BRRRR Turnkey Providers

51 Replies

Hi All,

I recently came across a company called ABC Capital Investments. This company provides BRRR services in Philly, Baltimore, Cleveland, Birmingham and Jackson. They complete renovation work and find a tenant for you after you purchase the home. They offer a home warranty and a rent guarantee. Their business model is to essentially facilitate the BRRR process for you so the investor just needs to put down the money and wait for them to renovate, rent, and refinance the home. I am curious to hear if anyone is familiar with other companies that offer similar services. I would like to get into BRRR, but I don't have time to find investment opportunities, analyze neighborhoods, oversee contractors/renovation work and rent properties in a market with strong cash flow. I am hesitant to work with ABC Capital after seeing the reviews that tenants have written about them. The majority of these reviews indicate that the homes needed maintenance after new tenants moved in and ABC Capital was completely non-responsive.

At this point I am open to the possibility of investing in any market that provides strong cash flow. I am more interested in learning if there are similar companies with this business model. If anyone is knowledgeable about similar companies it would be greatly appreciated if you could share your thoughts/experience.

Originally posted by @Ryan Holland :

Hi All,

I recently came across a company called ABC Capital Investments. This company provides BRRR services in Philly, Baltimore, Cleveland, Birmingham and Jackson. They complete renovation work and find a tenant for you after you purchase the home. They offer a home warranty and a rent guarantee. Their business model is to essentially facilitate the BRRR process for you so the investor just needs to put down the money and wait for them to renovate, rent, and refinance the home. I am curious to hear if anyone is familiar with other companies that offer similar services. I would like to get into BRRR, but I don't have time to find investment opportunities, analyze neighborhoods, oversee contractors/renovation work and rent properties in a market with strong cash flow. I am hesitant to work with ABC Capital after seeing the reviews that tenants have written about them. The majority of these reviews indicate that the homes needed maintenance after new tenants moved in and ABC Capital was completely non-responsive.

At this point I am open to the possibility of investing in any market that provides strong cash flow. I am more interested in learning if there are similar companies with this business model. If anyone is knowledgeable about similar companies it would be greatly appreciated if you could share your thoughts/experience.

 I am not familiar with the company, and cannot really say anything about those companies. However, I don't understand  this business model unless they really up their renovation costs.

Do they provide a fee structure or breakdown of their renovation costs?

    

I don't know anything about this company either, but if you look up reviews for most property management companies they will have low ratings due to tenant complaints. It seems tenants share their experiences when they are unhappy, but not when they are happy. So I'd take that piece with a grain of salt.

I can't speak about this company specifically, but I can warn you to be careful when investing in Baltimore if you're not familiar with the city. Home values can vary significantly on a block-by-block basis so you really need to make sure that the ARV is there. I suggest getting an independent BPO or Appraisal before making any purchase.

Are they helping you find the deals and you are funding the purchase and also funding the rehab? I would say financing is a bit harder in these situations. Unless you have enough cash to fund a full rehab!

I would be interested in companies that offer such a service for out-of-state investors as well.

I'm currently looking for BRRRR deals but the numbers in my market don't work for them.

I'd consider a service like this while I build my team and boots on the ground in another market.

@Ryan Holland are they essentially building in a wholesale fee into the purchase price? Do they charge a rehab management fee? I'd be curious to know if they are able to keep their investors below 75-80% ARV all in.

I think this model makes a lot of sense as the “provider” can make a wholesale fee and then their investors can recycle capital. The provider can keep their investors around for a lot longer instead of investors only doing a couple of deals and then running out of capital. 

Originally posted by @Ryan Holland :

Hi All,

I recently came across a company called ABC Capital Investments. This company provides BRRR services in Philly, Baltimore, Cleveland, Birmingham and Jackson. They complete renovation work and find a tenant for you after you purchase the home. They offer a home warranty and a rent guarantee. Their business model is to essentially facilitate the BRRR process for you so the investor just needs to put down the money and wait for them to renovate, rent, and refinance the home. I am curious to hear if anyone is familiar with other companies that offer similar services. I would like to get into BRRR, but I don't have time to find investment opportunities, analyze neighborhoods, oversee contractors/renovation work and rent properties in a market with strong cash flow. I am hesitant to work with ABC Capital after seeing the reviews that tenants have written about them. The majority of these reviews indicate that the homes needed maintenance after new tenants moved in and ABC Capital was completely non-responsive.

At this point I am open to the possibility of investing in any market that provides strong cash flow. I am more interested in learning if there are similar companies with this business model. If anyone is knowledgeable about similar companies it would be greatly appreciated if you could share your thoughts/experience.

 I'm in Birmingham. It is possible they are active in here but I've never heard of them. 

If anyone makes a guarantee in Real Estate its fraud since it's illegal to guarantee anything with an investment, rent or otherwise. 

Purchase a home from an investor that has finished the renovation then order an inspection & appraisal. 

You never want an existing tenant passed to you because you don't know the history or actual quality of the tenant. Place your own tenant or have the PM place them based on your criteria. The tenant is arguably more important than the property since it's the way you cover expenses monthly & in turn make money.

@Ryan Holland there are several companies that do this, and it is becoming more common for turnkey providers to turn to this model as prices have climbed and margins are tightened. Mostly, from what I've seen, as an investor you take on all the upfront risk, buy the distressed house and pay for the rehab, and hope they do a good job in a timely manner and within budget. Then they place a tenant. What do you get, in most cases it is maybe 10-15% of equity if all goes right, not the 30% in a true BRRRR. You have to figure in the risk/reward, and you've got to have a lot of trust in the team. Be very cautious.

Most "Turnkey" companies in Baltimore are just gonna sell you the crap all of us in the city don't want.  If you don't know baltimore block by block or have a good boots on the ground team, your screwed, as Joe said above.  

Wow, I am excited to see how many comments this post has received in the first day! I was hoping to speak with ABC Capital over the phone today to learn more about their company but I wasn't able to connect with them. 

@Ozzy Sirimsi My understanding is that the company provides a breakdown of their renovation expenses. I believe they charge a premium for the repair work, which is how they make a profit (in addition to property management).

@Mackaylee Beach The company essentially has everything in place, but the investor needs to have the funds available for the cost of the entire project. Most of their properties require an investment of $80k - $150k but the goal is to pull all the money out when you can refinance the home. 

@Ryan E. Most of the deals i've seen are closer to 90% ARM, meaning the investor will have to leave about 10% in equity if you do a conventional refinance (80/20).

@Larry Fried I appreciate the advice. I agree that the turnkey provider in this business model is taking very little risk since the investor is spending all the money. What are some of the companies that you've seen using this business model?

I feel like I should start doing the same thing. 

It is like a 203k loan, money is already there, buyers pay everything, I manage the construction and rent the place :D))) 

Sounds good to me :D))

Originally posted by @Brian Garrett :

@Ozzy Sirimsi A BRRRR is much different than a 203k loan which is a owner occupied FHA program and requires certain approved contractors.

    I was joking Brian, I used it as an example,I know what it is.

    Thanks though

Took a look at the website . A couple things I noticed . It says all properties are fully renovated with a new roof . Seems kind of weird to put a brand new roof on every single rental doesn’t it?
I mean if it needs it of course .

Also it mentions rent is guaranteed the first year and then you can get “rent insurance “ after that? What is rent insurance ? I’ve never heard of that .

Also this is one example they use of cap rate . Nothing for maintenance or repairs or vacancy etc .. I guess they would probably say there won’t be any repairs needed since it was rehabbed ..

Investment figures:����

Purchase Price $45,000�

Rehab $20,000�

Closing cost $2,500�

Total investment $67,500

ROI figures:

Rental Income $950

Expenses:

Property Management $95

Property Taxes $77

Insurance $60

Net income $718/ month (12.8% ROI)

Hi @Eric P. , I am also skeptical of the one stop shop type places . have you been able to achieve a true BRRRR in Cleveland , investing from out of state ?

Or do you use another strategy ? How often do you travel to Cleveland ?

Most likely they are making a profit on sale of the property ( wholesale fee ) then paid for handling the rehab management and then management fee .

Nothing wrong with this necessarily as they have a staff and are providing a service .
But I would be surprised if a true BRRRR is possible going this route . I looked around a bit on their website on the section “how it works “
and didn’t see anything about BRRRR or doing a cash out refinance .

If someone could link to that I’d appreciate it .

Originally posted by @Ryan Holland :

@Larry Fried I appreciate the advice. I agree that the turnkey provider in this business model is taking very little risk since the investor is spending all the money. What are some of the companies that you've seen using this business model?

 There are none I would recommend at this point.

@Joseph M. True BRRRR in a decent, safe neighborhood is tough to find nationwide rt now. 10 yrs of record low mortgage rates attracted everyone to REI & the amazing "true BRRRR" deals of 5-10 yrs ago don't exist much now except in ghettos or maybe "transitioning areas."

I prefer to work with investor-friendly agents who specialize in REI & PM companies who come highly-recommended by other investors. An awesome investor-friendly agent & awesome PM firm are worth their weight in gold. Will they find you a true BRRRR? Probably not - there's still plenty of good deals out there though.

I’m not necessarily against turnkey companies, but here’s some things to be wary of:

- They need to buy super cheap in order to turn a profit. Are the neighborhoods they’re selling in really as great as they make em seem?

- Are the rehabs of high quality? This varies greatly by provider

- Are they offering discounted PM services in order to make their numbers look better? If you assume a standard PM rate (which you’ll have to pay if they ever end their PM discount OR if you ever need to switch to a new PM), do the numbers still work? Is it still a good deal?

- Many of them use a lowball or nonexistent monthly maintenance expense in their estimates bc “hey, it’s newly rehabbed - nothing will break!” Or maybe they offer a 1-yr warranty or whatever. But how do the numbers look in years 2, 3, 4, etc when stuff inevitably starts breaking?! Always use conservative estimates when buying!

Just my 2 cents...

BRRRR models can be very tricky. Especially, as most commenters have already noted, you're not very familiar with the neighborhood and you're really having to tweak numbers to make it work. It's more of a hands-on model to real estate investing versus turnkey (which is what I do). With the BRRRR model, you're financing the rehab, carrying the loan (if there is one), and hoping it refinances at the price you want. Now I am not saying it's all bad. You're certainly going to find good companies out there that offer that. It just has more risk built in. (I really have no feedback or info on the ABC company you mentioned originally.)

With turnkey, as someone above recommended, it's done for you. 

Is there more to make from the BRRRR model? Maybe.

However, you can buy a turnkey property and still do the refi to buy another... and another... and another. 

If you are really educated in the rehab process, the BRRRR model may work. But if you want something that's done for you and cashflowing, turnkey is the way to go.

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