Opinions on Holton-Wise Property Group
Investor · Columbus, OH · Member since 2015 · 42 posts · 21 votes
Opinions on Holton-Wise Property Group
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes@Brandon Reinhardt I see this back and forth of a classic OOS investor who buys something wanting the greatest return possible but then expects them to perform like they bought a rental in Cupertino LOL.
get used to it... 550 renters anywhere in any big city are in constant turn over.. you ... but your right no need to reach for higher rent every month you stay vacant you lost ONE YEAR to make it up.. not many realize what you realize
I think Jim is about as honest as anyone in the space describing the challenges in C D class rentals.. I think buyers just choose to ignore the advice and or think for some reason their results will be different.
122 Replies
- Rental Property Investor · Cleveland, OH · Member since 2015 · 1k+ posts · 880 votes8y
Originally posted by @Chris Williams:
I must thank everyone for their input. I'd considered investing in the Cleveland area later this year or early next year. This has convinced me never to do that!Just because one broker doesn't operate the way you think is appropriate doesn't mean the entire market is crap and should be avoided.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Chris Williams:
Okay, I don't want to kick a hornet's nest here. Just want to share an observation.
Earlier in the thread, Mr. Wise posted a series of photos of the interior of a client's property...after the client purchased it. One other person pointed this out as a violation of said client's privacy. I emphatically agree.
In my industry (IT) this is akin to posting photos of a customer's datacenter on Instagram. GROSS privacy violation. Could easily lead to millions of dollars in cyberattack-related damage. If you did this you'd get fired THAT DAY, blacklisted from working in the industry again...and it would be 100% your fault.
I value my privacy (as I'm sure everyone here does). If a property manager treats it with casual disregard, well, they won't work with me. Ever. The whole "he started it!" is for the child's playground, not the professional's office.
I must thank everyone for their input. I'd considered investing in the Cleveland area later this year or early next year. This has convinced me never to do that!well don't throw the baby out with the bath water.. Cleveland is a big place.. when I started there last june.. I talked with Jim.. he was a little busy to handle our account. and I have bought over 35 properties since last june.. while he is a substantial broker in that area.. there are plenty more and its a huge market no one controls it.
Just like in your area there is more than Entero real estate :)..
- Investor · parma, OH · Member since 2016 · 3 posts · 0 votes8y
I think Holton Wise is very reputable in the Cleveland , Ohio area
- Pleasanton, CA · Member since 2015 · 246 posts · 115 votes8y
I have 3 properties under HW management and would like to add my feedback.
Property management:
- So far they have been good with the tenants placed, no extraordinary maintenance requests and they have all renewed after year 1. Turnover is the biggest drag on returns, so as my tenants stay longer, I will give HW all the credit.
- Communication: Overall happy, there have been a few instances where things took longer but in gen. they are good in getting back in a decent time. One thing I would say is that as you scale the volume, more staff is needed and it may take some time for the new staff to adjust to expectations.
- Urgency/Alignment in ensuring investor returns: It has been bit mixed.
When the tenants that were placed at the time of my purchase vacated, my goal was to have minimum time without having no income. The time between unit getting vacant and rent kicking in in my experience is close to 3 moths. It could easily take 2 months before a tenant places a deposit and then the rent only starts kicking in after they move in within 30 days after they place the deposit. So if there is a 3 month gap before we again get the rent and there is a rehab cost of 2.5k for a unit renting for 750 then you already are in a state where your returns for that year are almost gone. So now for the conundrum, would you want good rehab so you get a better tenant so they will renew and stay for >2 years, the answer is absolutely yes. What if they stay only 1 year- :) So as long as my tenants stay >2 years which I am hoping is the case I don't mind the extra cost to get a better tenant.
Also folks need to keep in mind, rehab costs are going to be a large chunk whether the unit is 450pm or 900 pm. I wish in hindsight no one OOS buys unit that rent for <650 PM as the chances you wont make any money are much higher. With the maintenance , PM, vacancy and utilities we have to pay there is zero room for anything going wrong.
Now coming to rehab costs, HW does a high quality job but also add a lot of default costs which they probably pick from a template (removing debris and et.al). So even if I bought a home from a flipper who did all the clean up and ensured it was rent ready I will still get a large bill. To create transparency , what would be nice would be for HW to put public stats on
- avg rehab bill for a property originally placed by HW when there is a vacancy (by unit type/SFH and neighborhood class)
- avg # of days between rent stopping and again getting accrued for investors
- avg lease length and % renewing (by unit type/SFH and neighborhood class)
I don't want to create a digression to the thread around their sales practices but the pro forma numbers usually reduce the expected costs so they should take the data from their rentals and use it in all of their # projections.
Numbers don't lie.
- Fremont, CA · Member since 2017 · 13 posts · 20 votes8y
I'm an investor from California and used Holton Wise's services while helping me serve a tenant in the Cleveland Heights area. I'm going to try to have a level-head while writing this review since the treatment meted out to me was pathetic, to say the least. Here are the facts and I'll advice you all to decide for yourself.
Problem #1: Lack of communication: For close to 2 months from the time I signed a contract with HWPM, I was able to reach a human behind a phone for a sum total of TWO times. The rest of the time was spent talking to voice mail boxes with a 100% guarantee from them that no one would call back.
Problem #2: My emails were far more lucky than my phone calls. They indeed got a response-rate of close to 50%. Although, I had to copy 2 or 3 different people before I got a response, I, at least, didn't have to pay google for those extra CCs.
Problem #3: Miscommunication: Obviously, when they don't have time to talk to the owners, there is only so much we can "communicate" with them. Some of the basic instructions I gave them were either not acknowledged or got lost in translation (Please see below).
Problem #4: Incorrect lease: One of my several emails had clear instructions on what kind of lease I wanted with the tenant, specifying clearly the rent amount, the lease duration and the terms on paying utilities. Of course, these instructions only matter when there is someone reading your email.
The lease that was signed and sent to me had an incorrect rent amount with an additional clause making me pay for utilities!! HWPM's response was simple: Sorry, but we cannot fix the error.
Reason: They pointed to a clause in their terms that says HWPM has every right to "negotiate" the lease terms with the tenants. Oh, thank my heavens for their power to negotiate a deal $125 less than what I had asked for and for making me pay my tenant's utilities! They also had one more interesting thing to say: That the lease is a binding agreement and that it cannot be changed. Well, blame me for not realizing that.
The only solace was that property manager called and accepted the error at their end. However, being the lucky owner that I am, I was given the absolute honor of footing the bill/loss.
Problem #5: Attitude: Several people I spoke to mentioned that such errors are common in management companies and that a good company would try to fix their mistake and keep you with them. But HWPM made no such attempt, even in the wildest of imaginations. In fact, an email I received from the owner made it clear to me to find some other management company. And I'm extremely glad that he said that - I'll be grateful to him for giving me such wonderful advice!
Problem #6: Fees: This one is for the math buffs. I was with HWPM under a contract for not more than 2 months. But man, they do make a good business out of you. For the under-prepared, here's a split-up of all the fees that I had to pay:
a) Account Setup Fee: $95
b) Bill Pay Fee: $15 (A bill paid to the city of cleveland for some permit)
c) Lease renewal fee: $195 (That is right! For getting me a lease whose terms I did not authorize)
d) Management Fee: 10%
e) Contract early termination Fee: $195 (Yes, I deserved this for going with them in the first place :) )
Bottom-Line: Not a single attempt from them to set things right. I have now moved to a different company in the same area and am loving it so far. They have taken ZERO fees from me so far and have been providing an amazing service . A world of difference and most importantly, the new company does indeed have humans who talk to you over phone and respond to your emails!
- Pleasanton, CA · Member since 2015 · 246 posts · 115 votes8y
Originally posted by @Sivakumar Ganapathy:
I'm an investor from California and used Holton Wise's services while helping me serve a tenant in the Cleveland Heights area. I'm going to try to have a level-head while writing this review since the treatment meted out to me was pathetic, to say the least. Here are the facts and I'll advice you all to decide for yourself.
Problem #1: Lack of communication: For close to 2 months from the time I signed a contract with HWPM, I was able to reach a human behind a phone for a sum total of TWO times. The rest of the time was spent talking to voice mail boxes with a 100% guarantee from them that no one would call back.
Problem #2: My emails were far more lucky than my phone calls. They indeed got a response-rate of close to 50%. Although, I had to copy 2 or 3 different people before I got a response, I, at least, didn't have to pay google for those extra CCs.
Problem #3: Miscommunication: Obviously, when they don't have time to talk to the owners, there is only so much we can "communicate" with them. Some of the basic instructions I gave them were either not acknowledged or got lost in translation (Please see below).
Problem #4: Incorrect lease: One of my several emails had clear instructions on what kind of lease I wanted with the tenant, specifying clearly the rent amount, the lease duration and the terms on paying utilities. Of course, these instructions only matter when there is someone reading your email.
The lease that was signed and sent to me had an incorrect rent amount with an additional clause making me pay for utilities!! HWPM's response was simple: Sorry, but we cannot fix the error.
Reason: They pointed to a clause in their terms that says HWPM has every right to "negotiate" the lease terms with the tenants. Oh, thank my heavens for their power to negotiate a deal $125 less than what I had asked for and for making me pay my tenant's utilities! They also had one more interesting thing to say: That the lease is a binding agreement and that it cannot be changed. Well, blame me for not realizing that.
The only solace was that property manager called and accepted the error at their end. However, being the lucky owner that I am, I was given the absolute honor of footing the bill/loss.
Problem #5: Attitude: Several people I spoke to mentioned that such errors are common in management companies and that a good company would try to fix their mistake and keep you with them. But HWPM made no such attempt, even in the wildest of imaginations. In fact, an email I received from the owner made it clear to me to find some other management company. And I'm extremely glad that he said that - I'll be grateful to him for giving me such wonderful advice!
Problem #6: Fees: This one is for the math buffs. I was with HWPM under a contract for not more than 2 months. But man, they do make a good business out of you. For the under-prepared, here's a split-up of all the fees that I had to pay:
a) Account Setup Fee: $95
b) Bill Pay Fee: $15 (A bill paid to the city of cleveland for some permit)
c) Lease renewal fee: $195 (That is right! For getting me a lease whose terms I did not authorize)
d) Management Fee: 10%
e) Contract early termination Fee: $195 (Yes, I deserved this for going with them in the first place :) )
Bottom-Line: Not a single attempt from them to set things right. I have now moved to a different company in the same area and am loving it so far. They have taken ZERO fees from me so far and have been providing an amazing service . A world of difference and most importantly, the new company does indeed have humans who talk to you over phone and respond to your emails!
need more info to comment on your situation. did you buy a property with PM and then switch to HW.
what is the rent, i dont understand the reduction of 125. owner paying water and sewer is standard practise for HW. if you want tenant to pay rent needs to be lower
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Sivakumar Ganapathy I do think its humerous how when trashing one PM the next PM is JUST wonderful.. when in fact the asset the market and the tenant base is the same.
give it time.. these things all balance out.. for the life of me I can't understand how anyone would want to put up with abuse like this from clients... and you probably wore them out and they said good by..
it happens.. PM is far from an exact science the PM can't live with your tenants..
@Sunny D. your absolutely correct basically any rents under 650 to 700 a month is not enough gross revenue on an SFR to keep the investment working.
Also think about the tenant base... Chris at MI taught me this one.
you have a 600 tenant whats the criteria to putting them in your home 3X rent they make 1800 a month take out 600 for rent few hundo for TV cell phone etc etc.. these are people living on 200 a week.. can you live on 200 a week.. ???? that's why there is so much turn over at those price points.
now take a tenant in the same market who rents for 1000 needs 3k to qualify right... minus 1000 he now is living on 2k a month.. or about 400 per week double.. and maybe just above the poverty level.
- Pleasanton, CA · Member since 2015 · 246 posts · 115 votes8y
Originally posted by @Jay Hinrichs:
@Sivakumar Ganapathy I do think its humerous how when trashing one PM the next PM is JUST wonderful.. when in fact the asset the market and the tenant base is the same.
give it time.. these things all balance out.. for the life of me I can't understand how anyone would want to put up with abuse like this from clients... and you probably wore them out and they said good by..
it happens.. PM is far from an exact science the PM can't live with your tenants..
@Sunny D. your absolutely correct basically any rents under 650 to 700 a month is not enough gross revenue on an SFR to keep the investment working.
Also think about the tenant base... Chris at MI taught me this one.
you have a 600 tenant whats the criteria to putting them in your home 3X rent they make 1800 a month take out 600 for rent few hundo for TV cell phone etc etc.. these are people living on 200 a week.. can you live on 200 a week.. ???? that's why there is so much turn over at those price points.
now take a tenant in the same market who rents for 1000 needs 3k to qualify right... minus 1000 he now is living on 2k a month.. or about 400 per week double.. and maybe just above the poverty level.
thank fully i am sticking to parma and west side (44135 and 44111)
my sfrs are at 950 and each unit in my 2 duplexes around 700 pm
i still think HW has to balance its own growth goals and in making investors money
if you want to be the largest broker, property mgr and also aim for the revenue growth coming from construction , then you cant meet investors expectations
the sales team is all about the numbers on 12 to 20 percent coc claims on paper, when it turns over to property mgmt the realty on numbers sets in and its true the rehab costs are not small if you look at it from a investors lens.
eventually people will move their business to pure PMs that are smaller and more boutique
- Fremont, CA · Member since 2017 · 13 posts · 20 votes8y
@Sunny D.: Let's take it up offline. I don't want to dilute the good discussions in this thread.
@Jay Hinrichs: Unfortunately, what might seem humorous for you was far from that for me. In any case, I only wanted to state the facts. I rest my case.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Sunny D. usually the only ones to make A TRUE 12 to 20% CoC are do it yourselfers... FRankly.
that's unrealistic for OOS investor expecting someone else to do it all for them.
also values have gone up on the assets and rents have not followed thereby squeezing return.
its quite common in the MF space to see blue sky proforma's.. those are all best case scenerios
there is NO best case in the rental game.. something is always going on.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes8y
Originally posted by @Sivakumar Ganapathy:
I'm an investor from California and used Holton Wise's services while helping me serve a tenant in the Cleveland Heights area. I'm going to try to have a level-head while writing this review since the treatment meted out to me was pathetic, to say the least. Here are the facts and I'll advice you all to decide for yourself.
Problem #1: Lack of communication: For close to 2 months from the time I signed a contract with HWPM, I was able to reach a human behind a phone for a sum total of TWO times. The rest of the time was spent talking to voice mail boxes with a 100% guarantee from them that no one would call back.
Problem #2: My emails were far more lucky than my phone calls. They indeed got a response-rate of close to 50%. Although, I had to copy 2 or 3 different people before I got a response, I, at least, didn't have to pay google for those extra CCs.
Problem #3: Miscommunication: Obviously, when they don't have time to talk to the owners, there is only so much we can "communicate" with them. Some of the basic instructions I gave them were either not acknowledged or got lost in translation (Please see below).
Problem #4: Incorrect lease: One of my several emails had clear instructions on what kind of lease I wanted with the tenant, specifying clearly the rent amount, the lease duration and the terms on paying utilities. Of course, these instructions only matter when there is someone reading your email.
The lease that was signed and sent to me had an incorrect rent amount with an additional clause making me pay for utilities!! HWPM's response was simple: Sorry, but we cannot fix the error.
Reason: They pointed to a clause in their terms that says HWPM has every right to "negotiate" the lease terms with the tenants. Oh, thank my heavens for their power to negotiate a deal $125 less than what I had asked for and for making me pay my tenant's utilities! They also had one more interesting thing to say: That the lease is a binding agreement and that it cannot be changed. Well, blame me for not realizing that.
The only solace was that property manager called and accepted the error at their end. However, being the lucky owner that I am, I was given the absolute honor of footing the bill/loss.
Problem #5: Attitude: Several people I spoke to mentioned that such errors are common in management companies and that a good company would try to fix their mistake and keep you with them. But HWPM made no such attempt, even in the wildest of imaginations. In fact, an email I received from the owner made it clear to me to find some other management company. And I'm extremely glad that he said that - I'll be grateful to him for giving me such wonderful advice!
Problem #6: Fees: This one is for the math buffs. I was with HWPM under a contract for not more than 2 months. But man, they do make a good business out of you. For the under-prepared, here's a split-up of all the fees that I had to pay:
a) Account Setup Fee: $95
b) Bill Pay Fee: $15 (A bill paid to the city of cleveland for some permit)
c) Lease renewal fee: $195 (That is right! For getting me a lease whose terms I did not authorize)
d) Management Fee: 10%
e) Contract early termination Fee: $195 (Yes, I deserved this for going with them in the first place :) )
Bottom-Line: Not a single attempt from them to set things right. I have now moved to a different company in the same area and am loving it so far. They have taken ZERO fees from me so far and have been providing an amazing service . A world of difference and most importantly, the new company does indeed have humans who talk to you over phone and respond to your emails!
Sivakumar Ganapathy
While it's never my goal to have an unhappy investor there are some investors who simply want a product that is different than the one that we offer. Holton-Wise's property management services are not the correct fit for everyone. I will be the 1st to state that. If you go to McDonald's & order a Taco you won't be given a Taco. Doesn't mean McDonald's is bad, just means they do not serve Tacos.
Holton-Wise does it's very best to remain as transparent as possible about all of our policies & procedures. The fee structure that you have taken issue with is available right on our website for download. While I am sure you would like to pay less I make no apologies for our fee structure. I feel that it is very competitive in this business that has razor thin margins. I have no intention of lowering that fee structure.
I started this business to make money just like I am sure all of you that have read or are reading this thread are here on Bigger Pockets to make money. I will make no apologies for creating a profitable business. The notion that your new Property Manger has been working for you without charging any you any fees. Hey, I am happy for you. However, I have no desire to compete with free. I hope it works out for you but unfortunately I've never heard of that company & I'd imagine the reason why it's so much smaller than Holton-Wise is it's fee structure as it's currently laid out is not a sustainable Business structure. Below is a screen shot of our property management FAQ. As you can see all of our pricing is right there in the open for anyone to download.
As for your complaint on the lease & you not having the final say over what terms were acceptable. At Holton-Wise when we manage the property, WE MANAGE THE PROPERTY. We negotiate the lease terms that we feel will result in the most profitable operation of your properties. We have the experience & expertise in this market, hence why we have been hired & built a portfolio that is sized the way it is. It would be logistically impossible for us to act in any other capacity.
Some investors want to be more hands on & have input & give approval on this process. While I can understand why an investor would want to do that it should be noted that Holton-Wise is not going to be the right fit for the hands on investor. The hands on investor is looking for more of an employer / employee relationship. Nothing wrong with that, but it's just not the business that Holton-Wise is in. Again, this is not something we hide from. It's listed right on our website on our Property Management FAQ.
It is also listed in our Property Management agreement which is available for download.
As for the water payments. Again, we make that as clear as possible on the Property Management FAQ.
Regarding your issues with our communication. Communication is a tough one. I apologize that we have fallen short on the communication end. It is incredibly challenging to build a Property Management company that hits it's customers expectations in this regard. Admittedly, it is still something that Holton-Wise is working out the kinks on. It should be noted that phone calls are an incredibly inefficient mean of communication between owner & Property Manger.
I am sorry you are less than impressed with Holton-Wise & that the business relationship didn't pan out. We are unable to change all of our products, policies & procedures to meet the specific needs of every single investor out there in the world. No business can please everyone. We simply try to put fourth the best product we can to service the clients that buy into our philosophy & strategy. I wish you luck on your future investments.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@James Wise well your correct to have the say on rental rates.. if you leave it to he owner he sets a rate way too high because that's what their return CRITERIA is.. you guys all waste your time showing a house that will never rent.
then the next thread will be HEY HW had my house for 4 months and it never rented DUH.. your the expert that's why they hire you .. you know what these homes will rent for.
this is one HUGE boo boo I see rookie and greedy new landlords make.. they will sit there and let their house stay vacant over 50 bucks a month..
so I ask you for every month it stays vacant you lost 800 1000 dollars even if you rented it say 2 or 3 months later for the higher number how many months is it going to make up for the 1600 to 3k you lost at 50 a month.. absolutely foolish in my mind.
Vacant houses kill you as a landlord in more ways than one.. 1. lost revenue 2.. Target for vandalism which is far more real than most OOS investors can even comprehend unless they have lived in these markets. and then you have the other great pleasure of a PM calling or e mailing saying your vacant house just got broken into and stripped..
some people you simply can't please.. any PM that does this for next to nothing will not be here in a few years they will be broke.. again Chris at MI makes no bones about it either.. neither do some of the other pro's I know in the business..
Its the owners who have to chill out.. they bought a rental .. this has some income risk and other risk .. this is not a mutual fund.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes8y
Originally posted by @Jay Hinrichs:
@James Wise well your correct to have the say on rental rates.. if you leave it to he owner he sets a rate way too high because that's what their return CRITERIA is.. you guys all waste your time showing a house that will never rent.
then the next thread will be HEY HW had my house for 4 months and it never rented DUH.. your the expert that's why they hire you .. you know what these homes will rent for.
this is one HUGE boo boo I see rookie and greedy new landlords make.. they will sit there and let their house stay vacant over 50 bucks a month..
so I ask you for every month it stays vacant you lost 800 1000 dollars even if you rented it say 2 or 3 months later for the higher number how many months is it going to make up for the 1600 to 3k you lost at 50 a month.. absolutely foolish in my mind.
Vacant houses kill you as a landlord in more ways than one.. 1. lost revenue 2.. Target for vandalism which is far more real than most OOS investors can even comprehend unless they have lived in these markets. and then you have the other great pleasure of a PM calling or e mailing saying your vacant house just got broken into and stripped..
some people you simply can't please.. any PM that does this for next to nothing will not be here in a few years they will be broke.. again Chris at MI makes no bones about it either.. neither do some of the other pro's I know in the business..
Its the owners who have to chill out.. they bought a rental .. this has some income risk and other risk .. this is not a mutual fund.
Yes, incorrect rental pricing &/or rental pricing disputes are another thing that highlights the fact that many novices don't seem to understand that the relationship between Property Manager (& or Realtor for that matter) is a two way street. The Property Management company is also making an investment in the client.
The client doesn't understand that the client is not the one who is paying the expenses on the process of getting a property leased. As a business owner I have my employees hourly wage to field phone calls, respond to emails, make ads & drive to & from tenant showings. If the property is overpriced it's only going to attract tenants whom don't qualify to live anywhere else. Hence a whole bunch of time, money & missed opportunity down the drain running around in circles for something that's a one in a million shot at best. Thing is it's not the investors time, money & opportunity wasted, it's my time, money & opportunity wasted. I am not interested in letting someone who lives halfway around the country who's only experience in Cleveland rental real estate rates is 3 days of craigslist & google earth research. I've dedicated my life to this business. My staff lives this stuff day in & day out. Aces in their places. Anyone with a solid understanding of core business principles is going to see that that running a business any other way isn't sustainable.
- Rental Property Investor · Reading, PA · Member since 2017 · 40 posts · 25 votes8y
Originally posted by @David S.:
I don't really have a dog in this fight, but have 15 years of experience in being a landlord. Here is some general advice concerning this thread:
1. Class C and D properties will usually have high turnover due to non-pays, kicking people out for illegal activities, a great tenant moving in the new partner (i.e. girlfriend/boyfriend) who is a dead beat who doesn't work and causes problems with the neighbors, kicking people out who tear up, etc. When there is turnover, there is a potential of large repair bills. Oh and the new dead beat boyfriend, he is just visiting....that is what they will tell the judge when you evict due to a lease violation of moving them in there without your permission.
2. Class C and D properties will get robbed more often. I know of areas where landlords must go run to the property to remove all appliances from the unit when it goes vacant because they grow legs and walk off. I know of landlords who bolt down or cage in their AC units because it will get stolen for $20 worth of copper that some crackhead will then use to go buy a crack rock, leaving thousands of dollars worth a damage to the owner for that hit of crack.
3. People who succeed in these properties are SPECIALISTS. They themselves are the boots on the ground or they have a dedicated employee or family member in that capacity.
4. If you are not a SPECIALIST in this type of property, then DO NOT INVEST IN CLASS C or D PROPERTIES!!!!! Get a higher asset class, class A or B, buy bonds, or just put your money in a S & P 500 index mutual fund. With the bonds, CD's or S & P mutual fund, you set it and forget it.
5. Your 20% pro forma and 12 cap rate calculations for C and D class properties are pure BS unless you have #3. If that is the case, you are working your a$$ off to get those returns.
6. 90 % of property management companies in my area do not take on Class C and D properties and about 95% who manage in Class C and D aren't worth a sh$t! This may or may not be true in your area. Managing these properties are a lot more work and I don't think you can please owners with a $4000 repair bill every time someone moves out. All applicants in Class D areas will have bad credit. I have seen some folks with good credit in Class C, but they are not in the majority.
7. The further you go down in asset class, the harder you (or your rep) will work. For example, Class C- is more work than C+. Class D----you may as well just show up in the area every day. These areas need full time babysitters and law enforcement.
Again, I will say.
IF ARE NOT A SPECIALIST IN CLASS C OR D, INVEST YOUR MONEY ELSEWHERE!!!!!!!!!!!
This is very interesting and enlightening to a newbie investing in class C properties. Kudos! :)
- Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes8y
I dont own in Cleaveland and have no experience with HW. But based on the threads here and the responses of HW, it is not a company I would choose to do business with. My PM in Indy returns my calls personally the same day I call. As a customer, if I cannot reach the PM who is managing over $500K of my assets, theres a problem. I have invested less money in several well known syndications and funds and even there I can get the fund manager on the phone the same day. The sheer arrogance of companies that would treat my business like that would see me walk out of there faster than a speeding bullet. If I wanted to be that hands off that I just dont care, Id buy an index fund and call it good.
- Pleasanton, CA · Member since 2015 · 246 posts · 115 votes8y
Originally posted by @Jay Hinrichs:
@Sunny D. usually the only ones to make A TRUE 12 to 20% CoC are do it yourselfers... FRankly.
that's unrealistic for OOS investor expecting someone else to do it all for them.
also values have gone up on the assets and rents have not followed thereby squeezing return.
its quite common in the MF space to see blue sky proforma's.. those are all best case scenerios
there is NO best case in the rental game.. something is always going on.
Good to see a detailed response from @James Wise to @Sivakumar Ganapathy
Honestly it feels Siva just woke up to the realty of C class returns. Over the long term, the new PM after a while will no longer shine as well
Now if we want to dissect why investors start getting cold feet on a market, the combination of aggressive sales, expensive construction costs with rehab and a reduced communication quality is not helping. I am pretty sure OOS investors are a big factor in the growth of HW business and BP has helped them grow, so they can't appear arrogant and closed to the feedback.
My main learning experience is to completely discount the projected numbers. Below is what one of my favorite HW realtors sent just yesterday. He is claiming a 21% COC return.
So what is wrong with the #s.
1. If the OOS investor goes to HWPG he should be prepared for a min 2k initial rehab expense despite the claim that property is in a ready to move condition. There will be some default costs around visual inspections and general cleaning but the small items in each room add up. In the pro-forma, the initial improvement is set as 0.
2. The vacancy loss is set as 5% and too low. If I assume tenant staying 4 years has a probability of 5%, 3 years a probability of 35%, 2 years probability of 65% and 1 year with a probability of 95%. If with each turnover there is a 3 month time gap before my rent starts accruing, then the calculated outcome is that a tenant stays an average of 21 months following which I will have a 3 month rental loss. Even if I want to be aggressive in this estimation and assume tenant staying 4 years has a probability of 25%, 3 years has a probability of 50%, 2 years probability of 75% and 1 year with a probability of 100%, the outcome still reflects that a tenant stays 24 months on avg. followed by a 3 month rental loss. So I estimate a 11% vacancy rates than the 5% in the pro-forma.
3. It is safer to assume now most get a 5.5% 30 year mortgage rate or 4.875% 15 yr mortgage right now.
4. Utilities are set as 0%. With owner being responsible for water/sewer, I would assume a 1000$ per year expense
5. Lawn care is set as 0. It should be 500$ per year
6. Maintenance and capex are low at 3%, $350 per year assumption. This is too low. We should assume at least 6% each per year.
7. For a financing assumption, I should also include loan costs which in my experience is a min of 2 to 2.5K.
From my own customized calculator, the coc returns are no where close to 21%. Also I like to do IRR calculations assuming a sale in 5 years with 10% selling cost
- 8yBrian CardwellPro MemberInvestor · Odenton, MD · Member since 2017 · 204 posts · 144 votes
Great write up @Sunny D. In my experience with HWPG, this is spot on. Now,also think one needs to define turnkey. Turnkey = fully rehabbed and rented. IMO HWPG doesn't typically work in the Turnkey market.
- Real Estate Investor · Marysville, OH · Member since 2014 · 242 posts · 196 votes8y
I've been using them for about 2 years. I have 5 buildings, 12 units total. I'd very much like more but deals are a little less amazing in the past 6-9 months than before.
Overall, I'm satisfied. I don't have to deal with tenants, EVER. I get a detailed accounting of repairs and monthly expenses / rents every month. (In fact, now I can access it in real-time whereas prior to 2018, it was only by email at EOM each month.) Can I be totally hands-off? No, because I still get utility bills, tax bills, etc. But it doesn't take up too much of my time.
Are there things they do pretty well? Yes. The agent I've worked with has really busted his *** for me and I've gotten some kick *** deals. The units look pretty nice after being fixed up especially if they rip out the carpet and finish the HWs. I stick to A or B areas so I don't really have an issue with things being fixed up "too nice". Could the same repairs be done cheaper? Maybe, but I'm not sure how much cheaper w/o DIY. Several of my units that had the leases expire they got the tenants to renew and most of them also had a rent increase along with it. I think only one tenant actually placed by HWPG (my very first property) actually has left left and been replaced so far. The rest of the tenants have either renewed, or if they left, they were inherited tenants from the retired landlord I bought the houses from, so I was not as heartbroken about it.
Are there things they could do better? Yes. They had/have a lot of growing pains. 2016 and maybe the first part of 2017 were not stellar with communication, but not as awful as what some people are saying here at least in my experiences. Are there still hiccups sometimes? Yes. It's gotten a lot better, at least for me, since Valerie started being involved in things. I usually get my questions answered same day or next day depending on when I email.
I would like a clearer automated understanding of where my property is at in the "tenant moved out -> unit secured -> unit rehabbed -> make ready -> unit advertised -> tenant deposit -> tenant moved in" pipeline without having to ask. Like their end of month reports they used to do by email, this could be modernized to be put into the Rentec portal and would provide a lot of useful information and cut down on email traffic.
- Attorney · Akron, OH · Member since 2016 · 535 posts · 389 votes8y
Originally posted by @Sunny D.:
I have 3 properties under HW management and would like to add my feedback.
Property management:
- So far they have been good with the tenants placed, no extraordinary maintenance requests and they have all renewed after year 1. Turnover is the biggest drag on returns, so as my tenants stay longer, I will give HW all the credit.
- Communication: Overall happy, there have been a few instances where things took longer but in gen. they are good in getting back in a decent time. One thing I would say is that as you scale the volume, more staff is needed and it may take some time for the new staff to adjust to expectations.
- Urgency/Alignment in ensuring investor returns: It has been bit mixed.
When the tenants that were placed at the time of my purchase vacated, my goal was to have minimum time without having no income. The time between unit getting vacant and rent kicking in in my experience is close to 3 moths. It could easily take 2 months before a tenant places a deposit and then the rent only starts kicking in after they move in within 30 days after they place the deposit. So if there is a 3 month gap before we again get the rent and there is a rehab cost of 2.5k for a unit renting for 750 then you already are in a state where your returns for that year are almost gone. So now for the conundrum, would you want good rehab so you get a better tenant so they will renew and stay for >2 years, the answer is absolutely yes. What if they stay only 1 year- :) So as long as my tenants stay >2 years which I am hoping is the case I don't mind the extra cost to get a better tenant.
Also folks need to keep in mind, rehab costs are going to be a large chunk whether the unit is 450pm or 900 pm. I wish in hindsight no one OOS buys unit that rent for <650 PM as the chances you wont make any money are much higher. With the maintenance , PM, vacancy and utilities we have to pay there is zero room for anything going wrong.
Now coming to rehab costs, HW does a high quality job but also add a lot of default costs which they probably pick from a template (removing debris and et.al). So even if I bought a home from a flipper who did all the clean up and ensured it was rent ready I will still get a large bill. To create transparency , what would be nice would be for HW to put public stats on
- avg rehab bill for a property originally placed by HW when there is a vacancy (by unit type/SFH and neighborhood class)
- avg # of days between rent stopping and again getting accrued for investors
- avg lease length and % renewing (by unit type/SFH and neighborhood class)
I don't want to create a digression to the thread around their sales practices but the pro forma numbers usually reduce the expected costs so they should take the data from their rentals and use it in all of their # projections.
Numbers don't lie.
Hi @Sunny D., I'm having some trouble understanding one of the issues you pointed out in your post. You indicated that you "again get the rent and there is a rehab cost of 2.5k..." Does this mean that you were consistently paying rehab costs with each of the tenants that Holton Wise was placing? Was this just an initial rehab cost? Was it a fluke that sometimes occurs with tenants?
I'm asking for clarification since the numbers you are sharing show a catastrophic problem. Namely, at these repair rates, investing in any property that provides 600-700 rental income is effectively worthless when managed by Holton Wise. If you wouldn't mind, could you expand on whether you think the $2.5k was excessive by virtue of inflated costs of repairs? In other words, was Holton Wise charging you for simple things like tightening the screws, replacement fixtures that were not necessary, or excessively increased costs above the wholesale value of the fixtures being installed?
Thank you for your insight.
- Pleasanton, CA · Member since 2015 · 246 posts · 115 votes8y
Originally posted by @James Galla:
Originally posted by @Sunny D.:
I have 3 properties under HW management and would like to add my feedback.
Property management:
- So far they have been good with the tenants placed, no extraordinary maintenance requests and they have all renewed after year 1. Turnover is the biggest drag on returns, so as my tenants stay longer, I will give HW all the credit.
- Communication: Overall happy, there have been a few instances where things took longer but in gen. they are good in getting back in a decent time. One thing I would say is that as you scale the volume, more staff is needed and it may take some time for the new staff to adjust to expectations.
- Urgency/Alignment in ensuring investor returns: It has been bit mixed.
When the tenants that were placed at the time of my purchase vacated, my goal was to have minimum time without having no income. The time between unit getting vacant and rent kicking in in my experience is close to 3 moths. It could easily take 2 months before a tenant places a deposit and then the rent only starts kicking in after they move in within 30 days after they place the deposit. So if there is a 3 month gap before we again get the rent and there is a rehab cost of 2.5k for a unit renting for 750 then you already are in a state where your returns for that year are almost gone. So now for the conundrum, would you want good rehab so you get a better tenant so they will renew and stay for >2 years, the answer is absolutely yes. What if they stay only 1 year- :) So as long as my tenants stay >2 years which I am hoping is the case I don't mind the extra cost to get a better tenant.
Also folks need to keep in mind, rehab costs are going to be a large chunk whether the unit is 450pm or 900 pm. I wish in hindsight no one OOS buys unit that rent for <650 PM as the chances you wont make any money are much higher. With the maintenance , PM, vacancy and utilities we have to pay there is zero room for anything going wrong.
Now coming to rehab costs, HW does a high quality job but also add a lot of default costs which they probably pick from a template (removing debris and et.al). So even if I bought a home from a flipper who did all the clean up and ensured it was rent ready I will still get a large bill. To create transparency , what would be nice would be for HW to put public stats on
- avg rehab bill for a property originally placed by HW when there is a vacancy (by unit type/SFH and neighborhood class)
- avg # of days between rent stopping and again getting accrued for investors
- avg lease length and % renewing (by unit type/SFH and neighborhood class)
I don't want to create a digression to the thread around their sales practices but the pro forma numbers usually reduce the expected costs so they should take the data from their rentals and use it in all of their # projections.
Numbers don't lie.
Hi @Sunny D., I'm having some trouble understanding one of the issues you pointed out in your post. You indicated that you "again get the rent and there is a rehab cost of 2.5k..." Does this mean that you were consistently paying rehab costs with each of the tenants that Holton Wise was placing? Was this just an initial rehab cost? Was it a fluke that sometimes occurs with tenants?
I'm asking for clarification since the numbers you are sharing show a catastrophic problem. Namely, at these repair rates, investing in any property that provides 600-700 rental income is effectively worthless when managed by Holton Wise. If you wouldn't mind, could you expand on whether you think the $2.5k was excessive by virtue of inflated costs of repairs? In other words, was Holton Wise charging you for simple things like tightening the screws, replacement fixtures that were not necessary, or excessively increased costs above the wholesale value of the fixtures being installed?
Thank you for your insight.
my experience has been that with every tenant turnover or when a tenant is placed after you aquired the property, the rehab cost will not be insignificant relative to your rent. HW itemizes everything they do and no little thing comes for free.
- Real Estate Professional · El Dorado Hills, CA · Member since 2016 · 13 posts · 23 votes8y
Hilariously (or not so) I had to ask HW why they were raising the rent on my property in marketing when they were already unable to lease it for several months. After weeks of trying to get a hold of someone, nobody could give me an answer other than "the higher rent is closer to market" to which I responded, if nobody is renting it at the lower price why would you assume a higher price is now market? I asked that they not only revert to the original rental rate but lower it another $50/month. Shocking strategy for someone who "dedicated their life to this business" and who's staff "lives this stuff day in and day out" Again, enjoying a steady 100% occupancy since switching PM companies. With the new PM I also get responses within minutes via text message instead of days or weeks after berating HW with calls and emails.
- Islip, NY · Member since 2013 · 95 posts · 27 votes8y
Wow one HELL OF A THREAD, I invest in ohio, (Dayton and surrounding areas) but only thru syndications and occupancy is always a problem. I am wondering does Cleveland have a & b class properties and if not HWPG then who is the expert in cleveland
- Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes8y
If you haven't looked at Holton-Wise in Cleveland then you need to. Some people will say they have "some bad" reviews out there. Who doesn't? Nobody is going to have 100% stellar reviews all the time. I would venture to say that MOST PMs that have more than 1 review on yelp are going to have a bad review....and it's typically from a disgruntled tenant, most likely one that they had to evict. I do know that someone that was on a BP Podcast last year that has over 100 units in Cleveland, fired his PM and started having Holton-Wise start taking over managing his rentals so THAT should tell you something.
Take advice from people who have actually bought in Cleveland my man, as opposed to tenants who have rented in Cleveland.
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