Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
Hello,
My name is Caleb and I'm still very much new and learning about investor in Real estate.
Recently I have come across a turnkey company called Memphis Invest. I've read most of the relevant threads on BP about them as well as the reviews on Turnkey-Review.com. Essentially all of them are great reviews.
I was wondering d anyone has bought from them or knows someone who has? I am considering buying from them in the future, but I would like to talk to a current investor (s) who have invested with them.
I am in the Dallas market and would be starting there.
Thanks,
Caleb
@Abdul Azeez that is the whole point of buying turnkey isn't it? You kiss away your equity in exchange for a completely passive option. That is the way turnkeys work. They take all the equity and you get no hassles. So with Memphis Invest, who are a class act, you are way better to buy their texas properties where there is a realistic chance of capital growth than pay retail in Memphis. You are buying a tattoo not an investment property in Memphis
Caleb - I am talking to them currently but have not yet invested with them. I think they are a very professional firm based on my conversations but my concerns are the following:
1. They are very clear that there is an equal likelihood that your appraisal can come in lower than list price. While they say the appraisal is one person's opinion, that one person's opinion is what is going into the bank loan and I would consider it to be the market value. This is very concerning for me because I know you don't have built in equity going in with a TK provided but it the appraisal is lesser, are you not going in with negative equity which can only bite you in the back when you sell? Also, if this does happen, your down payment would need to be more.
2. Property management fee is around 10% and 1 month charge for getting a tenant in or between tenants. It goes down to 9% when you have 5 or more with them. I think this may be ok.
3. There is no tenant placement guarantee. When I look at other TK providers, they guarantee a tenant in the door when the property closes or a minimum period after that during which if the tenant is not placed, there are some recourse. I do understand their vacancy rates are around 4% but is something to think about as to what happens if you buy a property that is unable to have a tenant placed for say two months.
4. I would ideally like to shop around for a mortgage lender but since they have existing relationships, I am not sure if I will have the chance to shop around for rates or if the lender who I work with would take me for a ride.
5. I am yet to see listings but my understanding is that due to the extent of rehab they do, the prices of the properties are much higher. I would be able to comment on this after I have a chance to see listings.
@Abdul Azeez that is the whole point of buying turnkey isn't it? You kiss away your equity in exchange for a completely passive option. That is the way turnkeys work. They take all the equity and you get no hassles. So with Memphis Invest, who are a class act, you are way better to buy their texas properties where there is a realistic chance of capital growth than pay retail in Memphis. You are buying a tattoo not an investment property in Memphis
Caleb - I am talking to them currently but have not yet invested with them. I think they are a very professional firm based on my conversations but my concerns are the following:
1. They are very clear that there is an equal likelihood that your appraisal can come in lower than list price. While they say the appraisal is one person's opinion, that one person's opinion is what is going into the bank loan and I would consider it to be the market value. This is very concerning for me because I know you don't have built in equity going in with a TK provided but it the appraisal is lesser, are you not going in with negative equity which can only bite you in the back when you sell? Also, if this does happen, your down payment would need to be more.
2. Property management fee is around 10% and 1 month charge for getting a tenant in or between tenants. It goes down to 9% when you have 5 or more with them. I think this may be ok.
3. There is no tenant placement guarantee. When I look at other TK providers, they guarantee a tenant in the door when the property closes or a minimum period after that during which if the tenant is not placed, there are some recourse. I do understand their vacancy rates are around 4% but is something to think about as to what happens if you buy a property that is unable to have a tenant placed for say two months.
4. I would ideally like to shop around for a mortgage lender but since they have existing relationships, I am not sure if I will have the chance to shop around for rates or if the lender who I work with would take me for a ride.
5. I am yet to see listings but my understanding is that due to the extent of rehab they do, the prices of the properties are much higher. I would be able to comment on this after I have a chance to see listings.
Just my 2 cents.
Regards.
We can't have our cake and eat it to.
Those looking for a hassle free option should expect to pay for the service they are receiving. Turnkey companies don't make anyone rich, they simply provide the arm chair investor a nice place to park their capital and earn a passive return.
@Abdul Azeez that is the whole point of buying turnkey isn't it? You kiss away your equity in exchange for a completely passive option. That is the way turnkeys work. They take all the equity and you get no hassles. So with Memphis Invest, who are a class act, you are way better to buy their texas properties where there is a realistic chance of capital growth than pay retail in Memphis. You are buying a tattoo not an investment property in Memphis
Dean - there seems to be a lot of disconnect on usage of the equity term. To clarify if you are buying at market price with 20 pct down payment thats your equity and I am fine with this. If you are buying at market price minus 10 percent you are making money going in and that's fine with me as well. What I am apprehensive about is buying at a price where your appraisal comes lower. This means you have negative equity and this is what I want to avoid.
Caleb - I am talking to them currently but have not yet invested with them. I think they are a very professional firm based on my conversations but my concerns are the following:
1. They are very clear that there is an equal likelihood that your appraisal can come in lower than list price. While they say the appraisal is one person's opinion, that one person's opinion is what is going into the bank loan and I would consider it to be the market value. This is very concerning for me because I know you don't have built in equity going in with a TK provided but it the appraisal is lesser, are you not going in with negative equity which can only bite you in the back when you sell? Also, if this does happen, your down payment would need to be more.
2. Property management fee is around 10% and 1 month charge for getting a tenant in or between tenants. It goes down to 9% when you have 5 or more with them. I think this may be ok.
3. There is no tenant placement guarantee. When I look at other TK providers, they guarantee a tenant in the door when the property closes or a minimum period after that during which if the tenant is not placed, there are some recourse. I do understand their vacancy rates are around 4% but is something to think about as to what happens if you buy a property that is unable to have a tenant placed for say two months.
4. I would ideally like to shop around for a mortgage lender but since they have existing relationships, I am not sure if I will have the chance to shop around for rates or if the lender who I work with would take me for a ride.
5. I am yet to see listings but my understanding is that due to the extent of rehab they do, the prices of the properties are much higher. I would be able to comment on this after I have a chance to see listings.
Just my 2 cents.
Regards.
We can't have our cake and eat it to.
Those looking for a hassle free option should expect to pay for the service they are receiving. Turnkey companies don't make anyone rich, they simply provide the arm chair investor a nice place to park their capital and earn a passive return.
James - I am prepared to pay for the service; I just want to ensure I am not overpaying.
I may be misunderstanding you but you are saying you are happy to pay full retail of let's say 100K on a property and put 20K in because then you have equity? No you don't you have zero equity. And In Memphis you will have to wait 20 years before you have any equity.
Why wouldn't you pay 80K for the same house from a wholesaler?
I reached out to them with a couple questions, no answer. I followed up - no answer again. So obviously too much to ask. There are much better turnkey providers out there who are willing to help and not only sell. That would concern me also if their purchase price is over the market value and I'd not buy from them. Just my 2 cents...
Thank you everyone for the responses. I have talked to several currently clients on BP about their experiences and so far they have been very positive. The two main criticisms are lower ROI and as previously mentioned, the appraisal value coming in lower then purchase price occasionally.
@Dean Letfus@Abdul Azeez equity would be the difference of the loan balance and the appraised value. Had Abdul paid cash for the deal, then he would be able to obtain a HELOC. In other words, equity can happen either through cash in the deal, buying under value or a combo of both.
It may be a jargon difference Alex. Putting money into a deal isn't equity. It just means you owe less than it's worth but you have no equity you paid full price. That's what I mean by equity. I do call it equity when you pay full price, 100% fund it and over time the rental payments reduce the principal. Now you have created equity with somebody elses money. But not when you put your own money in if that makes sense.
Dean - You are referring to built in equity. That's not the traditional definition of equity. Equity is the amount of money you put in. Assuming a $100k house priced at Market value and you put in $20k your equity is 20%. Assuming a $100k house you purchased at $80k putting down $20k, your equity position is 40% and you are going in with built in equity.
Alex - I am aware of equity which is what I have explained above.
@Abdul Azeez yeah, I knew you understood, I was just piecing the information on the thread and really answering Dean. At the end of the day, Dean and I typically present information with the same thought process, but mine of comes from more positive POV where Dean's is more of a buyers beware :)
So a totally different use of the word @Abdul Azeez, we would never ever call that equity in any of the countries I invest in :-). Equity is always the difference between what you are paying and what it is worth in my world.
Dean - I am sorry but I have to respectfully disagree. In any of the scenarios I have seen an initial equity position in an investment is what you have put in And over time this increases due to reinvestments or debt paydown.
Abdul, I think you may be missing the point these guys are trying to make. While the definition of equity may be calculated by taking the market value of a property and deducting any amounts still owed, most investors tend to look at equity as profits (increases in equity) gained from making wise buying decisions. If you pay full retail at 20% down, yes you will have equity in the property. But it's investment equity, not profit equity. If you do that on a few properties, you'll end up out of cash.
Do the math on your investment. if you're putting up $20-25k on an investment, are you getting back at least 10% ($200) monthly on your money? If not, I'd consider a different strategy.