of a buyer who bought through them and how their expectation was not met - but does that mean someone got screwed?
2. The company selling these properties is not a big company and they do virtually zero marketing. They rely solely on affiliate relationships for sales. The owner is a very good real estate investor and a fantastic business man with a great reputation. He does not sell on customer service, he does not sell on great management - hell, he doesn't even sell on doing extensive rehabs. He sells based on being a small company with low overhead a small management company and they do low-end rehabs to sell properties below market pricing to investors.
3. @Alex Craig is spot on with his analysis of the renovations done to these properties. They are not extensively renovated and still have deferred maintenance to this day. I am quite sure the same holds true with Lazini and the poster already said that the Chelsea Hill property had to be boarded up because it was being vandalized.
I was not there when these properties were sold. But, I am familiar with what was going on at the time and how companies were selling including the Affiliate company in LA. I am very confident that none of these were sold as short term investments. I am quite sure they were absolutely sold as long-term buy and holds beyond a 10-year hold.
Now lets look just real quickly at the houses themselves and the posters original post.
The outrage from BP posters came from this investor being taken advantage of by a Turnkey company who overpriced the properties, lied about value and did shoddy work. This company does not have a reputation for those things...
All three properties were purchased in early 2010 (this data comes from the assessors website so if it is wrong or Sabrina says she paid more....I'm just listing what is on the gov. site):
3381 Kings Arms purchased for $76k
3958 Chelsea Hill purchased for $35k.
9265 Lazzini Cv purchased for $70k.
Again, that is from the property assessors website so perhaps they are wrong, but this is exactly the way the sales were recorded. Perhaps the affiliate company and the turnkey company both mislead the buyer about the amount of work that was done or the amount of deferred maintenance needed, but I highly doubt these properties were sold at or above retail value. Maybe Chelsea Hill was sold as a great area of town, which again, would be wrong, but like I said, they don't look overpriced to me based on what I know about Memphis. And at $35,000 I have no idea how a buyer can think they are being over priced. @Ben Leybovich, there is your under $50,000 pig property that is almost impossible to have success with as an out of state investor.
Are the properties any good? Chelsea Hill is an area of town that we do not want to buy or manage. Kings Arms is a nice area and a good property. Lazzini is in a nice area and also a good property, but is an abnormal property at 2 bedrooms in a 3 bedroom area.
So I don't think any of these properties are sold too high. Not for the area of town and not for the work or lack thereof that was done. Only the OP knows what her expectations were for renovation.
What about the claim that they were listed at 25% below market value with no bites? I know other posters thought that was a little odd. Well, here is what the MLS shows:
3381 Kings Arms was listed at $109,900 that is 44% increase in 5 years!!! No way that property is listed at 25% below market value. IN fact, it was overpriced. It has been dropped to $99,900 and as was pointed out by Alex, it may still be slightly over-priced considering the lack of retail updates. But if it is sold at $89,000 based on lack of upgrades, that is still a capture of equity or appreciation, whatever you want to call it and would probably be slightly below retail value based on the lack of updates.
9265 Lazzini Cv. was listed on the MLS at $95,000. It is no longer listed, but again, at 95,000 that is not 25% below market value. That is at a whopping 34.7% mark-up and priced right at max value for that property in that area. It may be priced perfect or may need a little less to move to a retail buyer.
3958 Chelsea Hill does not show to have been listed on the MLS.
So were they ever listed at 25% below market value? Doesn't look like it, but that is the claim that sent BP into a frenzy. How can these properties not sell at 25% below retail value and not get a bite unless this buyer was screwed by a company? Or, they are not listed on the MLS.
OP claimed that selling all three as a package was preferable and that she just wanted to get out of them at break even or possibly a little profit. It sounds like Chelsea Hill will be the challenge for a package. Curt Davis has offered to help with that multiple times here on the thread and was even asked by Linda Pliagas to reach out and try to help you. He has done that. He has stated that he thinks he can help you break even at worst. At least give him some props for trying to help and offering to help if he can based on the original post.
I get how BP works. I have been posting and writing articles here for almost 6 years now and understand which comments to laugh at and which to really dig into. The best way to make BP work is to be willing to be honest and ask for analysis and advice based on all the facts. These properties were bought with no money down from an affiliate and from a vendor who is usually pretty up front that he does not believe in over renovating and likes to keep prices low.
To me, it sounds like a bad deal all the way around, but not the way the OP has described and certainly not the way the thread took off. It sounds like she wants to move on to other investments, but her long-term properties in Memphis are not going to let her realize a big profit. If she truly wants to sell, then with all the details on the table, there is bound to be a buyer on here and a solution that can help her get out of the properties at a break even if not a little profit.
299 Replies
- Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes11y
This is a good example of cash faux. If you do not have appreciation and rent growth how do you expect to get cash flow? What you are being sold is cash faux. Cash faux is receiving your money back over time in small increments. Hopefully.
- Investor · Hampton Bays, NY · Member since 2009 · 907 posts · 258 votes11y
@Sabrina Brown It appears that you may have overpaid for these properties or at best paid what an investor might pay. How do the numbers stack up as an investment? what are the gross rents?. What net return can an investor look for from your package?
I am a buy and hold investor in Dayton OH and find that the only market for my property there are other investors who of course will not pay retail. For now my best option is to hold and recoup as much as I can of my cash investment. Memphis is a similar market from what I have read. Investors I know are looking for at least a 12% Cash on cash return after PITI , management and maintenance. The expected return will vary depending on the characteristics of the neighborhood. A poorer demographic and older homes require a larger return to offset the larger risks.
- Developer · Philadelphia, PA · Member since 2013 · 1k+ posts · 902 votes11y
Originally posted by @Aaron Mazzrillo:
Originally posted by @Account Closed:
Sabrina: something isn't adding up. If the properties are desirable to owner occupant buyers, that's always your best buyer. If you received no offers from OO buyers, then the properties are not in a good area or are not desirable to them. Or, they area not being marketed properly. Were these properties offered separately? You cannot sell a package to OO buyers. IMO you need the help and opinion of value and desirability from outside the TK world.
Sounds to me like somebody drank the TK Kool-aid and now the reality of the situation is revealing itself. I think every person interested in buying turnkey houses should read this thread. It is the most honest and real information related to an exit strategy - extremely limited even at supposedly 75% of ARV - I've ever read on BP.
I'm waiting for the usual suspects that're always pushing turnkey to pop up! Any time someone mentions they're interested in TK you get several TK cheerleaders showing up saying how great TK is in X city, they own several themselves, and they can connect you with a great TK provider. Where ya'll at?!
- Oakley, CA · Member since 2014 · 38 posts · 11 votes11y
I guess I don't understand why most of these houses can't be sold to OO for retail if they are in great shape and good areas? Why only investors interested? If the houses were originally sold below or close to retail (as TK operators always advertise they do) she should break even at least. I must be missing something. This will definitely make me think twice on buying TK since there won't be an exit strategy if needed which is sad since I live in CA and one of my only options...
- Real Estate Consultant · Memphis, TN · Member since 2015 · 70 posts · 82 votes11y
Thank you everyone for your valuable information. I am glad all of you caught the writing in between my lines. I was "screwed over" (for a lack of a better term but still not strong enough to really express what I truly feel about it) by many so called "professional companies" that are circling in the same areas (just to name one example, the prior closing attorney is in jail!).
One of my major problems is that I do not have W-2 income, thus, I cannot refinance through conventional lending (while they are giving me the run around to take the properties out of LLC without even giving me options to begin with). In addition, I cannot jeopardize my excellent credit rating or I will never be able to do business in finance or real estate again. All loans have been current.
Jay Hinrichs understands the market correctly and I am glad he pointed out a few things that are happening in Memphis and what has happened to me as well.
There is nothing wrong with the properties or the areas. One needs to understand the different needs in each of these areas (low income vs. prime, family home vs. starter home, investment property vs owning, etc.) They are great properties with only cosmetic issues on one of the properties. I have had these properties for 5 years and even though prices have dipped a bit, the values/sales prices are still strong enough for an OO buyer to be able to finance them through conventional loans. Most OO buyers in Memphis don't seem to have the credit but some cash but even after having tried out lease purchase options, it always comes back to the same: they are not better than any tenant, costly repairs have to be made after move-out because deposit doesn't cover the damage so one invests in repairs once again, and the list just goes on with not being able to rely on management companies, contractors, realtors, etc. telling you the truth (yes, I have tried out numerous that were even in different circles!). One of the challenges is being an out of state owner. As soon as these companies know about it, one gets the short end of the stick.
Because I couldn't sell these properties in almost a year as OO, I started the cycle over by putting tenants in it, now having another challenge to not being able to sell to possible OO buyers, hence dealing with investors/TK providers, etc. once again.
So this is truly a catch22! Please feel free to use this thread as an example as I know many other investors having the same issues (most of them having done business in the same circle of providers). They are just not comfortable openly talking about it because a couple of them had to file bankruptcy or mess up their credit rating.
- Information Systems and Cyber Security Manager – US ARMY · Augusta, GA · Member since 2015 · 128 posts · 30 votes11y
This opens my eyes a little more to TK investments as well. I am wondering if there is not another viable exit for this dilemma. What about lease option (to buy) or something like that.. but I guess if the only ones who are calling are investors and they are shooting below market then this option really doesn't work. I really know not that much about TK investments other than what I have heard on BP. I always thought that TK investments would be a nice entry point for a new investor who may just want to get their feet wet with a "cashflowing" property out of the gate. Of course the numbers have to be run up front either way... whether TK or looking at pro formas. Learn something new today... check.
- Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes11y
Originally posted by @Account Closed:
Originally posted by @Sabrina Brown:
even if the investor asks the properties to be taken back by the TK provider in better shape than it was taken over.
Sabrina: Did you ask the TK provider to buy back the properties and if so, for how much? It's an extreme solution and understandably not a precedent any seller wants to set. But one that a TK provider with an unhappy customer should seriously consider.
I would buy back every single house I ever sold at 75% of value. I couldn't even begin to tell you how happy it would make me to have the current owners of the hundreds of houses I've sold completely fill my inbox with requests to be bought back at that price point. A 25% discount on a fully rehabbed house! Oh, I'm driving my imaginary fleet of Bentley's as I type this!!! A different color for every day of the week.
That being said, if the OP is struggling to sell these houses even on the retail market, well, I have to quote Ludacris (also a great name for TK company - Ludicrous Investments) "Yeah, things ain't always what they seem or cracked up to be."
There used to be a guy named Marshall Reddick who sold turnkey rentals. He offered to buy back any house bought through his program if the buyer wasn't happy with the results. Only in the fine print did one learn that he bought the house back subject to the loan leaving the original borrower on the hook still.
I don't think much of that business model as I've repeatedly pointed out. Maybe 1 out of every 50 buyers it might actually make sense for, but probably not even then. Personally, I think these are worse than the guy selling $10K wholesaling boot camps to newbs using the "No risk or credit needed" sales pitch. At least with that model, the person is done losing once the boot camp is over. It doesn't drag on and on for years.
- Real Estate Consultant · Memphis, TN · Member since 2015 · 70 posts · 82 votes11y
I have also tried lease purchase options, which are usually offered to OO with less than ideal credit. A lot of Memphis people don't seem to have the drive to truly care for someone else's possessions so that the lease purchase cost doesn't cover the damage they may have done to the house (who knows, this may have only happened to my property but with "regular" tenants I experienced the same). It is known to Memphis people that going after them legally isn't going to do much: they just switch employers over and over or move from one property to another (and with the owner's risk once again to run into unprofessional services "trying to help the owner" in this situation).
I was raised in Europe to be honest and reliable and will not switch to the bad side just because it now seems to be the norm to also be taken advantage of "professionals". It appears that there are less and less companies one can trust here in the US and many are just out to "get" someone.
Aaron, you pointed out perfectly what takes place in fine print. When I purchased these properties 5 years ago, I was an executive in the corporate world and worked very hard to put money aside while sacrificing my health, only to be robbed by some of these companies and ungrateful people.
Okay, I think I have expressed enough of my personal thoughts. I am still looking for ways to get them sold professionally! :-)
- Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes11y
@Sabrina Brown can you please share which company sold you these properties?
Also can you give a synopsis of the exit part of the contract?
- Rental Property Investor · Laguna Niguel, CA · Member since 2015 · 142 posts · 98 votes11yWhere are the pro TK people? I would like to see a debate on here where the issues are really hashed out. I have never invested in a rental property but will be buying my first couple TK properties very soon. I have read all the arguments for and against turnkey and decided TK is the best fit for me for a few reasons... 1) I work on average 60 hours a week right now and don't have time to search for properties and rehab them. 2) I live in CA. Finding a property that cash flows in CA sounds like a full time job. I'm sure it's possible, but how much more time away from my family will this require? 3) I don't expect amazing returns going this route, but they are still better than the 401k I've been contributing to. My calculations give me an average COC return of 12%. If there is even just 2% of appreciation then since I'm putting 20% down that's a 10% return from appreciation. So I have a total return of 22%. That's significantly more than my 401k which might give me an average return of 6 or 7% after management fees! So even if I'm off a bit somewhere, I'm better off doing this than what I've been doing by buying mutual funds. Please correct me if I'm wrong here! TK may not be the BEST but isn't it better than the alternative?? Even though TK seems to make the most sense for me, it does concern me when I hear things like this. I would love to see a thorough debate on this!
- Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes11y
I guess thats the real trick there. At the end of the day, it doesn't matter what you put down. The fact is that you were all in at the refi for 75% of the appraisal value and you would think that you'd have that paid down at least a little. Maybe to 72 or 73%?
So if you aren't getting an investor to come in close enough to your loan amount, then something is off. Either the home values dropped or the original appraisals were extremely liberal in your favor.
One way or another though, I would think you would have been able to sell them retail given the size of the discount you were offering and the fact that you rehabbed. That, to me, would be the biggest concern.
There's no retail exit in Memphis? Or in the areas in Memphis you happened to have bought. That would scare me - especially when I see most turnkey companies selling their homes at 100% of market value. And now you're saying that you can't even sell yours at 75% of market value even if you update the houses from rent ready to retail ready.
Thats crazy scary to me..... Something is really off in that scenario though.
Its one thing to say another investor wouldn't want to buy them at 75% because maybe they only pay 65%. But when you can't even sell them retail at 75% and they're move in ready, something is wrong there that would really have me concerned if I was going to buy in that area.
But again, maybe its the specific areas your houses were in. So its tough to say.
To me, the one suggestion would seem to be to target other investors looking for turn key stuff. You have it. Your houses are updated to retail ready. Sounds like they're rented again. And you're offering a MUCH bigger discount than any turnkey investor they'll ever find.
So I would keep listing them on the sites that a turnkey buyer might be considering. I do know that Brie Schmidt has some turnkey review site she's created. Maybe ask to put an ad there. I have to think turnkey buyers would be the main people going there.
There's clearly an opportunity for a win win here. You to sell your property at the 75% rate and a potential turnkey buyer to buy a house and pick up 25% more equity than they would be otherwise and probably get a house in a little bit better condition than rent ready as well.
Still. It makes you really wonder if when you're buying a turnkey house if you aren't doing something similar to buying a car. Drive it off the lot and you lost about 20%? Seems to be exactly what happened here. The house appraised out at x when it can't even be sold for 75% of x even though its been updated even further.....
Thats not a good position to be in when you have no exit strategy on SFHs other than having to sell to other investors at 60 to 70% LTV......
- Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes11y
Originally posted by @Mike H.:
I guess thats the real trick there. At the end of the day, it doesn't matter what you put down. The fact is that you were all in at the refi for 75% of the appraisal value and you would think that you'd have that paid down at least a little. Maybe to 72 or 73%?
So if you aren't getting an investor to come in close enough to your loan amount, then something is off. Either the home values dropped or the original appraisals were extremely liberal in your favor.
One way or another though, I would think you would have been able to sell them retail given the size of the discount you were offering and the fact that you rehabbed. That, to me, would be the biggest concern.
There's no retail exit in Memphis? Or in the areas in Memphis you happened to have bought. That would scare me - especially when I see most turnkey companies selling their homes at 100% of market value. And now you're saying that you can't even sell yours at 75% of market value even if you update the houses from rent ready to retail ready.
Thats crazy scary to me..... Something is really off in that scenario though.
Its one thing to say another investor wouldn't want to buy them at 75% because maybe they only pay 65%. But when you can't even sell them retail at 75% and they're move in ready, something is wrong there that would really have me concerned if I was going to buy in that area.
But again, maybe its the specific areas your houses were in. So its tough to say.
To me, the one suggestion would seem to be to target other investors looking for turn key stuff. You have it. Your houses are updated to retail ready. Sounds like they're rented again. And you're offering a MUCH bigger discount than any turnkey investor they'll ever find.
So I would keep listing them on the sites that a turnkey buyer might be considering. I do know that Brie Schmidt has some turnkey review site she's created. Maybe ask to put an ad there. I have to think turnkey buyers would be the main people going there.
There's clearly an opportunity for a win win here. You to sell your property at the 75% rate and a potential turnkey buyer to buy a house and pick up 25% more equity than they would be otherwise and probably get a house in a little bit better condition than rent ready as well.
Still. It makes you really wonder if when you're buying a turnkey house if you aren't doing something similar to buying a car. Drive it off the lot and you lost about 20%? Seems to be exactly what happened here. The house appraised out at x when it can't even be sold for 75% of x even though its been updated even further.....
Thats not a good position to be in when you have no exit strategy on SFHs other than having to sell to other investors at 60 to 70% LTV......
You're forgetting the cut for the turnkey provider.
- Greensboro, NC · Member since 2014 · 212 posts · 143 votes11y
And this is why so many TK operators focus on cash flow and not IRR in selling their product. If the OP buys turn key at retail and there is no exit other than investors at a discount, then the IRR is negative or paltry comparedd to other investments.
- Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes11y
Originally posted by @David Hodge:
Where are the pro TK people? I would like to see a debate on here where the issues are really hashed out.I have never invested in a rental property but will be buying my first couple TK properties very soon. I have read all the arguments for and against turnkey and decided TK is the best fit for me for a few reasons...
1) I work on average 60 hours a week right now and don't have time to search for properties and rehab them.
2) I live in CA. Finding a property that cash flows in CA sounds like a full time job. I'm sure it's possible, but how much more time away from my family will this require?
3) I don't expect amazing returns going this route, but they are still better than the 401k I've been contributing to. My calculations give me an average COC return of 12%. If there is even just 2% of appreciation then since I'm putting 20% down that's a 10% return from appreciation. So I have a total return of 22%. That's significantly more than my 401k which might give me an average return of 6 or 7% after management fees! So even if I'm off a bit somewhere, I'm better off doing this than what I've been doing by buying mutual funds. Please correct me if I'm wrong here! TK may not be the BEST but isn't it better than the alternative??
Even though TK seems to make the most sense for me, it does concern me when I hear things like this. I would love to see a thorough debate on this!
Somehow I don't think the OP made 22% COC return or even close to it.
- Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes11y
Originally posted by @David Hodge:
Where are the pro TK people? I would like to see a debate on here where the issues are really hashed out.I have never invested in a rental property but will be buying my first couple TK properties very soon. I have read all the arguments for and against turnkey and decided TK is the best fit for me for a few reasons...
1) I work on average 60 hours a week right now and don't have time to search for properties and rehab them.
2) I live in CA. Finding a property that cash flows in CA sounds like a full time job. I'm sure it's possible, but how much more time away from my family will this require?
3) I don't expect amazing returns going this route, but they are still better than the 401k I've been contributing to. My calculations give me an average COC return of 12%. If there is even just 2% of appreciation then since I'm putting 20% down that's a 10% return from appreciation. So I have a total return of 22%. That's significantly more than my 401k which might give me an average return of 6 or 7% after management fees! So even if I'm off a bit somewhere, I'm better off doing this than what I've been doing by buying mutual funds. Please correct me if I'm wrong here! TK may not be the BEST but isn't it better than the alternative??
Even though TK seems to make the most sense for me, it does concern me when I hear things like this. I would love to see a thorough debate on this!
For the turnkey operators the faster this thread gets forgotten the better. I'd be willing to bet that there has been at least one request to delete this thread. What do you say @Joshua D. has anyone asked for this thread to be deleted?
- Investor · Hampton Bays, NY · Member since 2009 · 907 posts · 258 votes11y
@Sabrina Brown I have been checking in on your post and see lots of talk about LTV, and Turn Key properties, but very little analysis of the investment worth of your particular property.
I briefly looked at the zip codes you posted and see that at least one of your houses are in an area with a price point of between $30000 and $60,000 . In my experience these properties are in neighborhoods that have over 50% non owner occupancy and often have an abundance of foreclosures and vacant property. Investors in these areas are looking for a price point that will cash flow immediately and look for a 1 1/2 to 2% rent ration to purchase price. This is known as the 2% rule of thumb. for instance if you had a gross rental income of $800 monthly a purchase price of $40,000 would be a starting point for an investor to consider the property. If we estimate expenses such as taxes , insurance, management and repairs at 50% of rental income or $4800 that would generate a cash flow of $4800 a year from a $40k investment.
This is how many investors look at these type of properties. How do yours stack up using this type of analysis?
- Memphis, TN · Member since 2013 · 969 posts · 524 votes11y
I would like to know the company that sold you the properties as well it would help us here on BP... Also I would be interested to look at some of the homes please PM me the addresses.
- 11yCurt DavisBusiness MemberFlipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
Everyone is making this out to seem like a Memphis issue when it reality I am sure this issue happens in every market. Investors who buy from a TK provider do so for many reasons and they know that they do pay a little more of a premium for doing so.
Regarding selling the home retail, some of this could be attributed to having the right Realtor to market the home. I recently have helped several sellers list their home as their listing agent and have had some cash buyers who were investors come in and pay only a few thousand below list price.
Sabrina should be able to sell her houses, it just might take a little longer. She should have them listed online with a local Realtor for starters and then possibly have to do some self marketing like she is here in BP. I would be interested in the homes but I have yet to receive any info on the homes so I dont know what the current LTV or anything is on them so I can not offer any suggestions or advice.
Another thing to think about, most investors looking to buy TK are not looking on the MLS and unless the Realtor states in the Realtor remarks section that the home is TK with a renter in place, it might get passed over and not show up on someones search criteria for MLS listings.
It could come down to how the home is or has been marketed.
Curt Davis - KAIZEN Realty538 Reviews - Real Estate Consultant · Memphis, TN · Member since 2015 · 70 posts · 82 votes11y
Yes, the problem is that the calculations given to the investor do not include the profit the TK provider makes, or it is somehow worded so it is very difficult to find the accurate information. TK Providers are very slick sales people and know how to word it with all the bells and whistles. Or, if you have a bad experience with one group, they let another group know that contacts you without even realizing they are somehow working together and/or bouncing investor off each other.
It also comes down to having a great management company and a terrific tenant but we know, this is just very rare (like I have at one of my other properties in IN). Usually the TK provider also has their own management company (often in a different name), which they refer so they make multi fold on your investment. I have tried giving the properties back to the TK provider but it would have been a pure ripoff! It appeared as if they were trying to make another huge profit like they did when selling the property to me.
Surprisingly, nobody has asked me to delete this post - quite the opposite actually.
- Investor · Memphis, TN · Member since 2013 · 741 posts · 845 votes11y
I absolutely agree with @Curt Davis on this, when you pay a premium on a property in a market that is not traditionally known for great appreciation then it is going to take a little longer to sell. The marketing and means by which you are trying to sell the house can make all the difference in wether it will sell or sit. If you are willing to share info on the addresses of the properties we can help you get these properties sold!
- 11yCurt DavisBusiness MemberFlipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
If my memory serves me her homes were purchased through an affiliate marketing person who at the time was promoting the whole " little to no money down " purchase strategy. This was something that was done a lot back in 2007-2009 and was very hard to do during her time when she was purchasing these homes. I believe the person who acted as affiliate marketing person helped her buy them through the TK provider is no longer promoting this type of buying model as it is almost extinct.
The actual TK provider is a legit company here in our market but I will let her name them if she chooses ( or at least I know one of the tk providers is still a legit company, dont know if all were purchased from the same TK company ).
Curt Davis - KAIZEN Realty538 Reviews - Real Estate Consultant · Memphis, TN · Member since 2015 · 70 posts · 82 votes11y
Properties were listed with a realtor at a discount when all 3 properties were vacant for about 9 months. I now have invested more money to fix these properties up but had to put tenants in it to get some sort of income. Then I got ripped off by yet another management company that I had to fire last week for not sending me rent payments and doing repairs in time while I then found out they don't even have a license (will get attorney involved to recover damages).
Here is the scoop about these properties, which I all bought in 2010 at zero down with 25% equity at the time:
zip code 38128: paid 49K (not including other repairs after purchase), low income area, rents $750-800, value 65k (has possible lease purchase tenant in place)
zip code 38115: paid 84K (not including other repairs after purchase), medium income area, rents $1,050-1,200, value 125K (currently rented)
zip code 38016: paid 82K, prime area, rents $1,050-$1,150, value 100K (ready for sale and/or rent)
- Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes11y
Originally posted by @Sabrina Brown:
Yes, the problem is that the calculations given to the investor do not include the profit the TK provider makes, or it is somehow worded so it is very difficult to find the accurate information. TK Providers are very slick sales people and know how to word it with all the bells and whistles. Or, if you have a bad experience with one group, they let another group know that contacts you without even realizing they are somehow working together and/or bouncing investor off each other.
It also comes down to having a great management company and a terrific tenant but we know, this is just very rare (like I have at one of my other properties in IN). Usually the TK provider also has their own management company (often in a different name), which they refer so they make multi fold on your investment. I have tried giving the properties back to the TK provider but it would have been a pure ripoff! It appeared as if they were trying to make another huge profit like they did when selling the property to me.
Surprisingly, nobody has asked me to delete this post - quite the opposite actually.
I think only moderators can delete posts.
- Real Estate Consultant · Memphis, TN · Member since 2015 · 70 posts · 82 votes11y
@curtdavis : could you name the reason/s why this type of buying model is almost distinct? Thank you.
- Greensboro, NC · Member since 2014 · 212 posts · 143 votes11y
I think both Jay and K Marie alluded to this earlier and I am still trying to understand:
These were bought 5 years ago with no $ down but they were bought with an equity position. That 25% equity should be at 28% or more by now. The OP, in theory, should be able to list on the mls and sell. If only investors and TK are offering, then these are C class or lower I presume.
Did the market there erode away the equity position?
Was the appraisal too liberal?
This story remains an excellent reminder to check and recheck your exit options, actual value based on a willing buyer who can perform (even if the only buyers are investors), and as I have said before, your expected IRR - not just cash flow or CoC. You have to factor consider IRR which factors your exit value.
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