Norada Real Estate?

61 Replies

Hay everybody,

Just wondering, do any of you have experience with Norada Real Estate? http://www.noradarealestate.com

If you do please let me know how you worked with them, and what your experience was like.  Thanks much!

Hi Joseph,

I live in San Diego and I bought 2 SFRs I found through Norada earlier this year – 1 in Atlanta GA and another in Birmingham AL. Overall, it was a very positive and smooth experience. Marco, who is the owner and the person you will most likely be working with, has many connections throughout the US and is very knowledgeable about the turn-key acquisition process.

Although these were not my first RE deals, he insisted on helping me through the entire process to make sure the deals went as smooth as possible. Since it looks like you are a beginner investor, you will find that extremely helpful. Be sure to ask for Marco’s property purchase checklist.

Now with that said, you need to understand what turn-key investing is and what it isn’t. What you should get is a freshly rehabbed property with a tenant in place. You will end up paying market value, but you will not have to deal with finding and rehabbing the property yourself.

At the same time, not all turn-key properties are worth buying. You need to start by finding a market (state, city) that fits your goals and preferences. Different markets have different economic fundamentals and demographics. The Norada website has descriptions and fundamentals for each market they operate in, which is a good place to start.

After you find a suitable market, you need to determine what your criteria for the property is (price range, neighborhood quality, size, age, etc.). It will be much easier for your to find suitable turn-key properties if you do the above instead of just browsing everything that’s available.

To sum it up, treat a turn-key acquisition as you would any other purchase. Don’t assume that the homes you are looking at are perfect. Double check all of the numbers until you know exactly what you are buying.

Feel free to reach out if you have any specific questions.

Medium bp dealcheck logoAnton Ivanov, DealCheck - RE Analysis | [email protected] | https://DealCheck.io

Nicely said, Anton. 

Good to see you on here and that you have been actively investing. I hope to catch up soon to see what you've been up to. 

Best regards,

Joseph,

One thing you will learn about this website is that there are ALOT of opinions. I am extremely detail oriented and do a ton of due diligence before making investing decisions. 

Anton explained it perfectly so I won't repeat what he said. 

I first decided I wanted to invest in turn key properties for many reasons, I then looked and talked to a bunch of different turn key providers to find who I wanted to work with. After my first call with Marco, I knew I wanted to work with Norada. Marco is on top of it and "gets **** done." He will hold your hand every step of the way. He has been so amazing to work with that I've already introduced many of my closest friends and family to him. I talk to him several times a week and he serves as an advisor, a partner, and someone I can trust. 

I guarantee you will love working with Norada like so many others have. Feel free to reach out privately if you want more information, but I guarantee you that you will be happy in making the right decision. 

-I purchase properties through Norada, apart from that I am in no way affiliated with the company. There are a lot of "questionable" turnkey companies out there so I want to make sure you work with a company that will be the best partner for you, not one that's just trying to sell you or be "gimicky" good luck!

Thank you guys so much, it's awesome getting such thorough replies so fast.  I'm diving into Marco's site right now. 

Would you suggest a first timer start investing out of state like you guys are?  The areas Norada is focus on are far enough way from me that it would be impossible to be near the property everyday.  Do you have any suggested articles, books or blogs about long distance investing I should take a look at before I step out of my area?  Thanks again for all the info, you guys are great! 

Actually, I never heard about this site. But as many reviews have shown that it's affiliated with the company. That's good for you.

Originally posted by @Joseph Molander :

Thank you guys so much, it's awesome getting such thorough replies so fast.  I'm diving into Marco's site right now. 

Would you suggest a first timer start investing out of state like you guys are?  The areas Norada is focus on are far enough way from me that it would be impossible to be near the property everyday.  Do you have any suggested articles, books or blogs about long distance investing I should take a look at before I step out of my area?  Thanks again for all the info, you guys are great! 

Out of curiosity - have you looked at your local market and/or connected with local real estate investors? Meaning why are you consider investing out-of-state instead of near where you live?

I'd say that investing out-of-state is doable on your first deal, but it may not be necessary. If you can find deals that meet your criteria locally, you should go with that.

Medium bp dealcheck logoAnton Ivanov, DealCheck - RE Analysis | [email protected] | https://DealCheck.io

Anton,

I completely understand what you're saying. 

I'm fighting this analysis paralysis.  I'm not to sure about the market I'm in... which is ridiculous, because so many experienced people say the best place to start is in the town you live!  Is there any reason someone shouldn't invest in their own town?  I guess I need a good kick in the @$$ to get me going.         

Hi Joseph!  I've done business with Norada as well, and found them to be efficient, honest, and reliable.  Thumbs up.  Good luck in your acquisitions.

Originally posted by @Joseph Molander :

Anton,

I completely understand what you're saying. 

I'm fighting this analysis paralysis.  I'm not to sure about the market I'm in... which is ridiculous, because so many experienced people say the best place to start is in the town you live!  Is there any reason someone shouldn't invest in their own town?  I guess I need a good kick in the @$$ to get me going.         

Joseph,

I think the people who say you should start with you local market are generally correct. It's always easier when you can talk to people in-person and see the homes and the process yourself. My first investments were local and I learned a ton about neighborhood research, inspections and rehabs that I would not have otherwise. This knowledge helped me considerably when buying remotely.

But yes, I think there are reasons not to invest in your own market. I don't any more because San Diego home prices are generally high, the cap rates are low and the market is saturated with investors. These conditions make finding good deals difficult (although not impossible).

Another reason is diversification. Although some people here would disagree, I believe the diversification principles that are very well accepted in stock investing apply in real estate as well. My goal is to diversify my real estate portfolio across different states, cities and demographics (high end vs low end, for example).

As many investors would tell you, you should start with your goals. What are your long-term real estate goals? What are your short term real estate goals? Start with these questions and be as detailed as possible. Whenever you look at a market or a specific property, ask yourself - will this area/property move me closer to my goals? If yes, then you can proceed. If no, look somewhere else.

Medium bp dealcheck logoAnton Ivanov, DealCheck - RE Analysis | [email protected] | https://DealCheck.io

Thanks Anton,

I just got my first list of properties in my area and starting to write my mailer.  I also just scheduled three property walk throughs for this week!  I so excited, you guys are awesome! Thanks you for all the advice.  

I am a first time investor and  looking for a comparison analysis for services offered by the turnkey providers.......like CNET review on best smartphone or any other gadget

 ....Thanks to bigger pockets, we have a forum and good discussions, expert opinions & suggestions. Exit strategy was one of my biggest concern with turnkey investing. No service provider has a buy back policy or any kind of  risk mitigation plan today. Does any one know a asset management firm or service provider that offers any kind of buyback.  My biggest concern is "what if" the deal went bad and investor ended up with a bad property. Investor may be stuck with the property. I understand that there is risk that comes with any investment but looking to see if there is some upfront preventive checklists for the potential reflags. I hear that one should research and build trust before investing. I do not see one negative review or a complaint or problems experienced by investors. Is it really that bulletproof or the investors who have some bad experiences are not sharing in any forums.

@Cliff Earle

@Anton Ivanov

@Lance Robinson

 What are your thoughts about their pro forma?  That is always my biggest concern. Many investments seem like a great idea when you've only had them for a couple of years because nothing has gone wrong yet. Then all of a sudden big repairs or capital expenses are needed and then what you thought  was a $15,000 profit, has turned into zero because you did not account for it

 Once I put in realistic numbers I always end up with a cap Rate of zero using their pro forma.

 The main issue I have with Norada  is there pro forma does not seem very realistic in my opinion.  Only 5% for vacancy?  Only 3% for maintenance, really??  Absolutely no capital expenses? 

 With pro forma's like this, you were not going to know you had a bad deal until a few years later when something big needs to be repaired and you suddenly realize you never accounted for It. 

 And I also agree with @Vinod Polina  that the exit strategy is extremely under talked about... Possibly on purpose? 

 These rental areas usually don't have much appreciation and since they are mostly rental areas you will have a difficult  Time getting rid of them.  Many turnkey providers forget to mention that small little detail.

Disclosure: Principal

Hi @Kyle Scholnick

Thanks for the question.  I will let the others answer but it's important to clarify two things for you:

First, when you click the Orange Button to get the cash flow analysis tool, you can change all the variables in blue to create your own scenarios.

Second, the vacancy and maintenance variables default to a single systemwide value, so if we change it for one it changes it for all properties listed.  That's a reason why our tool allows you to change the variables on each individual property.

 Don't get hung up on the default system variables as they've been there for years with 5% vacancy being an average of one turnover every two years.  We also have a lot of new construction which lowers the average maintenance variable so using your own number is the better option.

Continued success!

Medium norada real estate investmentsMarco Santarelli, Norada Real Estate Investments | (800) 611‑3060 | http://www.NoradaRealEstate.com

Disclosure: Principal

Hey @Kyle Scholnick :

One other comment.  You may be interested in the following information where I address the subject of your questions in more detail: 

Routine Repairs vs. Capital Expenditures (CapEx)  [website article]

Cash-Flow and Rates of Return  [podcast episode #5]

Continued success!

Medium norada real estate investmentsMarco Santarelli, Norada Real Estate Investments | (800) 611‑3060 | http://www.NoradaRealEstate.com

@Marco Santarelli

 Why doesn't your pro forma include any budget for capital expenses?

 And I have used the spreadsheet you are referring to where I can change the numbers, and that is the problem anytime I put some realistic numbers in there,  such as 8.3%  vacancy, 10% capital expenses, 10% maintenance, I end up always getting a cap rate of 0

Can you also touch on  exit strategies for people with your turnkey company? Would you buy back the houses?  And I would assume if you did it would be for way below market value. Don't many of the houses in these rental areas not appreciate ?  Aren't people going to have a tough time getting rid of them in 15 years?

"We also have a lot of new construction which lowers the average maintenance variable so using your own number is the better option."

So would you say that a newer investor going to the site it might be misleading that they see that variable and think it applies to a 30,40 year old building that is offered turn key??

Not saying the company is misleading just the way it might be  displayed throws off newbies.

I am posting this for the education of others. An investor going to the site and looking at this variable might assume it is correct because they do not have experience to know otherwise.

Any investor whether turn key or any asset class needs to know that resellers usually put the best case scenario on things to sell a product. If they put worst case scenario the sales volume would go way down.

So part of being an investor is getting educated and knowing with due diligence what the numbers should be.

It's just like strong rents. A reseller might be plugging in 4 or 5% rental increases and the market in the short term might be doing that so no misrepresentation but do not expect that to be the case over the hold time of your investment when long term average might be 2%. 

New construction is not even a given to have low costs. You have to make sure everything was quality and put together correctly. If not you can have just as much capex as an old property fixing issues. Do not rely on builder warranties. They often give one year and after a few months han off to a warranty company. The builders set up multiple companies for new projects so their lifetime warranties in many cases mean absolutely nothing.

If you can buy in your own backyard then start there first. Sometimes people live in areas where it is not possible. Example they have 40k to put down on a property so a 200k investment but in their market the minimum investment trades at 500k so they are priced out of the local market.

The options there would be to try to find a rehab in your price range locally to create value for retail. You could also partner with someone where combined you can purchase locally. You could invest passively with an equity slice in a larger local project. You could just wait and build more capital to invest locally. You could roll the dice in a foreign market that trades at cheaper prices and buy directly now.  

Medium allworldrealtyJoel Owens, All World Realty | [email protected] | 678‑779‑2798 | http://www.AWcommercial.com | Podcast Guest on Show #47

@Joel Owens

  on my new construction I give a extended 2/10 warrenty.. this is something that any investor buying new construction should insist on.. it cost us about 1000 per house.

WE are ridiculously insured on new construction.. the sub has insurance the GC has insurance I have insurance as the developer.. plus the 2/10  4 levels of insurance that add about 4 to 5k to each home we build.  If I was buying newco in soil stable challenged areas like Texas I would want this for sure.

@Vinod Polina

It is not possible or remotely feasible for a TK company a new home builder or any other fix and flip investor to promise to buy a home back if you have a bad day.. this just does not happen in any industry and if your looking for SURE thing don't buy rental houses period does not matter who or where they are at..  And yes there is a way to sell homes you list them with a Realtor.  I guess a developer could do this but they would need to register as a security most likely .

@Kyle Scholnick

I know I have touched on this on other threads.. however from my vantage point I see the industry adjust to market conditions.. in the 2000 run up to 2008..  rare was the talk of cash flow it was all about equity.. buy now sell in 3 years make 100k  and hundreds of thousands of investors did that... Then when the market crashed many equity investors as we know got hammered ( I was one of them) So then the Marketing companies repositioned the message and came up with a few new tag  lines:

" appreciation is only icing on the cake its all about cash flow don't care if the asset ever goes up in value"

" Live were you want but invest were it makes sense"

and so on.. so you have the last 10 years of investors primed for cash flow and primed to buy were the numbers are highest vis a vi a passive rental return..

So now you have enquiring minds like we have on BP who say hey wait a minute.. If rental markets just keep getting bigger who is going to buy my house when One day I either get burnt our land lord syndrome.. my kid needs to go to college... we are getting divorced  other life events that cause a change in investment strategy.  And if you bought in an area thinking you don't need or want appreciation you would rather make 12% return than 3% in an area with historic appreciation.. now what... you did it knowingly and willingly.

So for the cash flow game its about numbers and Mass. when Chris posted his clients totals you probably notice huge number only own 1 or 2.. those are the investors that are vulnerable to as Chris says being very happy .. or not so happy IE that one property has issues etc.

So to have values rise you need either rents to rise significantly like Bay AREA investors who have just killed it last 5 years.. and or areas were homes will actually sell retail to homeowners.. and retail to homeowners does not happen in many markets at 40 to 50k homes.. just doesn't.. those homes are now rentals and will be for ever.. you own a 100 of them and you have a business you own 1 or 2 and you have a 50/50 chance of being happy or not so happy.

And that is what I do for a few of my clients I help them own 100 rentals.. One of my clients has put 110 into service in the last 14 months.. they make their 150 to 200 a month cash flow but they run it as a business not a passive event.

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

Originally posted by @Kyle Scholnick :
 

@Marco Santarelli

 Why doesn't your pro forma include any budget for capital expenses?

And I have used the spreadsheet you are referring to where I can change the numbers, and that is the problem anytime I put some realistic numbers in there, such as 8.3% vacancy, 10% capital expenses, 10% maintenance, I end up always getting a cap rate of 0.

 

Hey Kyle -- I could literally spend an hour answering your questions above, but to give you a short answer here:

First off, there are several philosophies or schools of thought when it comes to expenses and capital expenditures.  Many new investors get these two items mixed up as they're not the same. 

Repairs are revenue expenses because they are charged directly to an expense account such as Repairs and Maintenance. Even significant repairs that do not extend the life of the asset or do not improve the asset (the repairs merely return the asset back to its previous condition) are Repairs and Maintenance (not CapEx). CapEx cannot be fully deducted in the period when they were incurred.

I personally suggest investors budget 2 to 3 months worth of gross rent for their operating capital or reserve account.  You can also use 3% to 5% of the property's value for your reserves.  These numbers go down per unit as your portfolio size increases. 

These funds are used as necessary and then replenished from the cash flows from the property back to its original watermark. 

You should also scale your M&R based on the age of the property, it's current condition, and the type of neighborhood.  This could subjectively range from 3% to 10%.

I would be happy to go over the entire proforma with you in detail if you like.  It's good to understand the various "buckets" for income, expenses, and capital expenditures.

Medium norada real estate investmentsMarco Santarelli, Norada Real Estate Investments | (800) 611‑3060 | http://www.NoradaRealEstate.com

Kyle Scholnick You should always do your own proformas. Everyone can manipulate them the way they want. You need to do it your way with your own rule of thumbs.
Originally posted by @Kyle Scholnick :
 

@Marco Santarelli

Can you also touch on exit strategies for people with your turnkey company? Would you buy back the houses?  And I would assume if you did it would be for way below market value.  Don't many of the houses in these rental areas not appreciate?  Aren't people going to have a tough time getting rid of them in 15 years?

You exit strategy (or anyone else's) will be based on you investment goals.  For example, if your plan is to build a long-term buy-and-hold real estate portfolio, odds are you will not sell your properties and likely pass them on to your heirs.

However, some/many investors will do a tax-free 1031 exchange by selling their properties and moving the equity into other income properties.  Those properties are often in other markets and allows you to improve your portfolio without any tax impact on the exchange.  This is a great strategy to increase your cash-flow when the timing is right.

Appreciation is based on local market fundamentals and economics.  When there are jobs, job growth and population growth you will see prices go up.  This is more pronounced in "cyclical" markets, but you get the same long-term effect in the more sleepy "linear" markets too.

You can learn more about this in Episode 006 of my podcast ("Understanding Linear and Cyclical Markets").

Hope that helps.

Medium norada real estate investmentsMarco Santarelli, Norada Real Estate Investments | (800) 611‑3060 | http://www.NoradaRealEstate.com

Originally posted by @Joey Noel :
Kyle Scholnick You should always do your own proformas.   Everyone can manipulate them the way they want. You need to do it your way with your own rule of thumbs.

You're right Joey -- this can be referred to as doing your due diligence.  It's important to properly include all expense items, and verify those numbers as accurate.  I've seen people hide or embellish numbers to enhance the returns on properties.

There is a saying I like to use: "Trust but verify."

It's also important to use realistic rules-of-thumb.  Too often people use rules that misguide them on what is realistic or useful.  Experience helps, but experienced advisers can fill in when one lacks that experience.

Continued success!

Medium norada real estate investmentsMarco Santarelli, Norada Real Estate Investments | (800) 611‑3060 | http://www.NoradaRealEstate.com

@Vinod Polina

@Kyle Scholnick

Regarding cash flow analysis, like some of the others pointed out - ALWAYS do your own math, regardless where you are buying the property. I know it's not something that's apparent to new investors, but unfortunately there are just too many differences between how different people calculate cash flow and cap rates. In a perfect world we would do it all the same, but that's not the case.

Like I've mentioned earlier in this thread, you shouldn't treat a turn key purchase as anything different. You shouldn't expect a stress-free purchase process. You shouldn't expect a maintenance-free home. And you shouldn't expect every turn key deal to be a good deal. You need to do the exact same research that you would when buying any property.

The exact same goes for the exist strategy. Your exit strategy should not depend on whether the home was a turn key or not, because there really is no difference after you buy it. Your exit strategy needs to depend on your goals, your finances and your portfolio strategy.

Once you stop treating turn keys differently, it will solve a lot of your problems. Feel free to PM me if you have any specific questions.

Medium bp dealcheck logoAnton Ivanov, DealCheck - RE Analysis | [email protected] | https://DealCheck.io

@Anton Ivanov

I think we understand we have to do our own analysis, but the point is that the pro formas are misleading.

You said: "

you shouldn't treat a turn key purchase as anything different. You shouldn't expect a stress-free purchase process. You shouldn't expect a maintenance-free home. And you shouldn't expect every turn key deal to be a good deal. You need to do the exact same research that you would when buying any property"

And that is exactly my point, on these turnkey pro formas, they are not realistic for any other property you would be purchasing

If you are evaluating a rental property to buy on your own and don't count for capital expenses, have more than a 3% maintenance fund or plan for at least an 8.3% vacancy, you are setting yourself up for disappointment when you end up making nothing.

You are making the exact point I have been saying.

@Kyle Scholnick

I agree with you that the numbers presented on many turn-key companies' listings can be way too optimistic, if not unrealistic altogether. 

I just don't think that's something that only happens with turn-key providers. I've seen the same thing from just about everybody who is trying to sell investment real estate, unless they are your close friend/partner. That's the nature of this business, even though it may sound a bit cynical.

Medium bp dealcheck logoAnton Ivanov, DealCheck - RE Analysis | [email protected] | https://DealCheck.io