Indianapolis Turnkey Gone Wrong

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Indianapolis Turnkey Gone Wrong

Carlos RoviraBusiness Member
Investor · Miami, FL · Member since 2015 · 329 posts · 124 votes

I'm putting this out there for anyone considering purchasing turnkey from Real Estate Done 4 U (i.e. Michael Drew). I just bought 4 properties from him back in November. Two of them had issues. One of them had a tenant that was withholding rent due to deferred maintenance issues that were pretty serious. I was able to stabilize that one but it has cost me a lot of money, headaches, and most importantly, time.

The second property had a pending eviction already when I closed. I was not made privy to this by the seller (Michael Drew), and did not find out about it until the property management took over management and 2 months went by. I am attaching photos of the property so that you can see the condition that it was delivered to me in. No doubt I will stabilize the property and make it profitable, but this totally defeats the purpose of buying turnkey and leaves a sour taste in my mouth. 

For anyone considering buying turnkey from this guy, STAY AWAY. STAY FAR AWAY. The product that he provides is NOT Turnkey. It is value add real estate that he is selling at retail. The complete opposite of what Turnkey should be. 

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Harvey LevinPro Member
Property Manager · Indianapolis, IN · Member since 2012 · 205 posts · 157 votes
9y

@JayHinrichs I have to respectfully disagree with you. I manage 400 class c properties in Indianapolis that are mostly section 8 . I have actively invested and managed locally in Indy since 1980. I have held a brokers listened since 1982 and owned a very successful renovation company for almost 20 years when I sold it. I am also have a CCIM designation. I do not say any of this to brag but to explain my credibility.   I have found that proper vetting of both the property at purchase and tenants are the key to success in any class of property. Class c can be very profitable if the manger has experience and understands the market. Class c can be very profitable if the rehab has been preformed correctly. I believe the problems occur when due to the availability of low cost inventory inexperienced resellers as well as investors make poor decisions. While even with the best vetting problems can occur I see way to many resellers who have never even been to Indianapolis, never seen the neighborhoods or the properties or met the contractors or the quality of their work, selling properties to newbie investors who find themselves out of luck. The class is not to blame, the  lack of due diligence by investors is. Real Estate has always been both a fantastic investment and an industry with a lot of fraudulent activity. The moral of the story is that there is plenty of money to be made in all areas of real estate investing but the buyer beware!!

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  • Ivan BarrattBusiness Member
    Investor · Indianapolis, IN · Member since 2015 · 764 posts · 953 votes
    9y

    Sorry to hear that. IMHO for every one good turn key outfit there are 9 bad ones.

    FYI: if you thinks there's fraud or other laws being broken you can file a complaint with the IN Real Estate Commission. 

    2Reply
  • Carlos RoviraBusiness Member
    OP
    Investor · Miami, FL · Member since 2015 · 329 posts · 124 votes
    9y

    @Lance Robinson

    0Reply
  • Michael Drew
    Indianapolis, IN · Member since 2016 · 1 post · 3 votes
    9y

    Although I do not post on these forums much I do believe that this deserves a reply.   Mr Rovira bought a home months ago and then came back to buy more like most clients.  After the closing of this home which was inspected and punched out fully, my understanding is - the tenant went through a sickness or death of a child and got divorced and took it all out on the property (as you can see.)  I even covered rent during the time and paid it directly to Carlos.  I would be happy to fix it all or buy the property back.  No parent should bury a child.   I am very sorry for this and am always 200% willing to do whatever it takes.  

    3Reply
  • Carlos RoviraBusiness Member
    OP
    Investor · Miami, FL · Member since 2015 · 329 posts · 124 votes
    9y

    Although it is unfortunate that it took a complaint on a public forum for Michael to react to this situation, I do believe that everyone deserves a chance to redeem themselves. I will try to work something out with him regarding this property and report back with my evaluation on whether the resolution was favorable or not. 

    1Reply
  • Tom Ott
    Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes
    9y
    Originally posted by @Carlos Rovira:

    I'm putting this out there for anyone considering purchasing turnkey from Real Estate Done 4 U (i.e. Michael Drew). I just bought 4 properties from him back in November. Two of them had issues. One of them had a tenant that was withholding rent due to deferred maintenance issues that were pretty serious. I was able to stabilize that one but it has cost me a lot of money, headaches, and most importantly, time.

    The second property had a pending eviction already when I closed. I was not made privy to this by the seller (Michael Drew), and did not find out about it until the property management took over management and 2 months went by. I am attaching photos of the property so that you can see the condition that it was delivered to me in. No doubt I will stabilize the property and make it profitable, but this totally defeats the purpose of buying turnkey and leaves a sour taste in my mouth. 

    For anyone considering buying turnkey from this guy, STAY AWAY. STAY FAR AWAY. The product that he provides is NOT Turnkey. It is value add real estate that he is selling at retail. The complete opposite of what Turnkey should be. 

     I am going to save this story! This is the kind of incidents that I cannot stand. That is why when investors go with Turnkey, you NEED to make sure that the provider does everything in house. They own, repair, and manage. You do not want someone who hires others for this kind of investment. It gets too risky.

    1Reply
  • Kristopher HanksPro Member
    Rental Property Investor · Davenport, FL · Member since 2016 · 593 posts · 382 votes
    9y

    @Carlos Rovira Thank you for sharing this experience. Most, including myself, struggle with talking open and honestly about our investments that do not work out quite like we thought they were going to. Regardless of the outcome with this property, it is at the very least educational for all of us that are still trying to learn all the ins and outs of this business. 

    0Reply
  • Grant Diggles
    Professional · Portland, OR · Member since 2017 · 21 posts · 16 votes
    9y

    This is an unfortunate situation on all sides. I'm sure Mr. Drew will do what is necessary to fix the problem and I hope Carlos will receive an appropriate solution to rectify this issue. I work with multiple turnkey providers across the country and personally fly out to each location to assess the developers and get proof of concept for this very reason. That's not to say that these issues don't arise, even with the best turnkey providers, and I find that its times like these when the best turnkey providers leverage these "opportunities" to prove their true quality. 

    Good luck with this gentlemen. I hope this turns out to be a win-win for both of you. 

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Tom Ott  well since I don't personally know either party.. but one thing I can say in my experience which is pretty deep in these areas INDY included.. if your buying low end rentals this is simply how your home may look in a years time because of the tenant base.

    I would be curious to know price point of these rentals.. if they are like Morris invest  30 to 50k  this is not something that is out of the ordinary..

    if this was a B class or suppose to be 80k purchase price or higher then that's another thing all together.

    Even as Tom is mentioning you can have it all in house you can do everything right but you get a crappy tenant and well its the rental business.. I have had new construction 200k brand new homes that I rented.. look like this in a years time.. bad tenant.. took it out on the house..  IT happens.

    you can mitigate this though a lot by buying in the top 20% of the tenant base which usually means the top 20% of median rent.. if these are 500 to 650 rentals get used to this..

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    4Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    9y
    Always buy off referrals of people who have bought before.
    0Reply
  • Harvey LevinPro Member
    Property Manager · Indianapolis, IN · Member since 2012 · 205 posts · 157 votes
    9y

    @JayHinrichs I have to respectfully disagree with you. I manage 400 class c properties in Indianapolis that are mostly section 8 . I have actively invested and managed locally in Indy since 1980. I have held a brokers listened since 1982 and owned a very successful renovation company for almost 20 years when I sold it. I am also have a CCIM designation. I do not say any of this to brag but to explain my credibility.   I have found that proper vetting of both the property at purchase and tenants are the key to success in any class of property. Class c can be very profitable if the manger has experience and understands the market. Class c can be very profitable if the rehab has been preformed correctly. I believe the problems occur when due to the availability of low cost inventory inexperienced resellers as well as investors make poor decisions. While even with the best vetting problems can occur I see way to many resellers who have never even been to Indianapolis, never seen the neighborhoods or the properties or met the contractors or the quality of their work, selling properties to newbie investors who find themselves out of luck. The class is not to blame, the  lack of due diligence by investors is. Real Estate has always been both a fantastic investment and an industry with a lot of fraudulent activity. The moral of the story is that there is plenty of money to be made in all areas of real estate investing but the buyer beware!!

    6Reply
  • Ross Denman
    Real Estate Consultant · Whitestown, IN · Member since 2014 · 547 posts · 933 votes
    9y

    @Harvey Levin. I find myself in the middle between you and @Jay Hinrichs. We manage about 400 properties that range from $500/mo-$3,000/mo. Statistically speaking, the B-class properties have much less headaches and expenses across the board. They are rarely late, little to no damage, very short vacancy periods, etc. With that being said, the owners who are willing to "do the right things" in a C-Class neighborhood can see a fairly stable performance that may even out-perform the B-Class properties. The issue is this... people are investing in $30-40k homes because they can't afford to do the right things. They defer maintenance, refuse any upgrades, and want the lowest quality materials that can be found. I have seen investors who have done fabulous work in C-Class neighborhoods, rent for 5-10% above market, and do fairly well. There are some decent tenants in the C-Class areas, the problem is weeding through the bad ones and sitting tight (with a non-performing property) until the right one comes along. Because of this, I still think it's safer and more stable to move toward the better neighborhoods if the resources are available. Even if they are not, you can finance a $80k home that needs little work for less than the cash price of rehabbing a $40k property. It's less money out of pocket, leveraging COC ROI, with a better chance of a stable and performing asset.

    Also, many of those C-Class assets have no retail value and will likely not have one anytime soon. This means very little appreciation or retail sales opportunity in the future. At the end of the day, it really depends on your goals and resources, but I prefer to steer my clients toward the class of properties that Jay is talking about as I have seen better chances of success.

    The first real estate adage that many of us learned was... Location, Location, Location! Buying the right kind of home in the right location sets the stage for everything else.

    3Reply
  • Carlos RoviraBusiness Member
    OP
    Investor · Miami, FL · Member since 2015 · 329 posts · 124 votes
    9y

    After seeing that I posted this thread, Michael reached out to me and offered to buy back the property. Within 2 weeks, we closed at a price of $75,000. I paid $68,000 for this property initially. After the closing costs on the initial purchase, and the losses incurred from the eviction and debt service, I more or less broke even on the sale, putting this terrible nightmare to a close.

    I thank Michael for being compassionate enough to offer to purchase this property back, and although it doesn't make it ok that he allowed me to purchase this property as is in the first place, I'm sure he learned a valuable lesson in general human decency and business and he won't allow it to ever happen again to any future clients in his Turnkey business. 

    On to the next deal!

    2Reply
  • Diane G.
    CA · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    @Carlos Rovira

    Hope you learnt a thing or two from this as well... And that is not to buy something that you don't thoroughly understand and sight unseen.....

    1Reply
  • Diane G.
    CA · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    @Jay Hinrichs

    your comment about "getting used to it" is so funny AND true....

    1Reply
  • Carlos RoviraBusiness Member
    OP
    Investor · Miami, FL · Member since 2015 · 329 posts · 124 votes
    9y

    @Diane G. I did learn a number of lessons here and I will continue to learn, but that won't prevent me from taking calculated risks in order to continue building wealth. Thanks for your concern!

    0Reply
  • Cameron Davis
    Investor · Austin, TX · Member since 2017 · 126 posts · 45 votes
    9y

    I am very impressed that the seller bought back the property. I have bought properties that I personally have not seen, but I always have somebody there to check that everything is okay at closing. You have to have a realtor, property manager, or somebody that you can trust on your side.

    1Reply
  • Rolanda Eldridge
    Investor/Realtor · Hoover, AL · Member since 2010 · 1k+ posts · 459 votes
    9y

    @Carlos Rovira...Favorable Results...Keep it Moving!!

    0Reply
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