My experience with USREEB - turnkey property

23 Replies

    I have been doing research on turnkey providers in Kansas City area, after talking to few people, visiting KC, driving around Independence, Raytown etc. areas and looking at few properties (from Bridge, McInnis, USREEB etc), I decided to move forward with USREEB. I will use this post to document my experience so far and update it in coming days. 

    Few key reasons why I decided to work with USREEB: 

    1. Good reviews and feedback from everyone on BP about USREEB, on how they handle property management and communicate well. 

    2. I saw two USREEB properties in person, one of them was in rehab. They were really doing a gut out rehab. Quality of work appeared better than other turnkey providers. 

    3. I am hoping to gain some equity in the purchase, i.e. hoping property will appraise higher than the purchase price. Usually, it is not feasible with newly renovated turnkey properties. 

    Now I have an SFH class 'A' property under contract with them. Property is 'complete', but no tenants yet. So far my experience with USREEB is less than ideal, but I am positive and going to give them benefit of doubt, at least for small issues.

    a) I feel it is not easy to get information from them. For e.g. I still have not received the scope of rehab work and seller's disclosures after asking multiple times. 

    b) Similar turnkey providers offer 6-month or more warranty on the property, at least on the rehab work. USREEB will only give 90 day 'handshake warranty'. 

    c) USREEB suggested instead of getting my own inspection done, I can just review an existing inspection report. I agreed to review existing report, in addition to getting my own inspection done by an inspector I trust. I never got that existing report. It took them 2+ days to confirm the date for inspection of this vacant property. On the day of the inspection, the lockbox code did not work. After finally getting someone on phone from USREEB and trying around 15 different lockbox code (as provided from USREEB), the inspector was able to enter the property.  

    d) According to my inspector (I have met him in person and he has done other inspections for me) quality of rehab is questionable, along with several small issues. I understand Property Inspectors can be very meticulous and every small item is not a red-flag, however, here are few things that stood out : 

    • Water was not on during the inspection. Dishwasher, Bath, shower, toilets could not be inspected. Toilets were dirty (apparently someone did their business and left a 'present', in both restrooms.  Not a big deal, but I wonder if property showings are happening in current condition? Is it ready for rental/move-in according to USREEB?
    • According to the inspection report, there are 3-4 layers of existing shingles under the newly installed roof. The roof is new and looks good on the surface, but all this added weight can't be good, especially in winter with the weight of snow/ice. I understand its easier/cheaper to slap new shingles on top of old ones, instead of tearing-off old roof and property installing the new one. Cutting corners in turn-key rehab is nothing new but in midwest, this could result in the roof collapse in the middle of winter.  And access to the attic is closed shut, so no way to inspect the rafters and roof structure. 
    • Structure/foundation: Piers in the center of the house are made up of brick and rocks. Is it still acceptable? Floors in the house have multiple directions of leaning and noticeable slope on the garage floor. Most likely due to soil moving or settlement. Again, nothing new but no mention of these issues and no seller disclosures so far. 
    • Other issues like a broken window or leaking skylight are not big items, however, I did not expect to see this in a 'total rehab' property, 'ready' for the tenant. 

I have already contacted USREEB and requested repairable items to be repaired asap for re-inspection. I am hoping they will be able to address all of these concerns just like they did for most other investors. 

We are scheduled to close in 2 weeks and supposed to have tenants moved-in before closing. Let's see. 

Mackaylee has been good at responding to emails and Kenna from property management was helpful when lockbox code did not work.
USREEB have more options in 'A' class neighborhoods (Lees Summit, Praire Village, Blue Springs etc) compared to other providers focused on B and C neighborhoods.  

I know a lot of investors on BP speak highly of USREEB, so maybe I am over thinking and these are regular issues. Please feel free to share your experience and input, I am sure some investors will relate to these pesky little concerns. I will update the post as I get response from USREEB and make progress towards closing my first turn-key out of state investment property! 

@Akash Jain Wow you would think with all the investors buying turnkeys in Kansas City you would have gotten some replies by now.  My own two cents: while the issues noted by your inspector are fairly minor, this being deemed a "rental ready house" by USREEB is a bit of a red flag to me.  You're paying a premium for a turnkey property.  To me that means the details are taken care of by the turnkey company, otherwise why wouldn't you just put your own team together on the ground there (agent, inspector, contractor, property mgr)???

Update: 

USREEB assures me that there are only 2 layers of the roof under the new shingles. USREEB also agreed to fix the minor items on my repair list including the grading around the house and drainage ditch in the backyard. 

On my request, USREEB sent a Structural engineer and this is from his report based on visual review: 

"The foundation walls of the house have experienced some common movements for a slab and the house shows signs of some stress cracks which have been patched in the past. The slab does not show signs of excessive movement which would require structural repairs at this time. Improvements have been completed to the foundation and it appears to be stable at this time. 

The buyer of the house should expect some continued movement of the house as it ages, but can greatly reduce any future movement with proper maintenance of the property, including keeping soil conditions consistent, not allowing excess or lack of moisture. I would not require any structural improvements to the slab at this time, but I would recommend the owner maintain the following items in the future:

  • Maintain grading around the foundation of the house per the attached specifications
  • Keep soil near the foundation walls moist during dry weather
  • Expect cracking in floor, and seal with flexible sealant when visible
  • The proposed maintenance is designed to retain strength of the foundation. The maintenance is not designed to, nor guaranteed to stop water seepage in the future."

    At this point, I am moving forward with the property purchase. Once repairs are done, I will get it re-inspected for the repaired items. I am also waiting for the appraisal report and value this week. 

    Akash

    Updated 5 months ago

    USREEB completed most of the requested repairs and sent my inspector for re-inspection. 1. Water is still not on at the property. 2. Some of the repair completed does not look very professionally done and my inspector shared his concerns about quality of work. 3. Inspector found Racoon poop in the attic. It looks old and must have been there for a while, however USREEB did not remove it during the 'total rehab'. I have requested USREEB to complete remaining repair items asap.

    @Stephen Flynt  Yeah, I was hoping to get some input from other investors. Maybe I posted in the wrong forum. 

    This post has been removed.

    @Account Closed I agree with you. I am sticking with this one so far now to see appraisal value which I expect to be around 15k higher than the purchase price. This property is in Waldo area, MO side of Stateline and other houses in the area are getting renovated and sold for good value. 

    This property is being sold by USREEB so trying to get this using Realtor won't make sense. However, I am considering working with local realtors to identify properties with potential at good value and hire my own General Contractor to get it fixed (the BRRRR business model)

    I can't speak to USREEB in particular, but I would note that you shouldn't expect to buy a property from a turnkey company and be able to BRRRR out (refinance out all of your down payment). These companies need to make a profit too, and so there's just not going to be enough fat left on the bone. You may get a little equity with turnkey properties, but most likely you will be buying at something close to market.

    Hey Akash, I have been working with USREEB for over a year now and have multiple properties under management with them. I am in Marin County and have similar real estate goals as yours. Let me know if you’d like to meet for coffee sometime and talk further.

    Update: 

     I requested repairs on 13th November 2017.  I sent my inspector for re-inspection on 30th November. 

    • Some repairs are still not done. Most of them are done, however, the inspector shared his concerns about quality of work 
    • Water is still not ON at the property, which made it impossible to inspect the restrooms and plumbing systems. 
    • Inspector found Racoon poop in the attic. It looks old and must have been there for a while, however, USREEB did not remove it during the 'total rehab'. 

    I have requested USREEB to complete remaining repair items asap.

    Appraisal: The property appraised at 131k, my purchase price is 122k. 

    Tenants: There are still no tenant applications, even though the property is listed for rent for more than a month now. I have asked to lower the rent from $1200 to $1100.  

    Update: 12/12/2017 

    Signed the Closing docs on 4, Dec 2017 last Monday. 

    USREEBPM contacted me last week. As of now, I do not have any updates on tenants/applications or a confirmation on 

    • pending/remaining repair items
    • water (utility) ON?
    • property is indeed rent-ready ?

    I can’t comment on this turnkey company or Kansas City but I’ve bought several turnkey properties before.

    I would say it’s not a big deal for some of the minor issues you’ve listed. I’ve had an inspection done before where things like the furnace or AC didn’t work (for an unknown reason) despite them being brand new. The key difference in my experience vs yours is communication.

    Communication should be better than you describe where you hear back within a day or so. If issues are found at inspection and then fixed you should be provided photos or video showing that.

    The other big flag for me that you describe is how long it is taking to get rented. If you still have zero calls either it’s overpriced or their PM isn’t that good. You should be averaging at least a few calls a week in a healthy rental market.

    On a side note it’s pretty cool you bought turnkey and it still appraised for 5 percent more than you’re paying. I’ve really only seen this happen in A class properties. I’ve typically dealt with B class turnkey.

    On that note buying A class may limit your rental pool as more of those people will probably judt buy a house. Just a thought

    Thanks, @Caleb Heimsoth for your comments. 

    Yes, ideally I would like communication to be little better, though I never had prompt or even satisfactory communication from other Property Management companies I dealt with in TX either. 

    USREEB listed this property as 'A', though I think it's more like B or B+ after driving around the house. I do agree with limited tenant pool and I prefer to buy only B/B+ properties. 

    They did list the house at $ 1200, higher for the area and recently changed it to $1100 on my instructions. I agree with @Jay Hinrichs December is slow for renting/selling any property that's why I was trying to get inspection/repairs completed asap to have a tenant in place by now.  It is freshly renovated/fixed so I was hoping for little more traction from potential tenants.  Oh well, let's hope they find someone good soon.

    There are good turnkey providers out there, but my suggestion is to always be diligent and do your own homework. I've heard too many horror stories. And I would also say you should manage your expectations. Generally, with turnkey companies, you will be buying at something close to market value. With the cost of the house, rehab and their own margin, there is rarely any equity left to pass on to the investor.

    Hi @Akash Jain !  

    I tell our investors to expect about a 50-75 day marketing time on a new acquisition. We generally begin the marketing toward the middle of the renovation or as it is wrapping up. If you haven't already checked the marketing on Zillow, I would say to make sure its out there and the photos and description are acceptable. Also, for this time of year, it feels to me like we have a bit of a higher supply than demand which is forcing prices to ease.   Hope you are able to place a quality tenant soon!  Happy Investing!

    Hi Akash,

    I recently (Nov 17) bought a property in KC from USREEB.  The purchasing experience went fairly smoothly for me.  It is only my second TK property so it was also more of a learn as you go experience.  They did address all of the safety and major inspections items on my inspection report and got a tenant in a timely matter.  Communication with my PM has been great and prompt so far and will be tested soon as I just found out my tenant decided to return home to Florida and dropped the keys off.  The only spotty issue for me so far has been accounting, which is starting to be a common theme per others on the other USREEB thread.  Been communicating with my PM who has brought it to accounting attention so hope fully she can get it resolved.  Sent you a PM request if you don't mind sharing which inspector you worked with.  Best wishes.

    Update - 

    Finally, this property is rented (at a slightly lower rent than advertised) in 1.5 months. 

    Closing date: 4 Dec, 2017 

    Lease start: 20 Jan, 2018

    Originally posted by @Andrew Syrios :

    There are good turnkey providers out there, but my suggestion is to always be diligent and do your own homework. I've heard too many horror stories. And I would also say you should manage your expectations. Generally, with turnkey companies, you will be buying at something close to market value. With the cost of the house, rehab and their own margin, there is rarely any equity left to pass on to the investor.

     Andrew to be fair I think the buy a house with instant equity ship has sailed unless they are like you and these investor reside there have the ability to source pay cash hire their own crews etc and thereby EARN equity.. Equity in todays market is just not given away no need to.. the market has FINALLY thank god rebounded .. its not 2012 anymore.  that's my take on it.

    @?

    Originally posted by @Akash Jain :

    Thanks, @Caleb Heimsoth for your comments. 

    Yes, ideally I would like communication to be little better, though I never had prompt or even satisfactory communication from other Property Management companies I dealt with in TX either. 

    USREEB listed this property as 'A', though I think it's more like B or B+ after driving around the house. I do agree with limited tenant pool and I prefer to buy only B/B+ properties. 

    They did list the house at $ 1200, higher for the area and recently changed it to $1100 on my instructions. I agree with @Jay Hinrichs December is slow for renting/selling any property that's why I was trying to get inspection/repairs completed asap to have a tenant in place by now.  It is freshly renovated/fixed so I was hoping for little more traction from potential tenants.  Oh well, let's hope they find someone good soon.

     Very smart move I can't tell you how many people I see say hey my house SHOULD rent for 1200 and let it sit on the market for a few months.. When lower it 100 or even 50 gets it rented right away..

    vacant houses are not good to have.. ( do check your insurance make sure you know how long it can be vacant before you need a vacant home ryder) 

    But just simple math.. you lower it 100 bucks get it rented.. you can raise it as time goes on.. you leave it vacant 2 3 months you just lost 2200 to 3600 in income .. and at 100 a month it will take you 3 years to get it back.. at the higher rent and many times you still don't get higher rent so you just lost that money and its not coming back at all.

    that's my thought on it..

    Originally posted by @Jay Hinrichs :
    Originally posted by @Andrew Syrios:

    There are good turnkey providers out there, but my suggestion is to always be diligent and do your own homework. I've heard too many horror stories. And I would also say you should manage your expectations. Generally, with turnkey companies, you will be buying at something close to market value. With the cost of the house, rehab and their own margin, there is rarely any equity left to pass on to the investor.

     Andrew to be fair I think the buy a house with instant equity ship has sailed unless they are like you and these investor reside there have the ability to source pay cash hire their own crews etc and thereby EARN equity.. Equity in todays market is just not given away no need to.. the market has FINALLY thank god rebounded .. its not 2012 anymore.  that's my take on it.

    @?

    Not sure I would say "thank god" to the rebound. Yes, it's obviously a good thing that the economy is doing well, but I certainly do miss those housing prices circa 2011-2012...

    Originally posted by @Andrew Syrios :
    Originally posted by @Jay Hinrichs:
    Originally posted by @Andrew Syrios:

    There are good turnkey providers out there, but my suggestion is to always be diligent and do your own homework. I've heard too many horror stories. And I would also say you should manage your expectations. Generally, with turnkey companies, you will be buying at something close to market value. With the cost of the house, rehab and their own margin, there is rarely any equity left to pass on to the investor.

     Andrew to be fair I think the buy a house with instant equity ship has sailed unless they are like you and these investor reside there have the ability to source pay cash hire their own crews etc and thereby EARN equity.. Equity in todays market is just not given away no need to.. the market has FINALLY thank god rebounded .. its not 2012 anymore.  that's my take on it.

    @?

    Not sure I would say "thank god" to the rebound. Yes, it's obviously a good thing that the economy is doing well, but I certainly do miss those housing prices circa 2011-2012...

     spoken by a true opportunist  :)

    Originally posted by @Jay Hinrichs:
    Originally posted by @Andrew Syrios:
    Originally posted by @Jay Hinrichs:
    Originally posted by @Andrew Syrios:

    There are good turnkey providers out there, but my suggestion is to always be diligent and do your own homework. I've heard too many horror stories. And I would also say you should manage your expectations. Generally, with turnkey companies, you will be buying at something close to market value. With the cost of the house, rehab and their own margin, there is rarely any equity left to pass on to the investor.

     Andrew to be fair I think the buy a house with instant equity ship has sailed unless they are like you and these investor reside there have the ability to source pay cash hire their own crews etc and thereby EARN equity.. Equity in todays market is just not given away no need to.. the market has FINALLY thank god rebounded .. its not 2012 anymore.  that's my take on it.

    @?

    Not sure I would say "thank god" to the rebound. Yes, it's obviously a good thing that the economy is doing well, but I certainly do miss those housing prices circa 2011-2012...

     spoken by a true opportunist  :)

     also if you were building new construction like we are in Portlandia you would say thank god for the rebound.. much better to put those nice checks in the bank then right them to sell inventory  :)

    USREEB has been "on my list" for KC properties and they seem quite professional.  I haven't bought or brokered anything through them yet.  However, as a 21-year Realtor, I do think that inspection is a bit concerning.  Not having water on is kinda sloppy, and all those shingles -- yikes!  Glad that you are having another inspection.

    Another update after 4+ months of Purchase from USREEB. 

    Their property management team went through some personnel changes but looks like they got a good handle on properties and on-going issues. So far so good. I do not have any complaints. 

    New people at USREEB-PM are pretty good at responding to emails and communicating in general.  

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