? about Pricing and Sharing Good Turnkey Evaluation Advice
Hi all,
I've received an offer to buy the following 3 turn-keys that I'm currently evaluating. They are currently being renovated and I haven't received any additional information yet, but I'm doing some basic due diligence. Thought it wouldn't hurt to throw it out to the community to see what others have to say about this potential deal.
Property on Harrison Ave, 63135 in Saint Louis. 1927, 1580 Sq Ft, 3br/2ba for 116k. Projected Rent 1300.
I've done the following:
Looked at Craigslist for similar rental comps and found rents going for $725-855 for 864-1056 sq ft. Not much data here. Considering my potential property would be 1580 sq ft, I could see rent being potentially $1300 but not sure how many people could afford that.
According to Zillow. Median home price in that zip is $65.5K. According to rent-o-meter, the rent projection is "way-too-high" when I plugged in the address. Based on the results of 15 listings (small sample size):
AVERAGE $899
MEDIAN $875
$750–$1,050 - 80%
$825–$1,013 - 60%
To me, the company's projections are way too high. They offer no rental guarantee period as well, but they did say that the unit will be rented with a tenant for sure at that price when they are finished with the unit. The number seems to be so much higher than usual that I think they made a mistake on it but I pointed it out and have gotten no response yet.
Good advice I received from a BP Pro that I'm going to follow-up with:
Call local realtors to see what they could sell the property at to get a rough idea of the value to make sure I'm not overpaying.
Call local property management firms to line-up a back-up PM if the turn-key company's PM is bad, and also to confirm rental rate. I think everyone should always use at least two different property management firms from all the reading and learning I did on BP to protect themselves in case something happens to the primary firm.
As you can see from this post, I'm very skeptical of this 'deal' and feel like an idiot that I spent the wire fees to wire over the money at this time. They said I needed to do it to 'hold' the deal, but I wish I had ran all these numbers prior to doing that because wire fees are expensive!
Are there any locals or experts in St Louis or 63135 that could chime in on this turn-key deal? I also have 2 other deals in Indianapolis from this same company where I haven't confirmed any of the numbers but they did yield a good COCR if they are accurate (which I don't think they are after doing the due diligence on the first deal).
Indianapolis package they offered:
Merts Dr, 46237, 1972, 1200 sq ft, 3br/1ba for $87500. Projected rent: $950
Tower Ln, 46257, 1978, 1250 sq ft. 3br/2ba for $86000. Projected rent: $1000
Note: they said these are fully renovated turn-keys with work done on roofs, HVAC, and all the big CapEx items so let's give them the benefit of the doubt and consider these pristine, A+ renovations (I will trust but verify, haven't done so yet, I will look at all SoW and verify the dates of all the major CapEx items and fly into these cities and tour these homes myself before I buy).
This is my first time purchasing so I'm taking everything I learned on BP and doing super careful due diligence because I'm investing from out of state (San Diego) and want to make sure that I'm not burned. The company does have a great reputation, but I've already found some huge red flags. For example, the investment adviser told me on the phone that all maintenance issues were warrantied for 6 months but when I read the paperwork sent by a different person at the company, it said all major expenditures over $250 were covered by the company over the first 90 days, and anything under came out of my rents. I will give my adviser the benefit of doubt here as I wrote him an email about this issue yesterday and will give him a chance to respond (he says he's too busy to respond at this time). Again, I trust but verify and the whole situation smells off but I'm still in the due diligence phase and there is a possibility that someone made a mistake in the paperwork I was sent so I'm not writing him off yet. Another thing was that they didn't have a budget for vacancy or CapEx and I used my mentor's spreadsheet to budget for those items properly. In the excel spreadsheet they sent me, the numbers were extremely optimistic with missing expenses. They did include 8% management fee, taxes, insurance. however, their maintenance fee was $500 for the year for the $116k place, and $350 for the $87.k and $86k place in Indy which according to another post I put on BP, every professional laughed at and said was ludicrously low.
Anyways, I'm thankful BP exists. So many people have given me great advice and I'm following through with this and my real life mentors advice to make sure I don't get burned. I have limited capital available so a mistake starting off with be crippling.
Feel free to chime in, make fun of me, or call me names for getting suckered into the wires and finding all these red flags afterwards. Do note that at least my earnest money deposit has been confirmed in writing by the investment adviser to be fully refundable and that it just means these properties aren't held anymore. Reading all this text I wrote, I do feel pretty foolish, but considering this all the cost of education.
At least I do NOT have "analysis paralysis". I've been working hard on verifying all the information and give people the benefit of doubt but verify every single number, and read every single contract carefully to not get burned.
Thanks for everyone's time. I hope this post helps other newbie out-of-state investors realize even turnkeys aren't 'easy'
I'm going to give my 'investment adviser' another week to pull the paperwork together to justify their numbers and to analyze it. From what I've done so far, it seems these aren't deals at all.