My Experience with Strategy Properties - Detroit MI

Rental Property Investor · Estero, FL · Member since 2016 · 195 posts · 105 votes

I found Real Wealth Network back in 2018 and became a member. Then went to an event of theirs in Orlando FL and was introduced to Strategy Properties. The high ROI is very attractive and with them advertising these properties as turn key homes I assumed no major mechanicals would need to be changed for at least 3 years because I was told everything in the homes I was purchasing would be brand new. Brand new roofs, brand new hvac, flooring, hot water heater etc. BUT I WAS IN FOR A RUDE AWAKENING.

Long story short we purchased 3 properties in a 2 year period and all have been nothing but trouble due to poor renovations. The trouble was extended with very poor property management as well.

1 - First of all they each had lead base paint issues ranging from $250 to $5,000 in remediation needed per home. As a result these properties were never certified for occupancy - not turn key right there. Which resulted in fines of close to $1k per property.

2 - Then due to poor rehabs we needed to replace a "brand new roof" and parts of "brand new flooring"

3 - When we purchased house #2 there was a small leak from the ceiling in a closet which I brought up at least 10 times that I wanted proof it was taken care of. Never received the proof and was just told it was handled. Then I needed to spend thousands later finding out half the ceiling in that room was covered in mold. This was due to a terrible job of installing a "brand new roof".

4 - Also house #3 took 6 months to add a tenant because the property management team at Pro Way
(Strategy Property affiliate at the time - now closed) had no record or lost the records that I purchased the home. I emailed many times and was either ignored, emailing an employee that no longer worked there, or was just told they will look into it. I got RWN involved and they got Proway to get me a tenant who unfortunately was/is a bad one. Section 8 tenant who never paid their portion of the rent. It is a nightmare to get tenants out at this time.

There are other issues that escape my mind at this time since I have been so busy with my business I didn't research the rest. I keep every email with all my property managers for future reference.

**RWN set up an email conversation with Strategy and after 2-3 months of discussions they offered me $4,000 to keep my mouth shut and not write this post. It was a no brainer to decline and share my story with everyone here. After spending $25k+ and still spending I would rather help someone else not make the mistakes I made of working with this company.

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Jay HinrichsBusiness Member

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

Quote from @David Garner:

Quote from @Will Zena:

Thanks for sharing. I do have a turn key property in Columbus OH that was well done. A great performing property with minimal issues. Just things you would expect. I also want to scale up but shelling out all the money to fix the issues of these 3 have slowed it down a bit. However I do have some reserve funds set aside if an opportunity presents itself.

The power of bigger pockets. We try to help others by sharing so they dont learn the hard way like we did.

Thanks for sharing your experience David.

Quote from @David Garner:

Wow, Will. Sorry to hear you had that experience, but thank you for sharing.

Sadly, I've experienced the same kind of thing whenever I've purchased supposed turnkey or 'managed rehab' properties. I learned that ultimately, i was the exit strategy for the seller, and they have a clear financial incentive to spend as little as possible on the rehab while charging as much as possible to the buyer.

I own over 100 of these types of houses, but I brought everything in-house in the end. Acquisitions, contracting, property management... all in-house. I just couldn't find reliable providers, and being out of state made it worse I think, because I wasn't there to pull people up on things so there were plenty of little things that initially escaped my notice, which eventually became much bigger problems.

I had to make the decision to either sell everything, or buy as much as possible to create the scale that was needed to pay for everything in house.

Again, thanks for sharing your experience!

Absolutely... sharing is caring! I'm glad your OH unit is working out!

From my point of view, I ended up spending time in the markets I buy in and building my own team, but I know that's not entirely practical for most people. Even then there are always issues to contend with. Again, scale has been the key for me.

Happy investing!

Scale is important for these types of properties for sure. I have been to Strategies offices and they have/had a robust team there and the owner certainly is high energy guy.. Like most TK brokers (RWN) there is only so much they can do when they are putting two parties together for compensation its how the TK industry works generally speaking you have 10 or so of these TK Brokers and about 50 to 60 providers around the country. At the end of the day up front inspections is important and of course your only as good as your tenant. Its not uncommon for Section 8 tenants to not pay their co pay.. frustrating I know but what are you going to do evict them over 50 bucks ??

I started my HML ing out of state Career in Detroit and had a great run from 2002 to 2005 when values started to crater even before the crash of 08. But I did end up with 2 homes that I owned and well it was not good rehab them get destroyed by tenant rehab again same thing I finally let them go to tax sale.

But when I went to see Strategy a few years ago I was pleasantly surprised at how nice many of the areas of Detroit Metro were / are and especially the new construction.. So like all these markets LOCATION is paramount you simply cant buy based on return numbers or price points..

the take away here is buy the best you can not the houses that look best on paper.. a 5 or 6% return that you actually get on these rentals over time without major issues with tenants needs to be weighted with the " My Criteria says I need to make 9 to 12% return) which turns out many times like what your describing above basically no return or negative returns with little hope to right the ship for many years to come.

Podcast Guest on Show #222

JLH Capital Partners51 Review

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David Garner
Investor · Ellwood City, PA · Member since 2019 · 93 posts · 124 votes
4y
Wow, Will. Sorry to hear you had that experience, but thank you for sharing.
Sadly, I've experienced the same kind of thing whenever I've purchased supposed turnkey or 'managed rehab' properties. I learned that ultimately, i was the exit strategy for the seller, and they have a clear financial incentive to spend as little as possible on the rehab while charging as much as possible to the buyer.
I own over 100 of these types of houses, but I brought everything in-house in the end. Acquisitions, contracting, property management... all in-house. I just couldn't find reliable providers, and being out of state made it worse I think, because I wasn't there to pull people up on things so there were plenty of little things that initially escaped my notice, which eventually became much bigger problems.
I had to make the decision to either sell everything, or buy as much as possible to create the scale that was needed to pay for everything in house.
Again, thanks for sharing your experience!
2 Reply
Will Zena
OP
Rental Property Investor · Estero, FL · Member since 2016 · 195 posts · 105 votes
4y
Thanks for sharing. I do have a turn key property in Columbus OH that was well done. A great performing property with minimal issues. Just things you would expect. I also want to scale up but shelling out all the money to fix the issues of these 3 have slowed it down a bit. However I do have some reserve funds set aside if an opportunity presents itself.

The power of bigger pockets. We try to help others by sharing so they dont learn the hard way like we did.

Thanks for sharing your experience David.

Quote from @David Garner:

Wow, Will. Sorry to hear you had that experience, but thank you for sharing.
Sadly, I've experienced the same kind of thing whenever I've purchased supposed turnkey or 'managed rehab' properties. I learned that ultimately, i was the exit strategy for the seller, and they have a clear financial incentive to spend as little as possible on the rehab while charging as much as possible to the buyer.
I own over 100 of these types of houses, but I brought everything in-house in the end. Acquisitions, contracting, property management... all in-house. I just couldn't find reliable providers, and being out of state made it worse I think, because I wasn't there to pull people up on things so there were plenty of little things that initially escaped my notice, which eventually became much bigger problems.
I had to make the decision to either sell everything, or buy as much as possible to create the scale that was needed to pay for everything in house.
Again, thanks for sharing your experience!

1 Reply
David Garner
Investor · Ellwood City, PA · Member since 2019 · 93 posts · 124 votes
4y
Quote from @Will Zena:

Thanks for sharing. I do have a turn key property in Columbus OH that was well done. A great performing property with minimal issues. Just things you would expect. I also want to scale up but shelling out all the money to fix the issues of these 3 have slowed it down a bit. However I do have some reserve funds set aside if an opportunity presents itself.

The power of bigger pockets. We try to help others by sharing so they dont learn the hard way like we did.

Thanks for sharing your experience David.

Quote from @David Garner:

Wow, Will. Sorry to hear you had that experience, but thank you for sharing.
Sadly, I've experienced the same kind of thing whenever I've purchased supposed turnkey or 'managed rehab' properties. I learned that ultimately, i was the exit strategy for the seller, and they have a clear financial incentive to spend as little as possible on the rehab while charging as much as possible to the buyer.
I own over 100 of these types of houses, but I brought everything in-house in the end. Acquisitions, contracting, property management... all in-house. I just couldn't find reliable providers, and being out of state made it worse I think, because I wasn't there to pull people up on things so there were plenty of little things that initially escaped my notice, which eventually became much bigger problems.
I had to make the decision to either sell everything, or buy as much as possible to create the scale that was needed to pay for everything in house.
Again, thanks for sharing your experience!

Absolutely... sharing is caring! I'm glad your OH unit is working out!
From my point of view, I ended up spending time in the markets I buy in and building my own team, but I know that's not entirely practical for most people. Even then there are always issues to contend with. Again, scale has been the key for me.

Happy investing!
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
4y
Quote from @David Garner:

Quote from @Will Zena:

Thanks for sharing. I do have a turn key property in Columbus OH that was well done. A great performing property with minimal issues. Just things you would expect. I also want to scale up but shelling out all the money to fix the issues of these 3 have slowed it down a bit. However I do have some reserve funds set aside if an opportunity presents itself.

The power of bigger pockets. We try to help others by sharing so they dont learn the hard way like we did.

Thanks for sharing your experience David.

Quote from @David Garner:

Wow, Will. Sorry to hear you had that experience, but thank you for sharing.
Sadly, I've experienced the same kind of thing whenever I've purchased supposed turnkey or 'managed rehab' properties. I learned that ultimately, i was the exit strategy for the seller, and they have a clear financial incentive to spend as little as possible on the rehab while charging as much as possible to the buyer.
I own over 100 of these types of houses, but I brought everything in-house in the end. Acquisitions, contracting, property management... all in-house. I just couldn't find reliable providers, and being out of state made it worse I think, because I wasn't there to pull people up on things so there were plenty of little things that initially escaped my notice, which eventually became much bigger problems.
I had to make the decision to either sell everything, or buy as much as possible to create the scale that was needed to pay for everything in house.
Again, thanks for sharing your experience!

Absolutely... sharing is caring! I'm glad your OH unit is working out!
From my point of view, I ended up spending time in the markets I buy in and building my own team, but I know that's not entirely practical for most people. Even then there are always issues to contend with. Again, scale has been the key for me.

Happy investing!

Scale is important for these types of properties for sure. I have been to Strategies offices and they have/had a robust team there and the owner certainly is high energy guy.. Like most TK brokers (RWN) there is only so much they can do when they are putting two parties together for compensation its how the TK industry works generally speaking you have 10 or so of these TK Brokers and about 50 to 60 providers around the country. At the end of the day up front inspections is important and of course your only as good as your tenant. Its not uncommon for Section 8 tenants to not pay their co pay.. frustrating I know but what are you going to do evict them over 50 bucks ??
I started my HML ing out of state Career in Detroit and had a great run from 2002 to 2005 when values started to crater even before the crash of 08. But I did end up with 2 homes that I owned and well it was not good rehab them get destroyed by tenant rehab again same thing I finally let them go to tax sale.
But when I went to see Strategy a few years ago I was pleasantly surprised at how nice many of the areas of Detroit Metro were / are and especially the new construction.. So like all these markets LOCATION is paramount you simply cant buy based on return numbers or price points..
the take away here is buy the best you can not the houses that look best on paper.. a 5 or 6% return that you actually get on these rentals over time without major issues with tenants needs to be weighted with the " My Criteria says I need to make 9 to 12% return) which turns out many times like what your describing above basically no return or negative returns with little hope to right the ship for many years to come.
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
5 Reply
Will Zena
OP
Rental Property Investor · Estero, FL · Member since 2016 · 195 posts · 105 votes
4y
Quote from @Jay Hinrichs:

Quote from @David Garner:

Quote from @Will Zena:

Thanks for sharing. I do have a turn key property in Columbus OH that was well done. A great performing property with minimal issues. Just things you would expect. I also want to scale up but shelling out all the money to fix the issues of these 3 have slowed it down a bit. However I do have some reserve funds set aside if an opportunity presents itself.

The power of bigger pockets. We try to help others by sharing so they dont learn the hard way like we did.

Thanks for sharing your experience David.

Quote from @David Garner:

Wow, Will. Sorry to hear you had that experience, but thank you for sharing.
Sadly, I've experienced the same kind of thing whenever I've purchased supposed turnkey or 'managed rehab' properties. I learned that ultimately, i was the exit strategy for the seller, and they have a clear financial incentive to spend as little as possible on the rehab while charging as much as possible to the buyer.
I own over 100 of these types of houses, but I brought everything in-house in the end. Acquisitions, contracting, property management... all in-house. I just couldn't find reliable providers, and being out of state made it worse I think, because I wasn't there to pull people up on things so there were plenty of little things that initially escaped my notice, which eventually became much bigger problems.
I had to make the decision to either sell everything, or buy as much as possible to create the scale that was needed to pay for everything in house.
Again, thanks for sharing your experience!

Absolutely... sharing is caring! I'm glad your OH unit is working out!
From my point of view, I ended up spending time in the markets I buy in and building my own team, but I know that's not entirely practical for most people. Even then there are always issues to contend with. Again, scale has been the key for me.

Happy investing!

Scale is important for these types of properties for sure. I have been to Strategies offices and they have/had a robust team there and the owner certainly is high energy guy.. Like most TK brokers (RWN) there is only so much they can do when they are putting two parties together for compensation its how the TK industry works generally speaking you have 10 or so of these TK Brokers and about 50 to 60 providers around the country. At the end of the day up front inspections is important and of course your only as good as your tenant. Its not uncommon for Section 8 tenants to not pay their co pay.. frustrating I know but what are you going to do evict them over 50 bucks ??
I started my HML ing out of state Career in Detroit and had a great run from 2002 to 2005 when values started to crater even before the crash of 08. But I did end up with 2 homes that I owned and well it was not good rehab them get destroyed by tenant rehab again same thing I finally let them go to tax sale.
But when I went to see Strategy a few years ago I was pleasantly surprised at how nice many of the areas of Detroit Metro were / are and especially the new construction.. So like all these markets LOCATION is paramount you simply cant buy based on return numbers or price points..
the take away here is buy the best you can not the houses that look best on paper.. a 5 or 6% return that you actually get on these rentals over time without major issues with tenants needs to be weighted with the " My Criteria says I need to make 9 to 12% return) which turns out many times like what your describing above basically no return or negative returns with little hope to right the ship for many years to come.

Yeah it doesn't change the fact that out of 3 "turn key" homes not were certified for occupancy with significant lead issues. That new roofs were very badly constructed causing mold and other issues. I can't blame the section 8 tenant or any tenant for poor rehabs and poor property management. I can't blame the section 8 tenant for Strategy taking over 6 months to place a tenant. Poor rehabs and poor management have nothing to do with any location and all to do with Strategy Properties.

What I took away firstly is don't work with Strategy Properties ever again. After that I go with what you said. I have 3+ years experience with Strategy Properties which is more than a visit.

1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
4y
Quote from @Will Zena:

Quote from @Jay Hinrichs:

Quote from @David Garner:

Quote from @Will Zena:

Thanks for sharing. I do have a turn key property in Columbus OH that was well done. A great performing property with minimal issues. Just things you would expect. I also want to scale up but shelling out all the money to fix the issues of these 3 have slowed it down a bit. However I do have some reserve funds set aside if an opportunity presents itself.

The power of bigger pockets. We try to help others by sharing so they dont learn the hard way like we did.

Thanks for sharing your experience David.

Quote from @David Garner:

Wow, Will. Sorry to hear you had that experience, but thank you for sharing.
Sadly, I've experienced the same kind of thing whenever I've purchased supposed turnkey or 'managed rehab' properties. I learned that ultimately, i was the exit strategy for the seller, and they have a clear financial incentive to spend as little as possible on the rehab while charging as much as possible to the buyer.
I own over 100 of these types of houses, but I brought everything in-house in the end. Acquisitions, contracting, property management... all in-house. I just couldn't find reliable providers, and being out of state made it worse I think, because I wasn't there to pull people up on things so there were plenty of little things that initially escaped my notice, which eventually became much bigger problems.
I had to make the decision to either sell everything, or buy as much as possible to create the scale that was needed to pay for everything in house.
Again, thanks for sharing your experience!

Absolutely... sharing is caring! I'm glad your OH unit is working out!
From my point of view, I ended up spending time in the markets I buy in and building my own team, but I know that's not entirely practical for most people. Even then there are always issues to contend with. Again, scale has been the key for me.

Happy investing!

Scale is important for these types of properties for sure. I have been to Strategies offices and they have/had a robust team there and the owner certainly is high energy guy.. Like most TK brokers (RWN) there is only so much they can do when they are putting two parties together for compensation its how the TK industry works generally speaking you have 10 or so of these TK Brokers and about 50 to 60 providers around the country. At the end of the day up front inspections is important and of course your only as good as your tenant. Its not uncommon for Section 8 tenants to not pay their co pay.. frustrating I know but what are you going to do evict them over 50 bucks ??
I started my HML ing out of state Career in Detroit and had a great run from 2002 to 2005 when values started to crater even before the crash of 08. But I did end up with 2 homes that I owned and well it was not good rehab them get destroyed by tenant rehab again same thing I finally let them go to tax sale.
But when I went to see Strategy a few years ago I was pleasantly surprised at how nice many of the areas of Detroit Metro were / are and especially the new construction.. So like all these markets LOCATION is paramount you simply cant buy based on return numbers or price points..
the take away here is buy the best you can not the houses that look best on paper.. a 5 or 6% return that you actually get on these rentals over time without major issues with tenants needs to be weighted with the " My Criteria says I need to make 9 to 12% return) which turns out many times like what your describing above basically no return or negative returns with little hope to right the ship for many years to come.

Yeah it doesn't change the fact that out of 3 "turn key" homes not were certified for occupancy with significant lead issues. That new roofs were very badly constructed causing mold and other issues. I can't blame the section 8 tenant or any tenant for poor rehabs and poor property management. I can't blame the section 8 tenant for Strategy taking over 6 months to place a tenant. Poor rehabs and poor management have nothing to do with any location and all to do with Strategy Properties.

What I took away firstly is don't work with Strategy Properties ever again. After that I go with what you said. I have 3+ years experience with Strategy Properties which is more than a visit.

Gothca so I think the lesson here is ROBUST inspections are needed with any property you buy.. I mean folks buying my new construction get full house inspections prior to moving in.. and for sure these older homes that have been refurbished need full home inspections/ and if lead is an issue then for sure that should be noted by the inspector and ticked off the list.. Now if no one told you about how important a lead cert is in that market then that's of course an issue. prices at all time highs time to EXIT ? and go to another market.. ? Were these sub 100k homes ?
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
2 Reply
Will Zena
OP
Rental Property Investor · Estero, FL · Member since 2016 · 195 posts · 105 votes
4y
Quote from @Jay Hinrichs:

Quote from @Will Zena:

Quote from @Jay Hinrichs:

Quote from @David Garner:

Quote from @Will Zena:

Thanks for sharing. I do have a turn key property in Columbus OH that was well done. A great performing property with minimal issues. Just things you would expect. I also want to scale up but shelling out all the money to fix the issues of these 3 have slowed it down a bit. However I do have some reserve funds set aside if an opportunity presents itself.

The power of bigger pockets. We try to help others by sharing so they dont learn the hard way like we did.

Thanks for sharing your experience David.

Quote from @David Garner:

Wow, Will. Sorry to hear you had that experience, but thank you for sharing.
Sadly, I've experienced the same kind of thing whenever I've purchased supposed turnkey or 'managed rehab' properties. I learned that ultimately, i was the exit strategy for the seller, and they have a clear financial incentive to spend as little as possible on the rehab while charging as much as possible to the buyer.
I own over 100 of these types of houses, but I brought everything in-house in the end. Acquisitions, contracting, property management... all in-house. I just couldn't find reliable providers, and being out of state made it worse I think, because I wasn't there to pull people up on things so there were plenty of little things that initially escaped my notice, which eventually became much bigger problems.
I had to make the decision to either sell everything, or buy as much as possible to create the scale that was needed to pay for everything in house.
Again, thanks for sharing your experience!

Absolutely... sharing is caring! I'm glad your OH unit is working out!
From my point of view, I ended up spending time in the markets I buy in and building my own team, but I know that's not entirely practical for most people. Even then there are always issues to contend with. Again, scale has been the key for me.

Happy investing!

Scale is important for these types of properties for sure. I have been to Strategies offices and they have/had a robust team there and the owner certainly is high energy guy.. Like most TK brokers (RWN) there is only so much they can do when they are putting two parties together for compensation its how the TK industry works generally speaking you have 10 or so of these TK Brokers and about 50 to 60 providers around the country. At the end of the day up front inspections is important and of course your only as good as your tenant. Its not uncommon for Section 8 tenants to not pay their co pay.. frustrating I know but what are you going to do evict them over 50 bucks ??
I started my HML ing out of state Career in Detroit and had a great run from 2002 to 2005 when values started to crater even before the crash of 08. But I did end up with 2 homes that I owned and well it was not good rehab them get destroyed by tenant rehab again same thing I finally let them go to tax sale.
But when I went to see Strategy a few years ago I was pleasantly surprised at how nice many of the areas of Detroit Metro were / are and especially the new construction.. So like all these markets LOCATION is paramount you simply cant buy based on return numbers or price points..
the take away here is buy the best you can not the houses that look best on paper.. a 5 or 6% return that you actually get on these rentals over time without major issues with tenants needs to be weighted with the " My Criteria says I need to make 9 to 12% return) which turns out many times like what your describing above basically no return or negative returns with little hope to right the ship for many years to come.

Yeah it doesn't change the fact that out of 3 "turn key" homes not were certified for occupancy with significant lead issues. That new roofs were very badly constructed causing mold and other issues. I can't blame the section 8 tenant or any tenant for poor rehabs and poor property management. I can't blame the section 8 tenant for Strategy taking over 6 months to place a tenant. Poor rehabs and poor management have nothing to do with any location and all to do with Strategy Properties.

What I took away firstly is don't work with Strategy Properties ever again. After that I go with what you said. I have 3+ years experience with Strategy Properties which is more than a visit.

Gothca so I think the lesson here is ROBUST inspections are needed with any property you buy.. I mean folks buying my new construction get full house inspections prior to moving in.. and for sure these older homes that have been refurbished need full home inspections/ and if lead is an issue then for sure that should be noted by the inspector and ticked off the list.. Now if no one told you about how important a lead cert is in that market then that's of course an issue. prices at all time highs time to EXIT ? and go to another market.. ? Were these sub 100k homes ?

I did have inspections done on all of them. That's how we caught the leak initially but it wasn't taken care of properly by Strategy so it became a larger issue. The roof was supposed to be brand new so for all I know if was glanced at, looked nice and shiney and the inspector moved on. The chimney brick had to be replaced, the flashing wasn't installed properly and there were no vents on the roof. You are correct, no one ever mentioned anything about a lead Certification. I learned that when my new PM took over but it was late and we started getting fines before they could be remediated properly.

I am still getting repairs done. 2 of the 3 tenants pay well but repairs/abatement is still being done to be compliant. The section 8 pays $644/month so its something but the line to get that tenant evicted is long. So even in this market with the issues they have I will take a loss. At this point the remaining repairs would cost me less than the loss I would take selling these so I am undecided. Might still make sense to sell depending on the sale price or my stomach for dealing with these issues.
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
4y
Quote from @Will Zena:

Quote from @Jay Hinrichs:

Quote from @Will Zena:

Quote from @Jay Hinrichs:

Quote from @David Garner:

Quote from @Will Zena:

Thanks for sharing. I do have a turn key property in Columbus OH that was well done. A great performing property with minimal issues. Just things you would expect. I also want to scale up but shelling out all the money to fix the issues of these 3 have slowed it down a bit. However I do have some reserve funds set aside if an opportunity presents itself.

The power of bigger pockets. We try to help others by sharing so they dont learn the hard way like we did.

Thanks for sharing your experience David.

Quote from @David Garner:

Wow, Will. Sorry to hear you had that experience, but thank you for sharing.
Sadly, I've experienced the same kind of thing whenever I've purchased supposed turnkey or 'managed rehab' properties. I learned that ultimately, i was the exit strategy for the seller, and they have a clear financial incentive to spend as little as possible on the rehab while charging as much as possible to the buyer.
I own over 100 of these types of houses, but I brought everything in-house in the end. Acquisitions, contracting, property management... all in-house. I just couldn't find reliable providers, and being out of state made it worse I think, because I wasn't there to pull people up on things so there were plenty of little things that initially escaped my notice, which eventually became much bigger problems.
I had to make the decision to either sell everything, or buy as much as possible to create the scale that was needed to pay for everything in house.
Again, thanks for sharing your experience!

Absolutely... sharing is caring! I'm glad your OH unit is working out!
From my point of view, I ended up spending time in the markets I buy in and building my own team, but I know that's not entirely practical for most people. Even then there are always issues to contend with. Again, scale has been the key for me.

Happy investing!

Scale is important for these types of properties for sure. I have been to Strategies offices and they have/had a robust team there and the owner certainly is high energy guy.. Like most TK brokers (RWN) there is only so much they can do when they are putting two parties together for compensation its how the TK industry works generally speaking you have 10 or so of these TK Brokers and about 50 to 60 providers around the country. At the end of the day up front inspections is important and of course your only as good as your tenant. Its not uncommon for Section 8 tenants to not pay their co pay.. frustrating I know but what are you going to do evict them over 50 bucks ??
I started my HML ing out of state Career in Detroit and had a great run from 2002 to 2005 when values started to crater even before the crash of 08. But I did end up with 2 homes that I owned and well it was not good rehab them get destroyed by tenant rehab again same thing I finally let them go to tax sale.
But when I went to see Strategy a few years ago I was pleasantly surprised at how nice many of the areas of Detroit Metro were / are and especially the new construction.. So like all these markets LOCATION is paramount you simply cant buy based on return numbers or price points..
the take away here is buy the best you can not the houses that look best on paper.. a 5 or 6% return that you actually get on these rentals over time without major issues with tenants needs to be weighted with the " My Criteria says I need to make 9 to 12% return) which turns out many times like what your describing above basically no return or negative returns with little hope to right the ship for many years to come.

Yeah it doesn't change the fact that out of 3 "turn key" homes not were certified for occupancy with significant lead issues. That new roofs were very badly constructed causing mold and other issues. I can't blame the section 8 tenant or any tenant for poor rehabs and poor property management. I can't blame the section 8 tenant for Strategy taking over 6 months to place a tenant. Poor rehabs and poor management have nothing to do with any location and all to do with Strategy Properties.

What I took away firstly is don't work with Strategy Properties ever again. After that I go with what you said. I have 3+ years experience with Strategy Properties which is more than a visit.

Gothca so I think the lesson here is ROBUST inspections are needed with any property you buy.. I mean folks buying my new construction get full house inspections prior to moving in.. and for sure these older homes that have been refurbished need full home inspections/ and if lead is an issue then for sure that should be noted by the inspector and ticked off the list.. Now if no one told you about how important a lead cert is in that market then that's of course an issue. prices at all time highs time to EXIT ? and go to another market.. ? Were these sub 100k homes ?

I did have inspections done on all of them. That's how we caught the leak initially but it wasn't taken care of properly by Strategy so it became a larger issue. The roof was supposed to be brand new so for all I know if was glanced at, looked nice and shiney and the inspector moved on. The chimney brick had to be replaced, the flashing wasn't installed properly and there were no vents on the roof. You are correct, no one ever mentioned anything about a lead Certification. I learned that when my new PM took over but it was late and we started getting fines before they could be remediated properly.

I am still getting repairs done. 2 of the 3 tenants pay well but repairs/abatement is still being done to be compliant. The section 8 pays $644/month so its something but the line to get that tenant evicted is long. So even in this market with the issues they have I will take a loss. At this point the remaining repairs would cost me less than the loss I would take selling these so I am undecided. Might still make sense to sell depending on the sale price or my stomach for dealing with these issues.

on the 644 section 8 then the tenant probably has to pay what 300 400 a month ? and if like you said they are not paying the co pay then thats another issues your stuck.. my experience with section 8 and i had over 200 of them was that co pay's were more in the 20 to 75 dollar range and many never paid it or would catch up when they go their tax return. I get the allure of section 8 but in some markets those are just professional generational tenants and these issues your having will never resolve until you finally say enough is enough like I did when I sold out 6 years ago.
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3 Reply
Will Zena
OP
Rental Property Investor · Estero, FL · Member since 2016 · 195 posts · 105 votes
4y
Quote from @Jay Hinrichs:

Quote from @Will Zena:

Quote from @Jay Hinrichs:

Quote from @Will Zena:

Quote from @Jay Hinrichs:

Quote from @David Garner:

Quote from @Will Zena:

Thanks for sharing. I do have a turn key property in Columbus OH that was well done. A great performing property with minimal issues. Just things you would expect. I also want to scale up but shelling out all the money to fix the issues of these 3 have slowed it down a bit. However I do have some reserve funds set aside if an opportunity presents itself.

The power of bigger pockets. We try to help others by sharing so they dont learn the hard way like we did.

Thanks for sharing your experience David.

Quote from @David Garner:

Wow, Will. Sorry to hear you had that experience, but thank you for sharing.
Sadly, I've experienced the same kind of thing whenever I've purchased supposed turnkey or 'managed rehab' properties. I learned that ultimately, i was the exit strategy for the seller, and they have a clear financial incentive to spend as little as possible on the rehab while charging as much as possible to the buyer.
I own over 100 of these types of houses, but I brought everything in-house in the end. Acquisitions, contracting, property management... all in-house. I just couldn't find reliable providers, and being out of state made it worse I think, because I wasn't there to pull people up on things so there were plenty of little things that initially escaped my notice, which eventually became much bigger problems.
I had to make the decision to either sell everything, or buy as much as possible to create the scale that was needed to pay for everything in house.
Again, thanks for sharing your experience!

Absolutely... sharing is caring! I'm glad your OH unit is working out!
From my point of view, I ended up spending time in the markets I buy in and building my own team, but I know that's not entirely practical for most people. Even then there are always issues to contend with. Again, scale has been the key for me.

Happy investing!

Scale is important for these types of properties for sure. I have been to Strategies offices and they have/had a robust team there and the owner certainly is high energy guy.. Like most TK brokers (RWN) there is only so much they can do when they are putting two parties together for compensation its how the TK industry works generally speaking you have 10 or so of these TK Brokers and about 50 to 60 providers around the country. At the end of the day up front inspections is important and of course your only as good as your tenant. Its not uncommon for Section 8 tenants to not pay their co pay.. frustrating I know but what are you going to do evict them over 50 bucks ??
I started my HML ing out of state Career in Detroit and had a great run from 2002 to 2005 when values started to crater even before the crash of 08. But I did end up with 2 homes that I owned and well it was not good rehab them get destroyed by tenant rehab again same thing I finally let them go to tax sale.
But when I went to see Strategy a few years ago I was pleasantly surprised at how nice many of the areas of Detroit Metro were / are and especially the new construction.. So like all these markets LOCATION is paramount you simply cant buy based on return numbers or price points..
the take away here is buy the best you can not the houses that look best on paper.. a 5 or 6% return that you actually get on these rentals over time without major issues with tenants needs to be weighted with the " My Criteria says I need to make 9 to 12% return) which turns out many times like what your describing above basically no return or negative returns with little hope to right the ship for many years to come.

Yeah it doesn't change the fact that out of 3 "turn key" homes not were certified for occupancy with significant lead issues. That new roofs were very badly constructed causing mold and other issues. I can't blame the section 8 tenant or any tenant for poor rehabs and poor property management. I can't blame the section 8 tenant for Strategy taking over 6 months to place a tenant. Poor rehabs and poor management have nothing to do with any location and all to do with Strategy Properties.

What I took away firstly is don't work with Strategy Properties ever again. After that I go with what you said. I have 3+ years experience with Strategy Properties which is more than a visit.

Gothca so I think the lesson here is ROBUST inspections are needed with any property you buy.. I mean folks buying my new construction get full house inspections prior to moving in.. and for sure these older homes that have been refurbished need full home inspections/ and if lead is an issue then for sure that should be noted by the inspector and ticked off the list.. Now if no one told you about how important a lead cert is in that market then that's of course an issue. prices at all time highs time to EXIT ? and go to another market.. ? Were these sub 100k homes ?

I did have inspections done on all of them. That's how we caught the leak initially but it wasn't taken care of properly by Strategy so it became a larger issue. The roof was supposed to be brand new so for all I know if was glanced at, looked nice and shiney and the inspector moved on. The chimney brick had to be replaced, the flashing wasn't installed properly and there were no vents on the roof. You are correct, no one ever mentioned anything about a lead Certification. I learned that when my new PM took over but it was late and we started getting fines before they could be remediated properly.

I am still getting repairs done. 2 of the 3 tenants pay well but repairs/abatement is still being done to be compliant. The section 8 pays $644/month so its something but the line to get that tenant evicted is long. So even in this market with the issues they have I will take a loss. At this point the remaining repairs would cost me less than the loss I would take selling these so I am undecided. Might still make sense to sell depending on the sale price or my stomach for dealing with these issues.

on the 644 section 8 then the tenant probably has to pay what 300 400 a month ? and if like you said they are not paying the co pay then thats another issues your stuck.. my experience with section 8 and i had over 200 of them was that co pay's were more in the 20 to 75 dollar range and many never paid it or would catch up when they go their tax return. I get the allure of section 8 but in some markets those are just professional generational tenants and these issues your having will never resolve until you finally say enough is enough like I did when I sold out 6 years ago.

Jay,

As I typed that message I started telling myself the same thing. I may very well do that and sleep better at night.
3 Reply
J.D. Norman
Investor · Member since 2022 · 1 post · 0 votes
4y
Hey Will,
Check out Gebrael Management at MIForRent.com. I know one of the team members, they are an honest and quality property management company.
Cheers!
0 Reply
Will Zena
OP
Rental Property Investor · Estero, FL · Member since 2016 · 195 posts · 105 votes
4y
Quote from @J.D. Norman:

Hey Will,
Check out Gebrael Management at MIForRent.com. I know one of the team members, they are an honest and quality property management company.
Cheers!

Thanks for the tip J.D. I will look do some research on that company
0 Reply
Scott Mac
Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
4y
Hi Will,
Before you buy a house you can have a Home Inspector go through it.
InterNACHI is the world's leading association for home inspectors--you might want to look into them (or another certified inspector of your choosing).
Another thing might be do a pre-purchase boots on the ground walk through yourself to catch things like poor fit and finish on the flooring and etc...
Good Luck!
1 Reply
Joe S.Pro Member
Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
4y
Thanks for the post. It definitely seems to me there’s so many land mines for investors especially new investors. A lot of the hype, books, and over the top postings are meant to sell/ Promote something and benefit those making the promotions.
1 Reply
Kathryn Schauer
Investor · CT · Member since 2019 · 71 posts · 29 votes
4y
@Will Zena
Thanks for sharing. I had a similarly horrible experience with a “turnkey” company. You’re not alone.
0 Reply
Will Zena
OP
Rental Property Investor · Estero, FL · Member since 2016 · 195 posts · 105 votes
4y
Quote from @Scott Mac:

Hi Will,
Before you buy a house you can have a Home Inspector go through it.
InterNACHI is the world's leading association for home inspectors--you might want to look into them (or another certified inspector of your choosing).
Another thing might be do a pre-purchase boots on the ground walk through yourself to catch things like poor fit and finish on the flooring and etc...
Good Luck!

Yes an inspection was done on each home. The inspector caught the leak in a closet causing mold and I was told it was taken care of. I asked maybe 10 times for pictures of the repair but I never got it and ended up having to replace the entire ceiling and at this point the entire "brand new roof". I went turn key with what I thought was a reputable company since their affiliate is reputable but I was wrong. I must say RWN did do their part in trying to help me but an affiliate can only do so much.

I totally agree if you can have your boots on the ground it's the best way to go. Now I know going forward.
1 Reply
Will Zena
OP
Rental Property Investor · Estero, FL · Member since 2016 · 195 posts · 105 votes
4y
Quote from @Joe S.:

Thanks for the post. It definitely seems to me there’s so many land mines for investors especially new investors. A lot of the hype, books, and over the top postings are meant to sell/ Promote something and benefit those making the promotions.

Yeah I stay away from turn key these days. If I need to rehab the property anyway then I rather not pay top of the market. I thought I was preventing that but I was wrong.
1 Reply
Will Zena
OP
Rental Property Investor · Estero, FL · Member since 2016 · 195 posts · 105 votes
4y
Quote from @Kathryn Schauer:

@Will Zena
Thanks for sharing. I had a similarly horrible experience with a “turnkey” company. You’re not alone.

Thank you. We think we are making a safe move by going with a turn key and paying top dollar to minimize risk but thats not the case in many cases. I think it's important to share these experiences. I have learned so much from bigger pockets. Hopefully this saves someone the headaches I dealt with.
1 Reply
Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
4y
Unfortunately, we've never seen a turnkey company in Metro Detroit area that investors can trust.
Strategy "sold" their Proway PMC business to Autumn PMC, but still same phone number and people - and same problems for investors.
Here's our standard copy & paste about turnkeys:
The biggest challenges with Turnkey providers:

1) Terrible renovation work - we've taken over many properties that investor bought turnkey and they were shocked to learn the true condition of their property from our TakeOver video.
---So, get a GREAT property inspector NOT recommended by the turnkey company to avoid bias.

2) Misrepresenting Property Class - have seen many turnkey providers in Metro Detroit area sell OOS investors Class C properties as Class B.
---So, learn the neighborhoods where you plan to invest and use Google Streetview to virtually explore them.

3) Poor Tenant Screening - they typically can't sell a property until they place a tenant. So, they have a conflict of interest in waiting for the right tenant.
---So, insist on them providing the rental application and supporting docs for your review. This means YOU need to learn how to evaluate a rental application!

4) Poor Property Management - Where do you think a turnkey provider will put their best staff, on selling properties and making $5k+/transaction or on property management and making $80/month transactions?
---So, ask about their standard operating procedures and make sure your management contract has an easy termination clause.

What are your options if you experience one of the above? Everyone thinks they can sue to solve the problem.

Do you realize how much it will cost to hire an OOS attorney to sue the turnkey company?

Unfortunately, the majority of investors that experience terrible service from turnkey companies, figure out that it's not worth spending tens of thousands of dollars suing their turnkey provider and just move on - which allows the turnkey provider to not change their ways and stay in business:(
Email us if we can assist with anything else - please note this is NOT a solicitation for your business as self-promotion is NOT allowed on BiggerPockets.
[email protected]248-209-6824
Logical Property Management4.9451 Reviews
Website View Page
2 Reply
David Garner
Investor · Ellwood City, PA · Member since 2019 · 93 posts · 124 votes
4y
Quote from @Drew Sygit:

Unfortunately, we've never seen a turnkey company in Metro Detroit area that investors can trust.
Strategy "sold" their Proway PMC business to Autumn PMC, but still same phone number and people - and same problems for investors.
Here's our standard copy & paste about turnkeys:
The biggest challenges with Turnkey providers:

1) Terrible renovation work - we've taken over many properties that investor bought turnkey and they were shocked to learn the true condition of their property from our TakeOver video.
---So, get a GREAT property inspector NOT recommended by the turnkey company to avoid bias.

2) Misrepresenting Property Class - have seen many turnkey providers in Metro Detroit area sell OOS investors Class C properties as Class B.
---So, learn the neighborhoods where you plan to invest and use Google Streetview to virtually explore them.

3) Poor Tenant Screening - they typically can't sell a property until they place a tenant. So, they have a conflict of interest in waiting for the right tenant.
---So, insist on them providing the rental application and supporting docs for your review. This means YOU need to learn how to evaluate a rental application!

4) Poor Property Management - Where do you think a turnkey provider will put their best staff, on selling properties and making $5k+/transaction or on property management and making $80/month transactions?
---So, ask about their standard operating procedures and make sure your management contract has an easy termination clause.

What are your options if you experience one of the above? Everyone thinks they can sue to solve the problem.

Do you realize how much it will cost to hire an OOS attorney to sue the turnkey company?

Unfortunately, the majority of investors that experience terrible service from turnkey companies, figure out that it's not worth spending tens of thousands of dollars suing their turnkey provider and just move on - which allows the turnkey provider to not change their ways and stay in business:(
Email us if we can assist with anything else - please note this is NOT a solicitation for your business as self-promotion is NOT allowed on BiggerPockets.

All of this, 100%.
No doubt, there are great turnkey providers out there, but making sure you really zero in on the potential issues before you buy is key in my experience.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
4y
Quote from @Drew Sygit:

Unfortunately, we've never seen a turnkey company in Metro Detroit area that investors can trust.
Strategy "sold" their Proway PMC business to Autumn PMC, but still same phone number and people - and same problems for investors.
Here's our standard copy & paste about turnkeys:
The biggest challenges with Turnkey providers:

1) Terrible renovation work - we've taken over many properties that investor bought turnkey and they were shocked to learn the true condition of their property from our TakeOver video.
---So, get a GREAT property inspector NOT recommended by the turnkey company to avoid bias.

2) Misrepresenting Property Class - have seen many turnkey providers in Metro Detroit area sell OOS investors Class C properties as Class B.
---So, learn the neighborhoods where you plan to invest and use Google Streetview to virtually explore them.

3) Poor Tenant Screening - they typically can't sell a property until they place a tenant. So, they have a conflict of interest in waiting for the right tenant.
---So, insist on them providing the rental application and supporting docs for your review. This means YOU need to learn how to evaluate a rental application!

4) Poor Property Management - Where do you think a turnkey provider will put their best staff, on selling properties and making $5k+/transaction or on property management and making $80/month transactions?
---So, ask about their standard operating procedures and make sure your management contract has an easy termination clause.

What are your options if you experience one of the above? Everyone thinks they can sue to solve the problem.

Do you realize how much it will cost to hire an OOS attorney to sue the turnkey company?

Unfortunately, the majority of investors that experience terrible service from turnkey companies, figure out that it's not worth spending tens of thousands of dollars suing their turnkey provider and just move on - which allows the turnkey provider to not change their ways and stay in business:(
Email us if we can assist with anything else - please note this is NOT a solicitation for your business as self-promotion is NOT allowed on BiggerPockets.

Drew, in regards to your point number 3. I think this item alone is one of the major issue that TK companies have to deal with and its because they have to keep up with the jones's this idea that a property MUST have a tenant day one so they dont miss a day of rent.. this is a bad policy in my mind and here is why.

once you place that tenant trying to get your inspections done and appraisals now has become very complicated working around the tenant and all their stuff in the house etc. And if things are found on the home inspection ( and they will be these are all 30 to 100 year old homes in the TK world of the mid west) you now have to schedule again for punch list items again very disruptive and time consuming.. the TK company mean time their cost of capital is running so they try to get tenant in quick as they can etc etc.. this leads to your point and I think Human nature they are under pressure from their TK BROKER to have a tenant in place before the TK Broker will market or allow the buyer to close.. WRONG this in my mind is not the way to do this.. The buyer should not demand and the TK BROKER should not be marketing what turn key is or the BP definition of TURNKEY IE home rehabbed and tenanted day one so the investor never misses a day of rent.. this allows the proforma's to look better etc.. However this takes the investor/buyer out of the tenant selection process and exactly as you say the urgency from the TK provider ( capital costs) TK Broker ( I want my FEE) and you end up with less than optimal situation when it comes to the tenant placement..

So with my Clients that I do this with I tell them flat out NO tenants day one I am going to fund this but I want you to not rent the house out until you have done the rehab and gotten the appraisal and Property inspection punch list complete and then close on the house. U can be taking applications but the new buyer should be involved in my mind with tenant selection it is their house after all .. And of course if they pick a poor tenant its on them.. I mean lets be real investors are buying these for very long term holds what is ONE month when your starting out of vacancy going to cost you answer about 500.00 . And if 500.00 ruins your proforma or is a deal breaker the investor may want to think of investing in some other type of asset.
Podcast Guest on Show #222
JLH Capital Partners51 Review
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2 Reply
Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
4y
@Jay Hinrichs Just solid advice, again, and again. I didn't realize most TK operations ran like that. I have zero interest in that type of investment (given our markets) but I can appreciate what they offer for investors.
0 Reply
Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
4y
Wow, the great @Jay Hinrichs liked one of my posts enough to comment - and gets more votes than my post!
Just kidding with you, but thanks all the same:)

[email protected]248-209-6824
Logical Property Management4.9451 Reviews
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0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
4y
Quote from @Drew Sygit:

Wow, the great @Jay Hinrichs liked one of my posts enough to comment - and gets more votes than my post!
Just kidding with you, but thanks all the same:)

these are valuable threads for those looking to buy rentals no matter where they are at or who is selling them or who is brokering them.
these are basic items that you detail that need to be followed same if your buying a home to live in.
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
0 Reply
Will Zena
OP
Rental Property Investor · Estero, FL · Member since 2016 · 195 posts · 105 votes
4y
Quote from @Jay Hinrichs:

Quote from @Drew Sygit:

Wow, the great @Jay Hinrichs liked one of my posts enough to comment - and gets more votes than my post!
Just kidding with you, but thanks all the same:)

these are valuable threads for those looking to buy rentals no matter where they are at or who is selling them or who is brokering them.
these are basic items that you detail that need to be followed same if your buying a home to live in.

Absolutely. Trying to take short cuts can be very costly.
0 Reply
Jezelle John
Member since 2021 · 72 posts · 49 votes
4y
@Will Zena thanks for sharing. It’s a shame that there are such crooked companies in the turnkey lane. Similarly to construction, it just seems to lack regulation and allows investors and landlords to get screwed. Tenants think the owners have so much money but that’s so far from the truth when you have to put 25k into something that was supposed to be “turnkey”. Thank you for sharing as I was just looking into turnkey in Detroit.
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