kathy fettke real wealth network
Saint Augustine, FL · Member since 2013 · 9 posts · 0 votes
kathy fettke real wealth network
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesJerry w.
The turn key business has been alive and well for 15 years or so now.. There are very few who survived 07 to 09.. So what you have now is a whole new crop of turnkey companies. And or the turnkey companies moved markets changed who they had selling their properties.
However when I started loaning hard money to I would say 7 to 10 Turn key guys here is how it went.
First I would say 80% of the buyers came out of the LA basin.. Mike Harris's radio show.. Jay and Bill down in San Diego, Nick Vertucci in Irvine, Marshall Reddick, You get the drift. These are the marketing companies. they then reached out to the wholesaler rehabber in the markets they wanted to work in.
Or the wholesaler rehabber reached out to them and said I have product. Many Started in Detroit before the melt down. Memphis had always been a hot bed with Memphis invest the Reedys LCS etc etc. North Carolina had Carolina liquidators , Jackson MS had 5 or six different companies.. One guy that sold a bunch was Demetris Mathis, Bob Lucroy, Walter Woofard, Brad Miller, then in Birmingham you had Justin Harrison, Aaron Adams at Alpine in Indy, And Jerry Cohen and his Son Sean who I loaned money to many times, I see Sean has gone into hard money lending. and the list goes on and on. Now other than Memphis invest and the Reedys I loaned hard money to each and everyone of these turn key operators clients and in many cases to them personally.. The clients came from the Radio shows in LA and San Deigo.. And some from SF there was a Doctor somebody I forget his name... So we loaned the turn Key operator short term money to secure the asset.. usually 3o days or so.. Then when they matched the home up with an LA investor through one of the marketing companies mentioned above we then did the 60% to 65% Hard money loan of ARV to the LA investor.. So now the LA investor is MY client. The loan would pay off the short term loan ( Pay me off and I made a fee there) I would escrow rehab funds and The Turn key provider and the Marketing company be it MIke Harris Jay and Bill Nick Vertucci any of these guys they got their profit as well. So now everyone has made there money. And its now me and the turn key company rehabbing with me controlling draws and I had independent inspectors to do draw requests and confirmations. Then the LA buyer would get a RAte and term refi at 75% LTV sometimes 80 and would very often get cash back at closing. So there you had The RAdio promoters promoting not only no money down but up to 8k cash back per closing and we can do 4 at once.. And with the lier loans and such it was one easy sell. So Refi happens I get cashed out and we do it again.. So at my peak ( not to be confused with Peak in KC) I was doing between 60 and 80 of these each and every month. And you can do the math we made 5 points plus junk fees and 15% interest I had credit line with my local banks at 6 to 7% so we were making not only the points but the spread.. BUT WE TOOK ALL THE RISK IF IT cratered.. And this went on for 4 to 5 years... Life was good right.
Everyone was making money.. Well then the excrement hit the fan.. I had about 700 loans out and everything came to a screeching half AUG of 08.. We were like the titanic and once we went into neutral then reverse we did 3 months of loans and got stuck with them. I was in Europe most of October going OH crap what am I going to do.
Well this is when I learned about PM and how hard it is to manage mid western properties. Some work fine but many have problems and major problems. My two hundred loans went under because the owners in LA were newbies did not know what they were really doing they had been sold a passive turn key program the guys on the ground are now doing something different because they are not making any new sales.. And the La investors failed big time.. this is were most of your 08 to 2011 foreclosure inventory comes from in all these markets , Granted it was a lot of sub prime Owner Occ but it was a crap load of investors who just could not keep properties up and running.. they were undercapitalized to start with. they were sold a program that called for positive cash flow,, they were really getting negative cash flow and of course the 8k per house they took out at closing is sitting in the driveway either on wheels a Jet ski or was that fabulous trip they could never afford. IT was a melt down of epic proportions.. I personally lost about 3 million in this down turn.. I paid all my creditors off never defaulted on my underlying bank loans and learned more than just about any person in the country about how turn key works.. I know I saw all the HUDS. I funded well over 2000 of these.. And after all this call me crazy but I went out and bought 350 homes the last 3 years.. And I just sold them all in Oct.
So what you have now is the new turn key guys.. The Cohens are not turn key anymore they are hard money.. Clothier and Memphis invest exploded as there was a huge vacuum in the space.. Atlanta became soup de jour and was hands down on of the best markets.. I bought 50 homes there from 09 to 2010 and sold them last July and made 50% profit. So just getting part of the 3 million I lost when the economy cratered and all the LA turn key investors and owners went pear shaped and turtled up.. NOw you have a whole new crew of turn key. Mike Harris is still on the Radio so is Jay and Bill,,,, Nick Vertucci has rocked it the last few years. Aaron Adams has gone from a great property manager to a great turn key guy in his own right.. Clothiers have such a good reputation as turn key gurus that they have a big following.... then there is me the little engine that "could" that made much of what went on happen I spent 2 years in limbo hell foreclosing on La folks and securing my assets Had to move to the south knocked on doors it was night mare of epic proportions I went from the penthouse on the cruise ship coming into Venice to cruising the Hood in Memphis looking at barred up windows caged Aircondioning units and talking with tenants that knew me to be a lamb to the slaughter.. Everyone paid there rent to someone.. just a night mare... I suspect in certain markets we were defiantly market makers. And the turn key guys that turned and ran and did not help their clients I would not deal with again. Those that stuck it out we are doing things today NOt as big as I was but substantial and fun.... So today I fund not only mezz financing for half a dozen of the guys in the bizz but do 5 year financing for them as well Ala a Peak product. WE fund almost a million a month of that paper and growing. And since I have the outlets and long history with my guys I have this down its me and 2 great gals that run it... I have a new mezz model that just rocks it and makes those deals so streamline its great. And I can tell you I am not by far the cheapest but I am by far the fastest and most reliable once I provide a credit facility for one of my turn key guys.. In addition I have 3 of the best off shore providers in my camp as well.
So there you go no mystery to this.. and other than the big cash out when folks bought the properties the business is really quite simple.. buy a bombed out foreclosure that an investor walked away from because PM was cruddy. And or they tried to do it themselves which is another recipe for disaster in the B and C class of any of these mid western markets... For the first 3 years after the great collapse all the turn key guys went to promoting IRA buyers.. all cash 60 % of all houses are bought with cash.. So other than my mezz financing there was no need for the hard money to put them in title and then do a rate and term refi so that business for now is gone probably for good.
And depending on when and where people are buying there are some really good buys.. BUT it really really comes down to one thing. Anyone can buy a foreclosure and Johnny lunch bucket can do the TIP TOP reno.. its all about PM without it your destined to fail in my Humble opinion and personal experience. further its my sincere belief that C properties are NOT an appropriate investment for anyone who does not live and work in the area. Yes some will work but many are disasters. I just had a lady e mail me from AU a few minutes ago.. She is investing with me in Oregon... And 2 of her 3 rentals are vacant and she paid full pop for them 80k a piece from one of the top Memphis turn key guys.. No matter who's fault it is she is just sick she is sitting over there not knowing what to do.. And for her to come here is 5k plus loss of work time.. Etc etc. Even people from LA or SF its a 1500 round trip if you got to go to one of these markets.. So my point is for arm chair passive and to be very conservative and safe investors need to look at much better properties pay more expect less cash flow but make it up with a true property that can be sold for a profit down the track.. C properties no matter were they are will never sell for more than wholesale value plus rehab plus a few bucks for profit for the rehabber.. Unless you have a highly organized well financed marketing machine that can move them for more than market value.. The turn key guys and marketers can do that YOu as an individual cannot 97% of the time.
Phew that my take on this
78 Replies
- Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes13y
I thought this was the real wealth network....
- 12yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
Hey @Noel Alpert -
I have known Kathy and her staff for about three years. In my opinion, they do a really good job of working with investors who are looking for advice on markets, strategies and companies to work with. We have done about 25 deals over the years with RWN clients.
So I may not be an investor who has worked with them, but we are very particular about who we will work with in the industry and they are one of three companies that we feel comfortable with the way they work with their clients. I think they do a lot more business with other companies, but like I said, I really like their team. I think they want to help investors make smart, informed decisions.
Hope that helps.
- Dallas, TX · Member since 2013 · 4k+ posts · 744 votes12y
The only real wealth network you need is Bigger Pockets and it is free.
Joe Gore
- Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes12y
I used to listen to her podcasts quite a bit. She kind of went away from real estate investing techniques and became more about pitching all the group deals she was acting as a middle man for.
I've looked at her deals before and some areas are absolutely terrible.
If you're looking for the turnkey investments, I would say the deals her site recommends are probably about the industry norm. You're paying retail and above retail pricing (i.e they're inflating the market value by quite a bit in some areas). But they have renters in place and will manage them for you.
But keep in mind that all she is is a middle man. She's handing you off to these other turnkey companies so she's not guaranteeing a thing. Other than, maybe, that she's done some due diligence on them.
The tipping point for me was when they adding an illinois company to their mix and I started looking at their property numbers. They were in terrible areas and had super over-inflated prices. Not to mention they were selling the houses for 100% of those super inflated prices.
I'd really have to question the company's motives there. If you were to go on the MLS, you could have easily bought homes for 1/3 of what they were selling for by this turnkey company and probably been all in (purchase plus rehab) at 65% or better than what they were selling them for.
But thats another example of what her company is and isn't doing. She's just finding turnkey companies that are selling homes and recommending them to her rich followers there in California. And she's getting a cut. She isn't actually on the hook should anything go wrong there.
So, if it were me, I would dump her podcast so you aren't getting sucked in to her pitches and start listening to the BP podcast where they actually bring in real investors that are sharing real investing techniques.
If you do want to go turnkey, there are better ways to do it than her system.
- Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes12y
I haven't worked with Kathy or gone through her company, so can't say anything there, but I have met her and her husband in person and hung out around them for a long weekend (investors' weekend in Nicaragua) and they are really cool people! I enjoyed meeting them and hanging out. That's all I can say.
- Saint Augustine, FL · Member since 2013 · 9 posts · 0 votes12yThank you for all the insightful feedback on the real wealth network. I have recently attended one of their bus tours, and I did get the impression that she is the middle person passing you along to the turn-key property managers. I will continue to do my due diligence and research to see if I am going to go with her suggested companies or continue to go at it on my own. Once again thank you for all your information.
- 12yKathy FettkePro MemberRental Property Investor · Los Angeles, CA · Member since 2014 · 104 posts · 180 votes
Hi everyone,
This is Kathy Fettke, CEO of Real Wealth Network. Thanks for sharing your thoughts - it's always interesting to hear what people think of me. :-)
I just want to reply with a few questions:
What if you live in a high price coastal market and want to buy cash flow property? How do you go about it? Would it be helpful to get advice from someone who's successfully done what you're trying to do? Would you get value from being a member of a group who has the "inside scoop" on who you can trust in this business and who you should avoid?
I'm from California, so I had to learn how to invest out of state if I wanted to build a cash flowing real estate portfolio. These are the questions I had when I got started. And believe me, I learned the hard way - this industry is filled with people who like to take advantage of Californians!
So since 2003, I made it my goal to find the people we could trust to help us reach our investing goals. I created a real estate investment club, Real Wealth Network, a group of like-minded people who want to learn from each other and get support in the process. We have a lot more power when there's 14,000 of us instead of trying to go it alone!
Mike H, I appreciate your feedback and I agree that if I lived where you lived, it would be easier for me to find deals myself and be able to cut out the "middle man." But since I live far away, I have to have lots of "middle men" to help me find deals, renovate them, and manage them. Do I have to pay more for those services than if I were doing it myself? Of course, but that's the price I pay for living in a non-cash flowing marketplace.
If I tried to do it myself, I'd be paying for lots of flights and hotel rooms, and of course the time spent trying to find the deals, find the crews, find the tenants, etc... all that costs money so it really wouldn't be cheaper for me to do it myself when investing out of state. I'd rather pay more for a local expert to do the work for me - and do it better than I could.
This is also how our busy Silicon Valley and Hollywood members feel. They don't have the time to do it themselves and will happily pay an expert to help them. In fact, our podcast, The Real Wealth Show, is now broadcast in 27 countries, so it's not just Californians we are helping now.
Our system is not for everyone. But for our 14,000 members, we are the solution they've been looking for. Consider this - we send our members to a wholesaler or property manager we've vetted in Indianapolis or Houston or any city we see has potential. If that wholesaler or property manager does not offer the service they promised, we will hear about it. And we will share that information with our database - and we will no longer work with that team. So you see, over time, we have a list of people we really trust who we know take care of our members.
This is the value of a network. Again, not for everyone, but truly valuable to those who need it. And as for the comment that I'm not "on the hook" for anything - are you kidding me? Imagine the pressure of so many investors coming to me for advice. If I screw up, they lose money, and my name is mud. Obviously we wouldn't be doubling our membership every year if we weren't do something right. :-)
Looking forward to more feedback on how we're doing - we're always looking to improve. Thanks for listening!
- 12yMike D'ArrigoPro MemberTurn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
I don't know Kathy well but I've met her a few times at various events and have always been impressed. Do you pay more for a property working with someone like Real Wealth Network? Yes. They have to make money too, however, you have to look at the value of the service you are paying for. I could save money by doing my own auto repairs but I pay someone to do it for me because I have neither the time, skills or desire to do it myself. That's the case for many people who want to invest in cash flow properties too. People are busy with their lives, families and jobs and for them to do it on there own can be an insurmountable task for some and they end up not doing anything at all. Yes, I agree that there is some fantastic information and knowledge on BP, but it's not just about knowledge. It's about time and skill also. I presume that Kathy and her team fully vette the turn-key operators they are working with to assure quality rehab standards, know the area at a neighborhood and street level and have screened the property manager fully. For some people it is worth paying someone else for their service and having a cash flowing property from day one. For those that have the time, skill and inclination, they might want to be more hands on and save some money. Everyone has their own motivation and needs.
- Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes12y
I wrote a longer post but decided to dumb it down to this.
The chicago land area turn key provider they're recommending to all their members is selling their houses in areas like South Holland and Hazel Crest. And they're selling them for 135 to 150k where the cash on cash returns on the deals are running between 4 and 8% of the ones I looked at.
Thats about all I have to say about how well they vet those turn key companies.
Its one thing to "expect to pay for someone's services". Its another thing to be told how great a deal it is when they're not. Those are not great deals and they're in very bad areas to boot. If the group really knew about real estate, they wouldn't be recommending those deals to their members.
My 2 cents anyway.
- 12yEngelo RumoraBusiness MemberInvestor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
Originally posted by @Aaron Mazzrillo:
I thought this was the real wealth network....LOL
This thread is heating up.
haha
- 12yKathy FettkePro MemberRental Property Investor · Los Angeles, CA · Member since 2014 · 104 posts · 180 votes
Hi Mike,
You're right. The Chicago properties are in C neighborhoods. This is disclosed, and is only recommended to investors looking for that. Ron Manabat is our Director of Operations. He's from Chicago, and those are the very neighborhoods he invests in - successfully. People who buy there are not new to the game, but rather VERY sophisticated and know what they're doing. We have not received a single complaint from those who bought - but rather have had RAVE reviews from people waiting in line for more. Don't you think we'd have a lot of hate mail if people were getting screwed, rather than an A+ rating on BBB?
I understand you are trying to protect people by these posts. I just wish you looked a little further into what we're doing before judging us. I personally buy from the very vendors we recommend. I just bought a property in Ohio in an A neighborhood for $65,000 after all rehab, and it rents for $900 per month. What's not to like about that? Not one vacancy yet. One of our newest members just bought a duplex in the same A neighborhood for $85,000 that rents for $1200/month. That's not bad for having to pay a company to do the work for you.
I hope you join us on a tour sometime to really see what we're doing. And I didn't even mention the commercial properties that we are getting our investors for as low as 10 cents on the dollar... Those deals are so good that I dare not say more on this forum or I might get accused of something else. :-)
- Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes12y
I have no dog in this fight, but I am curious. @Kathy Fettke are you saying your company is fine with acting as middleman for investors that are buying properties in C neighborhoods and only getting 4 to 8% cash on cash returns? When you say the people buying are sophisticated investors and they are intentionally buying in C areas and are happy with those returns, are you referring to the net worth of those people (qualified investors under federal law due to income) or are you saying they are knowledgeable about real estate investing?
I am far from an expert but isn't 4% a pretty bad rate even for an A neighborhood?
- Real Estate Investor, Flipper, PM, vacation rental, Wholesaler · Athens, GA · Member since 2013 · 260 posts · 210 votes12y
- 12yKathy FettkePro MemberRental Property Investor · Los Angeles, CA · Member since 2014 · 104 posts · 180 votes
Hi Jerry,
Great question. I think what Mike H was saying is that he could find deals in the same neighborhoods for 4-8% better returns than we are getting. If that's the case, that's fantastic for him. I do know that the two companies we were recommending do a very thorough renovation, so that needs to be calculated into the equation. Our investors want their rental homes to be in like-new condition upon purchase. They don't want issues.
Obviously we are not looking for properties that net 4-8% or we'd stick with California. When going out of state, returns need to be a minimum of 9% and often they are much higher than that (like the OH property I just bought for $65K that rents for $1100).
So, to be clear here.... I am not actually a big fan of Chicago properties and we haven't actually promoted the area for some time. The taxes and landlord laws are not in the favor of investors.
However, several years ago we did promote a turn-key operation South of Chicago for a short period of time because we liked the quality of their work. Mike H contacted me at that time with concern that we were in rough areas. I went to check it out myself, wondering if my staff had made a mistake. I saw no signs of graffiti, overgrown grass, bars on windows, punks on the street, or anything that would indicate a rough area. On the contrary, I saw nice cars, high-end shopping centers and businesses. I'm not saying Mike H is wrong. I just am wondering if maybe the area is like Oakland, CA where one street is great and 5 minutes away you need police protection. You have to know an area down to street level.
This is one of the properties Mike H warned me about. It's in South Holland, and certainly doesn't look "rough." An investor paid $135,000 for it and is getting $1500/mo in rent. It was like a new home after renovation. Every member who bought through this group has raved about their investment.
The only complaint we've had is that our members wanted to buy more but the company decided to only work with several NY hedge funds who wanted all their inventory. That is a scenario many turn-key rental property providers found themselves in these past years.
So... if these deals are as awful as Mike H says, why did these hedge funds want all the inventory? (Sure, you could say not all hedge funds know what they're doing...)
Anyway, to try to make up for the demand we had within our network for Chicago properties, we interviewed other companies and found one that also had excellent renovations but they operate South of Chicago in rougher neighborhoods. I had my concerns about this, but decided that as long as we disclose that the neighborhood is C class, then the investor can decide if they want it.
Here's a picture of one the duplexes this second group offers:
An investor paid $162K after a very complete renovation with everything updated to "like-new" condition, and is getting $2000/mo in rent.
Like I said, our director of market operations is from Chicago and actually invests in these neighborhoods, but he admits it's not for everyone. I agree! It's actually not for me. I like A neighborhoods.
- Real Estate Investor, Flipper, PM, vacation rental, Wholesaler · Athens, GA · Member since 2013 · 260 posts · 210 votes12y
So when you have 14,000 investors, the buffet will have both the ugly outcomes such as what @Mike H. illustrated as well as the great outcomes such as what @Kathy Fettke just posted about. These are the statistical tails, I suppose, and the customer should never believe the "poster-child" scenario. Make your decision based on the median, not the max/min extremes. So what else is new? Diligence always rules the day.
- Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes12y
@Kathy Fettke thank you for the reply. In looking at the post of @Mike H. I am not sure what the 4 to 8% means. If he is talking about a difference in returns not the total cash on cash returns that is a pretty big difference.
As I understand it your company hooks up with rehabbers and property managers, and you do the national/international marketing for them after doing due diligence to make sure the prices, neighborhoods, and management are reasonable?
I suppose I would have to look at your site to be able to judge the value you bring to your investors. Are you following up on companies you recommend to see if their price structure or business model changes? I realize I may be getting into an area that is explained on your site.
- Real Estate Investor, Flipper, PM, vacation rental, Wholesaler · Athens, GA · Member since 2013 · 260 posts · 210 votes12y
@Kathy Fettke , welcome to BP! We don't normally skewer folks on the same day that they join the site, but as you can see, we hold some very spirited discussions. Thanks for jumping right in to help share more information. The different perspectives make the conversations more rich, which at times may seem like a double edged sword.
We look forward to your participation here.
- Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes12y
re: 4 to 8%.
Actually, what I was referring to was the proforma numbers that the chicago land area property listings showed for cash on cash return. Every investor in this area could do 30% better than the numbers you're showing - and in much better areas too. Those deals are RETAIL! Come on!
And it seems real interesting that almost all the chicagoland properties were removed from your site over night. Where did they all go? They were "bought" the same night this discussion happened to start up?
Yesterday, there were 25 or 27 properties listed on there. Today, there are 4.
Just happened to time out that way? :-)Here's one of the 4 properties still there- with typical numbers of all the deals:
South Holland. Purchase price 142k.
Your own proforma Cash on Cash return is listed as: 6%Maybe the hedge funds would jump all over investments where you're paying at or above retail and have a cash on cash return of 6%. But I wouldn't recommend that kind of deal to any friends or "members" of my group. And definitely NOT in that bad of an area.
And I didn't say you couldn't get a nice looking house. But it doesn't change the area they're in. And it doesn't change the price. There are some really great houses in Sauk Village built in 2000 or later, over 2,000 sq ft. You can get those for 70k with 15k or so in rehab. They're fantastic houses. They'll rent for 1,500 too.
But I wouldn't tell anybody to invest there either. Just because the house is nice doesn't mean its a good investment. South Holland, Chicago Heights, etc, are NOT great areas and you apparently don't know it.
The fact that people get off a bus and love the finish of the rehabs is not a justification that they're great deals. That logic is the other silliest thing I've ever heard. Its a bad area and a terrible investment.
To me, if you're going to invest in bad areas, you should be getting way better than 6% cash on cash return.
But don't try telling me what a good deal it is because the bus tour loved or some hedge funds loved it. Have you seen some of the crazy prices the funds are paying for homes? They can obviously take far less in returns than any individual.
But I do understand your group tends to be a little different type of investor. So if they're happy with 6% cash on cash and being in the fringe areas where there is a lot more risk, then I guess you should keep feeding them what they want. Just don't tell me that they're great investments. The numbers don't show it and the risk of the area doesn't suggest it.
- Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes12y
To be fair, I do want to say I don't think the entire organization is bad. I actually think they do some pretty unique deals (outside of the turn key stuff) that would appeal to investors with large amounts of money to invest.
The other syndication investments, in my opinion, is where the group really has some quality stuff.
And I have never understood the numbers for the turn key stuff either so I'm probably a little biased. I guess knowing the areas so well on this one just kind of touches a nerve that the investments don't make any sense to me at all as people could really lose their shirts on them.
But I actually used to enjoy the RWN podcasts as, back in the day, they were very good discussing the numbers of real estate. And Kathy is very motivating to keep investing which I loved.
I would have no problem recommending people look into any of their other syndication offerings. And, if I ever have a big chunk of cash, I would even look into investing with them on those as they really do seem to be finding great returns. Although I'm pretty sure I'll be on the naughty list with them after these posts. :-)
The one thing I will say is that I really do believe their intentions are good. But as someone posted earlier, you still have to do your own due diligence because at the end of the day, they are just pitching products for their own profit.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes12y
This is a spirited discussion. Let's keep it civil and stay out of theatrics and any future character assassinations that are easy to get into when things get heated.
So far it seems everyone is discussing with a level head for now.
I do agree based on what I am hearing Chicago is a pro-tenant state. I do find it interesting that Kathy mentions she buy the A's and has purchasers buying the C's. I would guess cherry picking is going on and then B and C's are sold off with what is left over. If you are the promoter sourcing the deals of course you would take the best ones for yourself so not surprising there.
If the cash on cash is really pre-tax only 4 to 8 percent you might as well buy something like triple net leasing if you have the cash where you worry about nothing and have no expenses. I do focus on that for my clients so I am staying subjective but the point is you can get a tax equivalent yield over 10% and be hands off with a commercial asset.
I think the issue is you have to have more money to play than buying houses. The houses also seem to be more of a spec play on future values rising. As long as the buyers understand that it should be okay. The rents mentioned if they are true rents and not inflated for the area are pretty decent for the purchase price at about 1.5% but not close to the 2% rule which is hard to hit in many areas.
I can tell you that it's all relative to what numbers you can get. For instance in GA I have some local investors that want 10% on multifamily but then I have out of state or out of the country that are thrilled about a 7 to 8 cap purchase. The reason is Cali on some areas is a 3.5% cap, New York 4%, Utah 4.5% etc.
So the perceived deal is all in the eyes of the person placing the capital and what they see value in.
- 12yKathy FettkePro MemberRental Property Investor · Los Angeles, CA · Member since 2014 · 104 posts · 180 votes
Hi Joel,
Thanks. I prefer civil and must say my first day on Better Pockets felt like a battle zone. Whew!
Gotta set the record straight - I bought 3 properties last year from turn-key providers. How is that "cherry picking" out of the thousands of properties available?
Second - Our target is 9-12% cash on cash returns on fully rehabbed SFR's (including all new electrical, new HVAC, new plumbing, new roofs, new appliances) in B neighborhoods.
Third - we see returns in many neighborhoods are declining as prices are increasing so we have turned our attention to foreclosed developments, apartments and commercial buildings.
For example, we picked up 27 waterfront townhomes in Portland that were 70% complete before the bank failed. The loan was $12.8M but we bought the project for $3M. We finished it out and sold retail. Investors got 20+ IRR.
Latest projects are similar - an unfinished resort in Tahoe that was $38M that we tied up for $2M and a foreclosed subdivision in Tampa that was $160M that we got for $16M. We still like single family buy & hold rentals, but these bigger projects are too good to pass up and our network loves them because we only partner with successful developers how have 30+ years experience.
My one request - PLEASE STOP making assumptions about me. It's unfair. Happy to answer questions but getting tired of false accusations from people who don't know a thing about me or my company.
- Chicago, IL · Member since 2014 · 28 posts · 10 votes12y
@Joel Owens If it is a spec play, I' would be quite concerned. As a long time resident of the south side of Chicago. In my opinion it seems risky, since I don't see South Holland or Hazel Crest appreciating faster than any other area. Maybe 40 years ago, but not today.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes12y
Hi Kathy,
Just for future reference you might gain value from putting some of your properties in the real estate marketplace section. You have to be a paid member for that service but there are a lot of investors on here. The details of the property or properties could be shown and the offering could be discussed and analyzed on the merits of the deal.
Maybe "cherry picking" wasn't the best choice of words but the 3 deals you have bought from turn key providers out there were likely the better or best deals available as you sound like a more seasoned investor.
The bottom line is some investors love turn key and some don't. Chris Clothier is an example when he first came on here as having his feet to the fire by other members because he was selling a turn key product. Over time he won a lot of investors over who went turn key and some who will never do it and choose to unlock the value themselves. He has tons of business from BP over the years.
Glad to see you here on the site.
- Dallas, TX · Member since 2013 · 4k+ posts · 744 votes12y
- Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes12y
I'd point out that someone else actually started this thread when they asked what we thought of the RWN. So I blame Noel for this. :-) (That is meant to be taken with humor - just in case Noel is wondering.).
I did catch that Kathy F. mentioned they had moved on from the housing and were focusing more on the bigger developer deals these days. Thats probably why I stopped listening to the podcasts awhile ago. They really seemed to have gotten out of the real estate investing model and moved into the syndication model on these other deals.
There's nothing wrong with that model and I think they're actually providing more value to their target audience doing that given the turnkey stuff I saw. But I just had zero interest in them once they did. Not where my interest lies at all.
So I guess to Joel's beginning post on what people thought of the RWN. I would restate my answer this way:
I would personally stay away from their turnkey stuff but would suggest they have some unique investment/syndication type offerings where they act more as facilitators and financial planners for their members. And something like that may be more the niche I would consider investing with them in.
But in no way do I believe hat their model is going to be anywhere near as profitable as being a more direct investor in real estate would be (i.e. buy and hold or flipping, SFH or MFH).
At the end of the day, they're basically like having a stock broker finding their members or clients real estate deals (mcuh the same way a stock broker finds/recommends stocks). The upside is about the same as a good stock broker might be and probably a little higher given the innate value of real estate as an investment. Nowhere near the upside of investing in real estate directly. But far simpler for you from an effort standpoint......
I will always think well of RWN. Their initial podcasts where they shared the value of SFH investing really helped keep me motivated during the first few years I was doing this. It was RWN, Judson and Lynn Voss, and then later Lifestyles Unlimited podcasts that provided much of my listening entertainment that kept investing fun for me.
And now I have BP. Where I get all the advice I could ever hope for and see more real world issues in one month of posts than I could get in 5 years of investing on my own. Its a beautiful thing.
And nobody's podcasts are more on point in terms of having a focus on educating about investing strategies than BP's are today. If they could just get rid of their high pitched intros for "Quick Tips", it would be perfect. :-)
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