Anyone worked with Profit From Rentals?
Investor · Littleton , CO · Member since 2014 · 30 posts · 10 votes
Anyone worked with Profit From Rentals?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes@Miriam Nalumansi @Brie Schmidt @Engelo Rumora
First off
Brie is correct I do have experience with this company and I have a lot of experience in the space having funded over 2,000 rehabs in a 20 year career in 21 different states. And as such I consider this company a top Tier TK company and have invested with them.
I suspect I have quite a bit more experience than you have Miriam. To that point.
As Brie noted on a trip to Chicago when Brie and I got together for a nice dinner and to talk shop the purpose of the trip was to do deep due diligence on PPR and Alex the owner. I also met with Engelo and his partner on that trip...
I spent 4 days there going through the as is middle of construction and finished product
I met with their staff their rehab superintendent along with Closing attorney REaltors etc etc. The kind of deep due diligence one cannot get from a cab ride and talking to a know it all cabbie.. your feed back is not credible in my mind. And to sway others is a disservice to the community.
While your correct non inhabitable units will sell for 40 to 50k AS IS these units require 80 to 120k in rehab to get to the point that Alex's company then sells them..
Alex's rehabs are top notch from my due diligence and experience.. homes are taken to the stud's new plumbing new electrical new windows all new kitchens with slab granite under mount sinks bathrooms completely redone in tile.. ( heck they are as nice as my new construction here in Oregon).
I just wanted to clear the air here since on BP anyone can take pot shots, and as we know there are a lot of newbies on this site that really have no clue as to what they are doing.
109 Replies
- Real Estate Investor · Irvine, CA · Member since 2012 · 8 posts · 9 votes11y
I thought I would provide an update on my purchase with PFR. I just closed on my duplex. This is my first investment property. I worked directly with Alex throughout the process and he was a pleasure to work with. Before putting in an offer, I checked references and the folks I spoke with had good things to say about the company. The rehab was in very good shape. I hired a home inspector who was referred to me by someone on BiggerPockets and the inspector commented that the rehab was well done. There were follow up issues, all of which PFR handled. I worked directly with the lead of PFR's contracting team and he was generally very responsive and handled the remaining construction and rehab issues. The home inspector also noted that he has various clients that are repeat buyers with PFR and that they generally have a very good product. I also hired a lawyer (although I practice law and have a real estate brokers license in California, I do not know Illinois specific law or real estate procedures) who oversaw the purchase, reviewed the contract and generally provided me with Illinois specific information. The purchase price was $170k and the property appraised for the same and passed financing. I went out and visited the property and I think the area is generally a class c neighborhood. It is about 15 minutes from the University of Chicago and the lake. There are a lot of high rise yuppie apartments and condos just 10 blocks north. It seems to me the area is going through gentrification and it reminds me of areas in DC that are very popular now but were lower income about 10 years ago. I'm not by any means an expert in urban planning nor do I have any such training but that is just my perspective. My property is already rented and we have section 8 tenants in it. I just started working with the property management company and they appear to me to be organized, responsive and well managed. I only closed about a week ago so I'll update the thread once some time has passed and I can speak to the rental experience. All in all, the process took 6 months from putting in my offer to closing. That is because the property was still going through the rehab when I put in the offer. If you are on a shorter time frame, I suggest you seek to put in an offer on a property that has already been completed. Feel free to let me know if you have any questions.
- Real Estate Investor · Chicago, IL · Member since 2014 · 229 posts · 171 votes11y
@Kate Santon do you mind sharing more specifics on cash flow? with a 170k purchase and assumed rental rate of 1300-1400 how much is left over?
- Real Estate Investor · Irvine, CA · Member since 2012 · 8 posts · 9 votes11y
Rents are 1100 per unit in the duplex so 2200 total. Both tenants are section 8. My projections show cash flow of 600 monthly. I will track actual cash flows monthly starting next month and can provide more detail then.
- Investor · East Bay, CA · Member since 2014 · 156 posts · 48 votes11y
@Account Closed
Update: I closed on a duplex with PFR 2 weeks ago. Waiting on getting tenants. This is the real test in terms of how their property management performs. The closing went rather smoothly. There were delays due to items that came up during the inspection. PFR strongly recommends their preferred lender. Their rates are competitive, but not the best.
The inspector I hired was really strict. He said it was a slightly above average rehab, but that it should rent well as it is above the standards in the area.
Feel free to PM me with specifics. Perhaps later I'll start a new thread to log my experiences...the OP of this thread looks inactive and the typo in the title is getting to me ;)
- Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes11y
Like Michael L, I do am waiting to close on a property with PFR, one of the last 15 properties that the owners have to close out together after their break apart. I am working with Alex. Who are you working with Michael L? The renovations have been taking much longer than I was led to believe. A couple of weeks ago I was told the renovations were complete, but then told not ready for inspections because the units stilled needed to be punched - a term I'd never heard before. Alex explained that it was finishing touches. Anybody else heard this term?
- Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes11y
That should be "I too am waiting" not "do"
- 11yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Larry punch means punch list final items like touch up paint.. deep clean.. any systems that you need plumber or electrion to come back and tidy up.. Like is a hot and cold line got reversed or a bad circuit etc.
if your getting a loan on the property then the appraiser needs to do a 442 for the lender and everything needs to be ship shape.
- SFR Investor · Dallas, TX · Member since 2011 · 604 posts · 243 votes11y
Never buy any property without having an inspection and appraisal from an uninterested third party, that is just asking for trouble.
Even if the company is a great company to deal with, they might have 'lemons', and you want your own people going through the project and numbers.
- Real Estate Investor · Fenton, MI · Member since 2008 · 946 posts · 153 votes11y
Originally posted by @Dawn Anastasi:
So they are trying to sell something worth maybe $40k for $170k and the condition of the properties are sub-par, and the neighborhoods are dangerous?
And this type of investment is acceptable to out of state/country investors???
My thoughts exactly, but you said it best.
- Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes11y
Thank you, Jay Hinrichs. Andy C, I have hired an inspector and he is awaiting an okay from the seller (PFR) to inspect. The seller tells me that CHP (Section 8) should inspect first, before my private inspector. I am not sure why.
- Investor · East Bay, CA · Member since 2014 · 156 posts · 48 votes11y
I wasn't aware of the split up between the partners. I have been working with Alex since the Summer. I agree the renovations took much longer than expected. One of my units is tenanted and there is some CHA headache with the other unit that needs to be cleared up before it can be leased.
- Real Estate Investor · Atlanta, GA · Member since 2014 · 19 posts · 8 votes11y
@Jay Hinrichs Thanks for your feedback!
What neighborhoods were the houses that you had a chance to check out during your visit? I'm curious what rating (a/b/c) you would give the neighborhood you saw. I'm still trying to get better at evaluating neighborhoods. I believe Southshore is where Kate purchased her investment from PFR and it would be great to hear how you rate that area.
Thanks,
Mike - 11yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
I did a thorough inspection like I always do when placing 7 figures in a market. and Of course the A B C type designation is different in each city that I work in... If I was comparing this to say Memphis or Indy these areas would be B to B - as they are unbelievable Brick structures that have been totally gutted from the studs out and every thing brand new.. As compared to say a 80 year old home in Indy... the bones are just not the same. Many Streets had neighborhood associations on them which showed pride of ownership with the owner occ's in the neighborhoods.. Lots of Big commercial development at the HUGE University in the vicinity. LIke I said above what sets these apart and what Alex does in the TK industry is a definite step and or giant leap above what anyone else that I have done business for that last 20 years does ( as it relate's to the rehab) And of course when you have the Bones like has to start with you end up with a property that would cost well over 500k to replace from ground up.
that's my personal take on it all.
- Investor · Chicago, IL · Member since 2012 · 111 posts · 73 votes11y
I have to respectfully disagree with you in regards to the locations. To be fair, I am not privy to all of their locations but the locations I do know of are in rough neighborhoods. Your comment about the HUGE university I am assuming is UC. Having gone to school there and spent lots of time in Hyde Park. The surrounding areas are rough. The university is an oasis where students are given the boundaries and told not to go beyond. Now those boundaries have been increasing, there are still very rough areas that have not turned yet and may not. And looking on a map, these neighborhoods are deceivingly close to the university. I think there are opportunities in these neighborhoods but that play is much different than a cash flow play which is being pitched.
I'm not sure if this is the way that I am reading this, but I think your description in relation to other turnkey providers hides the truth. The truth is these neighborhoods in which they buy are solidly C to C-. To describe them any other way, would be a disservice to a potential buyer.
I absolutely agree with you about the physical property and the rehab. 500k would be an understatement for these properties in the right neighborhoods. Most of the are solid brick construction. Great architecture. I worked with some of there contractors on other projects and I think they do a good job. It is pretty much a new home on the inside.
- Real Estate Investor · Irvine, CA · Member since 2012 · 8 posts · 9 votes11y
I agree that the neighborhood is a C. I also agree that the properties are very nice and would be ranked a B. The campus nearby is UC. It's about 10 minutes north. The neighborhood is about 10 minutes from the water. I think the Southside of Chicago is slowly being revamped. PFR is partly responsible because of their provision of nice homes. The property is a much better long term investment, as is the case with most real estate generally. Just my two cents.
- Investor · East Bay, CA · Member since 2014 · 156 posts · 48 votes11y
Just to update everyone, my duplex is completed rented (2/2) as of today. Yay! Small victory for me. Now, I just need to see some rent checks rolling in.
As it has been mentioned previously, the majority of the tenants in PFR managed properties are Sec8 folks. There is plenty of information on the webs about this, but there are pros and cons.
My decision to pull the trigger with PFR was largely based on running the numbers. There are some markets that offer similar returns (Philly, Jersey, etc.) but I was especially impressed with Alex and Chris fro PFR. Before I bought, I flew to Chicago and got to tour the operations with Chris and see the neighborhoods for myself. I've also spoken with Alex at length about various aspects of the investment and I'm confident in his ability to produce and surround himself with capable people.
This is a long term investment for me and I love the BP community, so I don't mind posting updates as I move forward. Also, feel free to PM me as well.
- Real Estate Professional · Las Vegas, NV · Member since 2013 · 225 posts · 74 votes11y
Originally posted by @Michael L.
What sort of cash-on-cash return are you guys projecting? - Investor · East Bay, CA · Member since 2014 · 156 posts · 48 votes11y
Hi @Alex Silang ,
The numbers posted on PFR's site is close to what I'm projecting:
http://profitfromrentals.com/properties/details.cf...
Monthly Cash Flow (+) $ $648 Annual Cash Flow (+) $ $7,794 ROI Financed 17.23% ROI All-Cash 9.42% Although I little on the high side, since 1) I use 10% for maintenance and vacancies rather than 4%, 2) my insurance costs are about 25% lower (I shopped around) , 3) closing costs were about 3K more than their estimates.
I just noticed this thread. I'm new to BP so please forgive me if I've breached protocol by posting my slightly off topic comments.
I'm not familiar with PFR, so I'm not qualified to criticize or endorse them. I'm just sharing my thoughts based on my experience. I've lived on the south side of Chicago and southern suburbs for most of my life. I've been a full time investor for a decade, with properties in Chatham, S.Chicago, Dolton, Riverdale, and Robbins.
There are literally thousands of cheap houses ( < $50k) and rents are high (the lower end of the market is $1100-1500/mo). For landlords that know what they're doing, its a very profitable business. One of the challenges for out of state investors is the dearth of property managers that know how to work this niche. Its high touch, high turnover, high tear up management.
The biggest issue I see with PFR is that they have priced their properties at what I would call, the highest justifiable price. From what others have posted it sounds like their houses are the nicest house on the block. So in order for it to appreciate, the surrounding houses have to catch up. The question is what's the likelihood of that happening? Most of their properties are in C areas. Many of these areas will not gentrify anytime soon (or ever). So these top dollar properties may never appreciate. To see how big the gap is, look up the prices of homes sold in the immediate vacinity.With PFR houses, the analogy that comes to mind is, prettiest pig in the pen. In my opinion, the critical question turnkey buyers should ask themselves is: will I be happy with the ROI on this investment if I can't sell it for more than what I paid for it? For me, as a pig farmer, I don't need appreciation because the NOI is sufficient to recoup my investment within 5-6 years.
One more FYI: PFR sells mostly 2 flats that are > $170k. In Chicago, SFHs tend to be better investments. There are SFHs that don't need rehab, in B areas, that can be bought for $85k and would rent for $1500/mo.- Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes11y
Hi @John Lowe ,
I am currently under contract for a property with PFR and I am traveling to Chicago next week. Can you tell me more specifically where I can find $85k SFR properties in B areas that would rent for $1500? Are these off market, MLS? What areas?
And welcome to BP!
- Investor · Chicago, IL · Member since 2012 · 111 posts · 73 votes11y
I would argue that they don't exist. The properties that fall below 100k in the Chicagoland area are in C or D areas. The price point for B areas is much higher.
- 11yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
I will be in Chicago end of next week as well maybe we can meet.. funny two Oregonians meeting in Chicago :)
- Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes11y
@Jay Hinrichs I would love to meet up with you. It looks like we will be there at same time. I will email you, so we can figure something out.
Our meeting in Chicago reminds me of a line from a play by Edward Albee
"Sometimes you have to go a long way out of your way in order to return a short distance correctly." - The Zoo Story
Originally posted by @Larry Fried:
Can you tell me more specifically where I can find $85k SFR properties in B areas that would rent for $1500? Are these off market, MLS? What areas?
Some folks would argue there are no A areas on the southside of Chicago. If their definition of an A area is something like Lincoln Park, then they're right, there's nothing like that on the southside. I don't know anything about buying, flipping or renting $300k houses. That's not my world.
The first thing to know is that the southside is overwhelmingly African American. There are a few exceptions, the very high end areas are diverse, and there are pockets that are hispanic. But the bottom line is, culturally the southside is black so that's the tenant base.
My definition of an A area means it has undergone gentrification or there was never any disinvestment. Hyde Park, Kenwood, the areas around Universities of Illinois and Chicago, Bronzeville (some parts are A the rest is B). The residents are upper middle class. Rehabbers have been working the areas that fell into disrepair for years. A good place to live, but there's nothing here for pig farmers.
There are a couple of different types of B areas. Some are areas where revitalization started but abruptly halted with the RE bust. Here there are vacant lots scattered amongst homes (recently built or restored old mansions). There are other areas that are established, very stable neighborhoods with low turnover. Here, houses just don't come on the market very often. One of my rentals is located on a block where there's only been one sale in the past 10 years. Beverly, Jackson Park Highlands, South Shore (within a few blocks of Lake Michigan), Garfield Blvd (but not neighboring streets), Pullman (the immediate surrounding area is C). One characteristic you may see driving around some of the older B neighborhoods is an active block club. All the yards will be well maintained, there will be no board ups. The residents are older, there won't be a lot of young kids running around.
The majority of the southside I'd classify as C areas. There are also D areas, where the defining characteristic is the prevalence of board ups. I won't buy a house on a block where there is a board up.
I find that Rentometer and Zillow rents are fairly accurate. Almost all detached SFHs within city limits are above $1200/mo. Homes in C areas that are 3/1 rent for $1200. Other things being equal, a 4th bedroom is worth $100 more per month, a 5th bedroom is worth an additional $100 to folks that need it, mostly Section 8 renters. A 2nd bath in area that has mostly 3/1s is worth $150/mo.
Ok, so the $85k house in a B neighborhood. This price would be below market value, probably ~60 cents on the dollar. They aren't a needle in a haystack, but you're not going to go online and see dozens of listings.
I don't know anything about this house other than what's online, but here's an example: http://www.realtor.com/realestateandhomes-detail/4207-S-Prairie-Ave_Chicago_IL_60653_M78054-91369?row=2
- Chicago, IL · Member since 2014 · 710 posts · 200 votes11y
Good post
Beverly, Mt Greenwood, Garfield Ridge Id classify as A they are solid neighborhoods very desirable to City Workers. (Residence requirement)
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