Spartan Invest - Birmingham Turnkey Case Study

Chris A. · 2017-03-30T11:43:14-07:00

Hello BP Community!In efforts to give back to the community, I wanted to document the process of acquiring my first turnkey property through Spartan Invest. I know when I was first researching the forums, case studies like the one I am attempting to do were very helpful and provided me lots of insight into the process of acquiring a turnkey property through a full service turnkey provider. Part I - Making contactI first made contact with Spartan Invest by reaching out to them through a link I found on their website. The response time was great and I heard back from their VP Sales, Maureen within 24 hours. Part II - The DiscussionsFrom the time we made contact (almost a month ago) up until now, Maureen has been more than accommodating. Communication has been really good and any questions I had were answered. What I really appreciated about everything is that she was very transparent. There was a slight fall-out in communication a week ago but it was because Spartan Invest is currently growing very rapidly and it seems like their team is overloaded. They are now currently looking to hire new help in order to meet the demands. I just want to note that during the week where they dropped the ball on communication I began to worry and was considering crossing Spartan Invest (SI) of the list. I decided to reach out to the CEO @Clayton Mobley who is very active on the forums to see what was the cause and he was very responsive and explained the situation. Maureen (who spearheads all sales) was on a business trip and was swamped, but when she returned she made sure to reach out to me and explained everything. She was very transparent once again and openly took fault and owned up to the lack of service during that time. Not only did she admit to her lack of service, but also provided a solution to what SI was doing to remedy this. I personally really appreciated this "find solutions, not excuses" approach.Part III - The PropertiesBefore being able to start seeing what properties were available, I had to provide pre-approval for a loan. SI recommended a lender that they typically use due to the familiarity the agent (Graham Parham) had with their type of deals. Of course, Maureen ensured that she was willing to work with any lender I chose as long as she was able to vet them before hand. Main reason for this was she wanted to make sure that the lender would be able to close the deal. I decided to go with Graham and up until this point the service and responsiveness from him has been excellent and their rates were what the market commanded as well. Once I was pre-approved, I began to receive pro-formas of available properties. One thing I liked about SI was that their pro-formas were very well made and allowed the flexibility for you to change and add your own contingencies when doing financial analysis. Part IV: Putting a Property under ContractOnce I found a property I was interested in and committed to get under contract, Maureen passed my off to Scott who would be my personal representative throughout the rest of the process. I want to note that before committing to getting the property under contract, I was provided with Scope of Work being done on the property, the PM agreement, and also a draft of their typical sales contract. As of now I am currently getting a contract underway this property. I shall update as I progress! Cheers!

Clayton MobleyPro Member

Birmingham, AL · Member since 2014 · 875 posts · 947 votes

8y

Hey @Chris A., @Albert L. and @Andrew Frishman, my apologies for my delay in attending to this thread - as Chris mentioned, we have definitely been expanding rapidly this year and I haven't always had as much time as I'd like to be on BP.

That being said, I am sorry to hear that there have been some communication issues on our end. While it is true that there are some growing pains involved in the expansion - and we refuse to hire just anyone for our team simply to fill seats - we still have always prided ourselves on our service, and it sounds like we're falling down on the job a bit. Andrew, I know you and I spoke quite a while ago and then you were in touch with Maureen. I checked on where that communication ended, and it looks like this was 100% on us - we didn't follow up with additional properties for you to review as we had promised, and that's our fault. While our growth rate may be an explanation, there is simply no excuse for that oversight, and I apologize. We never want any of our prospective clients (or current clients, for that matter) to feel like they aren't a priority, and it sounds like that's exactly the impression we gave, so please accept my sincerest apologies.

As Albert mentioned, we do now have a waiting list - which is both a great indicator of our success, and a bit of bummer for new investors who are excited to pull the trigger. While we would love to get every single prospective client under contract right away, we're simply not willing to cut corners on our vetting process, rehab, or tenanting. At the end of the day, getting into any investment quickly isn't as important as getting into a good investment, a property with quality craftsmanship (which will result in higher rents and lower maintenance costs) and reliable long-term tenant. We are working hard to build our team to meet the increased demand, but again, we're not going to hire just anyone, just like we won't rent to just anyone. In the long run, being picky and having this period of transition is going to pay off for us and our clients in terms of the quality and performance of our investments. And we ask that our clients stick with us during this period of transition - we know you don't owe us your patience, by any means, but we sure do appreciate it :)

Now, while I absolutely agree that we need to do a better job on increasing our communication efforts, I will note that one of the reasons you will often see complaints about communication frequency on BP (not about Spartan in particular, just in general it's a topic that comes up a lot), is because it tends to be the primary issue for new investors, who are also some of the most vocal and enthusiastic participants on the forums, since they're excited to learn and get started on a new adventure. This issue has been discussed several times in several forums, and what typically happens is that newer investors who are waiting on rehab or closing are disappointed in the amount of communication from the provider, and then all the old hats pop in to say that the reason there is so little communication during those processes is because there's no updates to give (I think Jay Hinrichs and Chris Clothier piped in on this issue when Chris A. first started this thread). And this is true. I spoke with Scott, who manages our rehab and closing processes about this before starting this post, to discuss this issue and see what we could do on our end, and why this issue is coming up at all. From the provider perspective, the primary reason for lower communication rates, especially during rehab, is that there is just no useful information to give, and using time to contact the construction team, who then has to contact the contractors, then everyone waits for an answer to be passed up the chain so Scott can touch base with the client just to say 'today they worked on plumbing' is simply not an effective use of time. Multiply that process by all the properties we're working on at once, and it's whole day's work for numerous teams. Especially since we are working to build our team (which in itself requires time and training, even after we find a great candidate), we are always striving to use our team's time and energy in the most effective ways. We absolutely understand that investors, especially new investors, feel understandably a little bit nervous about turning over so much capital, and feel like they need to keep tabs on every step to ensure their money is being put to best use - and you should absolutely expect reasonable and timely communication about important milestones or issues or deadlines. But, again especially during rehab, there is so little of value to say on a day-to-day, week-to-week basis, that all that back and forth ends up being a drain on resources, and slows down the process in general, which means the investor ends up waiting longer to close and get the cashflow train chugging along. If the contractor is having to document everything that's achieved day-to-day to send to the construction team, who then sends it to Scott so he can update the client on which electricals have been rewired, which fixtures have been updated, then that's time they're not busy working on the next project.

Now, I don't want this to be interpreted as an excuse - because I am 100% taking responsibility for our lapse in communication, and the team is all aware of this issue and working to develop better systems to ensure the issue is taken care of. BUT, I do feel it worth mentioning that, at the end of the day, the more time we spend updating clients on non-crucial elements of the rehab process, the longer that process takes, and the longer you have to wait to start seeing a return on your investment. Again, we hear you, and we are working to rectify this legitimate issue, but it's worth noting that, from an efficiency perspective, constant communication isn't actually productive.

Ok, I think that's enough from me. Albert, I believe Scott has been in touch early this week and that we are working on passing inspections, and I know he will make sure you are kept aware of updates. Andrew, again, I apologize that we dropped the ball. If you are willing to give it another go, we would love to have you on board and we will work hard to make sure we don't repeat the same mistake. Chris, as always, thanks for maintaining this thread - the only way we can ensure that we address the issues we will inevitably come up against as we grow is to know about them. When multiple people have the same complaint, there's something that needs to be fixed, and this thread is an invaluable tool for us and for the BP community. Keep on tagging me for the good, the bad, and the ugly ;)

Thanks to all for your participation, your candor, and your patience.

All the best,

Clayton

6 Reply

Dino Cardamone

Ottawa, Ontario · Member since 2016 · 42 posts · 13 votes

8y

Spoken like a true gentleman @Clayton Mobley. I respect and applaud your honesty and transparency.

1 Reply

Andrew Frishman

Ridgefield, CT · Member since 2017 · 101 posts · 60 votes

8y

It is alright to decline new investors...Honesty is the best policy.

Please let me know if you are accepting new investors?...(still a bit confused)?

If so.... give me some times/ days .. to touch base and we can coordinate?

Andrew

0 Reply

Clayton MobleyPro Member

Birmingham, AL · Member since 2014 · 875 posts · 947 votes

8y

@Andrew Frishman We absolutely are always accepting new investors! I'm sorry if we haven't been clear about that. We do have a waiting list due to the massive increase in demand, as was mentioned earlier, but we're definitely not turning people away. And, in general, we anticipate a new investor starting with us today to be close on a rehabbed property within about 4 months. Again, that's a guideline, but it's about the average.

Let me touch base with Maureen and I will let her know that she should reach out to you ASAP to see what we have in the pipeline that will work for your goals. I know you guys already spoke so she'll have notes about your specs. She'll reach out to set up a time to get things rolling again. Thanks for the second chance to show you what our service is really made of :)

0 Reply

Clayton MobleyPro Member

Birmingham, AL · Member since 2014 · 875 posts · 947 votes

8y

@Dino Cardamone thanks for the kind words!

0 Reply

Blake La Grange

Rental Property Investor · New York, NY · Member since 2016 · 45 posts · 44 votes

8y

I have gone ahead and put 1 property under contract with Spartan. So far, so good. Maybe I’ll do a case study here on BP. we’ll see.

0 Reply

Clayton MobleyPro Member

Birmingham, AL · Member since 2014 · 875 posts · 947 votes

8y

@Andrew Frishman Just wanted to confirm that you and Maureen should have a call today - though perhaps it's already come and gone by now, my day kind of got away from me... I also checked with Racquel, who works with Maureen, and it looks like she has been sending you properties for the past few months (last email on 10/5) so perhaps we have your address on file incorrectly if these emails are not going through - or perhaps they are going to your junk folder for some reason? It looks like we have the same address that's listed on your BP profile (hotmail), but let's make sure we have the most updated contact info so we can ensure everything we send gets to you in a timely manner. If you've already spoken with Maureen, she may have already gone over this with you, so my apologies if this has already been addressed. Just wanted to make sure you knew we are still engaged with the issue, looking for where our communications fall through and why, and working to make sure we're better going forward.

@Blake La Grange We are excited to add you to the Spartan roster! I promise we'll work hard to live up to our reputation for excellent service - including excellent communication ;)

1 Reply

Blake La Grange

Rental Property Investor · New York, NY · Member since 2016 · 45 posts · 44 votes

8y

For all who are interested, here is a link to my case study of Spartan so far:

Spartan Invest Case Study

I have to say. I am so pleased with my experience so far. Can't wait to see how this plays out!

-b

0 Reply

Anthony Bertolino

Encino, CA · Member since 2017 · 36 posts · 24 votes

8y

Thanks for this post (and subsequent thread) Chris.

I haven't done any research on a turnkey style approach but this shows that it may be something I should consider when looking into my first few properties.

Cheers!

0 Reply

Andrew Frishman

Ridgefield, CT · Member since 2017 · 101 posts · 60 votes

8y

@Clayton Mobley..Yes got reacquainted with Maureen. I look forward to experiencing Spartan Invest 2.0!!

1 Reply

Chris A.

OP

Los Angeles, Cali · Member since 2017 · 53 posts · 54 votes

8y

Update - October Rent Collected!

$795 Rent collected

($71.55) Management Fee (9%)

No Maintenance costs (:

This marks 6 months of rents collected and no maintenance (:

Will update again next month! Cheers!

2 Reply

Blake La Grange

Rental Property Investor · New York, NY · Member since 2016 · 45 posts · 44 votes

8y

@Chris A. woot woot!

0 Reply

Chris A.

OP

Los Angeles, Cali · Member since 2017 · 53 posts · 54 votes

8y

Update - November Rent Collected!

$795 Rent collected

($71.55) Management Fee (9%)

No Maintenance costs (:

This marks 6 months of rents collected and no maintenance (:

Will update again next month! Cheers!

1 Reply

Chris A.

OP

Los Angeles, Cali · Member since 2017 · 53 posts · 54 votes

8y

Update - December Rent Collected!

$795 Rent collected

($71.55) Management Fee (9%)

No Maintenance costs (:

Will update again next month! Happy holidays and happy New Year everyone!

1 Reply

Johnson Lo

Los Angeles, CA · Member since 2017 · 22 posts · 7 votes

8y

Thanks for the continued updates Chris, this has been super helpful for a newbie looking to get into turnkey!

0 Reply

David Rosenberg

Cedarhurst, NY · Member since 2017 · 38 posts · 19 votes

8y

I have a question about Turnkey Providers in general, not necessarily Spartan (Whom I need to reach out to in the next couple days!)... I understand the charge for placing a tenant, though I think a whole month’s rent is a bit steep, but I guess a lot goes into it, so that’s justifiable in my book. What I don’t get is the rather large fee ($500 can be two months worth of CF) to re-up a tenant. What really goes into that to justify the cost? You want to renew your lease? Ok, here’s the paperwork. Seems pretty simple. I’m sure there’s a good reason, just wondering what it is. Perhaps Clayton Mobley can weigh in on this one...

0 Reply

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

8y

Originally posted by @David Rosenberg:

I have a question about Turnkey Providers in general, not necessarily Spartan (Whom I need to reach out to in the next couple days!)...

I understand the charge for placing a tenant, though I think a whole month’s rent is a bit steep, but I guess a lot goes into it, so that’s justifiable in my book. What I don’t get is the rather large fee ($500 can be two months worth of CF) to re-up a tenant. What really goes into that to justify the cost? You want to renew your lease? Ok, here’s the paperwork. Seems pretty simple.

I’m sure there’s a good reason, just wondering what it is.

Perhaps Clayton Mobley can weigh in on this one...

How do you propose the owners of the property management business turn a profit if they cannot charge for services they provide?

0 Reply

Clayton MobleyPro Member

Birmingham, AL · Member since 2014 · 875 posts · 947 votes

8y

@David Rosenberg thanks for the tag and the question. While, as @James Wise correctly said, a business does have to make money :) we also believe in transparency when it comes to costs. So, to answer your question, the $500 renewal fee is primarily to cover the cost of our leasing teams efforts to secure the renewed lease. Tenants aren't necessarily thinking as far ahead as we are, and of course we want to keep good tenants as long as possible. That requires that our leasing team starts *gently* (and then late not so gently ;) reminding current tenants that their lease will expire and that we'd love to keep them - and we have to start doing that about six months out. That's six months of calls, letters, emails, and discussion. Like anyone else, tenants are trying to minimize costs wherever they can, and while we know our properties are some of the best on the market for the B/B+ tenant group, it still takes some legwork to secure the renewal - primarily because most tenants don't realize their lease is up until the final month if left to their own devices. Our minimum term is two years, which is a long time, so by the time its the term is nearly up its not at the forefront of their minds anymore. Also, people that already have a place to live aren't quite as quick to sign a lease as people who need to move, need to find a new place right away. Existing tenants know they have the option to renew if they want to, which means they're often slower to actually commit. Having options makes bargain hunters of us all ;)

Of course, we do also sometimes need to do some of the small maintenance work you'd normally expect for a tenant turnover. It's not nearly as extensive as it would be to make-ready for a new tenant, but sometimes there are items that need handling (that the tenant hasn't mentioned previously, for example) to keep the property in good working order and keep our long-term maintenance costs down, so the $500 renewal fee is also meant to cover those items

At the end of the day, we make far less on a tenant renewal than we would on a new tenant - but keeping solid tenants in place keeps costs down for us and for our investors, so we really push to keep the tenants we have whenever possible, and that costs money. Our tenant vetting process is extremely rigorous, so when we find a good person for a property, it behooves everyone involved to keep them there.

Hopefully that helped alleviate your concerns - we always want to be sure potential investors (and anyone really) have all the information they need to understand our operation and the value we provide. If you have any other questions, feel free to PM me any time.

All the best,

Clayton

1 Reply

Clayton MobleyPro Member

Birmingham, AL · Member since 2014 · 875 posts · 947 votes

8y

PS: And thanks, as always, to @Chris A. for maintaining this thread so diligently!

1 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

8y

@Clayton Mobley while I think these case studies have some benefit. I am in @Chris Clothier camp on this one.. a measure of a rental property in a given market needs to be done in year 3.. with a report on year 1 and 2.

buying a rental and reporting rents for the first year is quite misleading.. as the first tenant is brand new the house is brand new.. and 80% of the time or more the first year is a cream puff LOL.

so for those that watch along and say hey I am going to see what happens in the first 6 months and if its good I am going to jump in.. well that simply is not enough time in this business to fully understand a property or an area or PM company.. we are all rock star's first year or so.

Chris often mentions those that given one year rental guarantee's he will say ya ask them to guarantee year 3.. I love that... !!!

this is why when folks go to buy commercial assets they usually want to see 2 to 3 years of tax returns to really see how a property is running.. there is simply no way you can know in the first 6 months how your investment is going to do for the 20 years you own it..

AS for these buyers talking about how long it takes to get a property I am sure your like my Vendors in B ham inventory is quite tight.. and that is good that means the markets have rebounded from the bottom.. And all current owners want this to happen.. they want the properties to go up in value.. They want limited inventory so great rental properties are in high demand.. this is good for the owner investor. Not so good for high volume flippers.. but hey you need market balance.

Podcast Guest on Show #222

JLH Capital Partners51 Review

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0 Reply

Clayton MobleyPro Member

Birmingham, AL · Member since 2014 · 875 posts · 947 votes

8y

@Jay Hinrichs of course you're correct - long term performance data is crucial. But you can't get to year 3 without going through months 1-6 ;) In the end, while long-term data is important, short-term positive experiences are just as important to the investor (and that's who we're accountable to, in the end). If the prop sits vacant for the first six months, the client is unlikely to buy another, even if the 3-year performance ends up making up for it. That first impression is important, and I think the BP community likes to see any and all data available. We hope @Chris A. continues this thread for as long as he's with us, but we can't fast forward five years in the future just because people don't think short-term data is important.

And Jay, you know I respect your wide-ranging experience and success - no one's going to toe-to-toe with you as a pro ;) But I also think its a bit harsh to imply we aren't in this game long-term enough to be evaluated. While Chris is a new client, our business isn't made up of clients who just joined us 6 months ago - we would have capsized long ago if that was case. Perhaps we should be more proactive about asking clients to review us, that's not part of our marketing strategy, but if you want to see some opinions from people with a longer track record with us, there are a couple in this thread: https://www.biggerpockets.com/forums/92/topics/365...

What's more, anyone that reads my comments here on BP knows I'm a huge proponent of new investors asking tons of detailed questions before cutting a check. Perhaps I haven't specified this clearly enough in the past, but that includes asking for references from existing clients. We are always happy to provide contact info for long-term clients, and we expect people to follow up on those references. We would expect that of anyone researching any investment company, not just turnkey providers.

I agree that Chris (Clothier, not A. ;) makes a great point about rental guarantees (and many other things) - ask for a 3 year, a 5 year guarantee. Hell, ask for the whole investment to be guaranteed! Any investment is inherently risky and pretending you can protect the client from that risk entirely is misleading, regardless of what kind of investment you're in. When we present our data, we are very clear about where it comes from and what it includes. We are also clear about the fact that some figures may change over time, such as maintenance rates as our portfolio ages. I am always upfront with people that we know our rate will likely go up over time, as we end up having to deal with capex items. We install new big-ticket items during rehab, but everything has a shelf life. While we do firmly believe that our proactive strategy for installing high-quality, long-life items right off the bat and never deferring maintenance will help mitigate those costs in general, it would be dishonest to tell an investor that whatever numbers you have today are guaranteed for the life of the investment, that's just not how it works.

In the end, you are 100% right. The more data you have - either more years or more doors, or ideally, both - the better an idea you'll have of what your real average numbers will be. And of course we very, very much would like our clients to continue to build their portfolio with us - to get more years AND more doors under their belts - and many of them have or we wouldn't be where we are today. But all that starts with door 1 and month 1, and the better that first experience is, the more likely we will have a mutually beneficial long-term relationship and be able to show BP that sweet sweet long-term data.

Thanks again to Chris for this thread, and to everyone for keeping BP interesting ;)

Clayton

1 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

8y

@Clayton Mobley actually my comment on the 6 months was not really aimed at you specifically its for all the post of these types ( case studies) with many different vendors on BP.

my point is 6 months simply is not enough time in on a rental to understand the long term profitability of an investment.. especially some of the other companies that are selling VERY LOW end stuff.. which I know your not.. I am very familiar with your product..

You have very impressionable investors or first time investors on BP and they say OK well this person got rent for 6 months on time so I am going to jump in.. that in itself is not a reason to think every thing is perfect.. just isn't/

And my quote of Chris was aimed at those Turn key companies that induce folks to invest with them with their one year rental guarantee.. Chris's point is and its true first year is pretty predictable.. its subsequent years that no one has a crystal ball on.. So this one year rental guarantee can get folks to buy stuff that maybe should be scrutinized further.. Not only that in my experience I have seen rental guarantee's take companies down.. IE they got in over their ski tips and could not pay them.. then you talk about investors madder than hornets LOL..

But at the end of the day all investments have a component of risk.. that is a given..

but generally speaking I really like where the Turnkey industry is going and whence it came from.

my funding this stuff since 2001.. I have seen many a company come and go.. and there is no question that the top players are far stronger than they were in the past.

Podcast Guest on Show #222

JLH Capital Partners51 Review

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1 Reply

Clayton MobleyPro Member

Birmingham, AL · Member since 2014 · 875 posts · 947 votes

8y

@Jay Hinrichs as usual, you're right on the money. And I apologize if I seemed defensive, I was a bit confused about the post regarding misleading info on a thread meant to review our product lol But you're correct, you can't know the future, and I don't think any investor should jump into something because one person is doing well six months in - or even three years in. Even a shoddy provider can skate by for three years for one client, just like even a good provider can have a bad investment, a client that's never satisfied, a bad run - its the cumulative, aggregate experiences that matter.

I agree, I think the turnkey industry as a whole has been improving, and I think part of that is investors getting smarter about due diligence, working harder to weed out the charlatans, and asking tougher questions. It doesn't necessarily make my day to day job any easier lol but it definitely makes for more stable long-term relationships and happier clients.

2 Reply

Jared Friedman

Investor · Studio City, CA · Member since 2016 · 38 posts · 54 votes

8y

I own 5 properties with Spartan and I'm closing on my 6th pretty soon. I purchased based on a referral from a colleague of mine who has long term experience with them (5+years). I have only owned for a little over a year and things are going as expected. Some properties rented before I closed. Some took a few months to rent. All in all no investment will be perfect.

Long term with anything is hard to predict so due diligence is everything. I own and manage a few rentals in California as well that I personally rehabbed and rented. I cash flow very little with my California properties but I have seen appreciation between my two Cali rentals top $500k in the past 5 years. My turnkey properties however cash flow nicely- around $300-350 each but I am not expecting any appreciation with those. I think its all about diversifying your entire portfolio and not owning just one type of asset.

4 Reply

Clayton MobleyPro Member

Birmingham, AL · Member since 2014 · 875 posts · 947 votes

8y

@Jared Friedman Thanks so much for this shout-out. We're so happy you chose us and we will continue to work hard to keep you happy!

1 Reply

Spartan Invest - Birmingham Turnkey Case Study

Spartan Invest - Birmingham Turnkey Case Study

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