A Turnkey Review: TCS Investments
Hello and good day!
Long time lurker here who’s learned an invaluable amount from the BP community over the past year and a half or so. I remember reading through a really good thread by Tyler Jahnke a while back, a review of a turnkey provider he used and noticed that many readers found it helpful and insightful. Over the past year, I too have been working with a turnkey provider and thought I could contribute to the community with a review of my own.
Warning – Lengthy review below.
For anyone simply looking for a short summary of my experience, here’s the TLDR version:
I started working with TCS Investments in late 2017 and I'm happy with my decision to jump into REI with them. Perfect? No (detailed below) but it's exceeded my expectations. The negative: I can tell the company is going through some growing pains and had difficulty keeping up with demand, but I've lately noticed new names joining the investment and management teams to help with the workload. Their processes also need refining (utilities sign-up, transition from investment to management, etc.) but I have seen this start to improve over the past month or two. The positive: Their model allows for BRRRR, the team seems very passionate about their work, and the returns are well within my ideal numbers. Don't get me wrong – there certainly have been a few bumps in the road, but nothing that has prevented me from moving forward. Overall, I'm very happy with my investments and experience with the team, and plan to continue working with them again once my latest BRRRR wraps-up.
On to the details...
About me, and why I chose the turnkey route:
I'm 35, work in IT, and live and own in Queens, New York. I've been studying and immersing myself in RE investing books, videos, podcasts, and articles for the past two years, and I knew that buy-and-hold was the direction I wanted to take. However, being that I have a full-time job, a somewhat unpredictable schedule, and living in one of the most expensive markets in the country, I knew that I would succeed best with out-of-state properties and to stay clear of the five boroughs. The BRRRR strategy was fascinating to me but I also knew that I couldn't be in-person frequently enough to manage rehabs. It's for these reasons I decided to look into turnkey providers.
Why TCS (Formerly Turnkey Philly) and why Philadelphia:
I originally discovered TCS Investments when they were Turnkey Philly simply by searching around for turnkey providers focused in Philadelphia. The first thing that stood out to me was how the head of TKP, Josh Weidman, had a decent online presence – videos on strategic renovations, rental markets, tenant retention, etc. – and the content wasn't a sales pitch. The second thing I noticed was that their process allowed me to BRRRR through my investments since the purchase and renovation are all cash deals, versus buying an already renovated property off their hands. I also have family from Philadelphia, visit the city every-so-often, and have seen areas improve over the past few years. Adding to that – it's a short train ride away, was a city I know has been attracting investors recently, and I don't want to be too distant from my investment properties.
I called TKP in early summer of 2017 and was told they’re swamped with existing projects and would be more available for new investors in the late summer. Fast forward a few months and we began speaking about my RE goals, budget, and timeframe. Josh hosted a remote session online and explained their process, markets, and timeframes for about 1-hour. I decided to pull the trigger (with now TCS Investments) and I began to receive proformas for some off-market properties.
Property #1 – SFH
Summary
My first property with TCS was a SFH – four bed, one bath row home in the Logan area of North Philly not far from Olney – not an A/B location, but the property ROI was attractive and would allow a nice cash-out refinance once completed. Finally, the property located in their traditional rental market (versus an up-and-coming market) and the all-in fit within my original somewhat limited budget.
Time Frame
Estimated time to completion for the rehab was 60-days.
Actual time to completion for the rehab was 90-days.
Cost & Details
Purchase Price: $60,000
Estimated Renovation Cost: $42,500
All-In Including Title Insurance, Transfer Taxes, etc.: $106,000
Estimated ARV: $130,000
Actual Renovation Cost: $42,500
Actual Appraised Value: $130,000
The property needed a new roof, hot water heater and furnace, rough in plumbing, bathroom, and kitchen. Additional items off the SOW included sealing up the doors between bedrooms (giving them a single entrance), lay down new flooring throughout (12mm laminate), install a ½ bath, repair cracked areas of the sidewalk, brick pointing, repair and refinish the staircase, side the exterior, support and repair the front deck, and paint the interior, among a number of other items on the 4-page rehab SOW. Payments were made over five separate draws.
Closing was done remotely (FedEx closing docs overnight) and demo began the week after. Each week during the rehab phase, typically on a Friday or Monday, I received a list of items completed for the week and a list of items scheduled for the following week. The e-mail would also contain a link to a set of photos taken to show progress of the renovation. One thing I really enjoyed about this was that Josh reached out and scheduled a call with me, after the e-mail was sent, to answer any questions or concerns I had about the property.
Once I was told the reno was wrapping up, I hired a home inspector who was met by TCS for entry to the property. We provided TCS with the inspection report a couple days later and they ran through a final punch list before I brought the inspector back for a follow-up (see below as this was a small headache).
The project was then handed off to the management side of TCS. I worked directly with a leasing agent who marketed the property, collected a handful of applications for the week, and held a 1-hour call with me to describe which of the applications he recommended and why. I was given all the applications and background checks, selected a tenant, and had the property two weeks after it was initially shown.
The tenant reported a couple of minor issues after move-in. Luckily, properties acquired through TCS Investment have a one-year warranty with the management company, so these issues were handled with no additional cost.
Fast forward six-months after purchasing the property and I closed on a cash-out refinance, 30-year conventional loan with a 75% LTV with a lender whose notes have no due-on-sale clause.
Additional Numbers
Annual cash-on-cash return after all expenses and reserves: 45%
Cap Rate: 8%
I’m saving 8% for repairs despite all new mechanicals and roof with the intention of using a considerable reserve for numerous mechanical and cosmetic updates in ~10-years.
Things I liked:
1. Always felt I could reach out with any question about the renovation and receive a clear answer in a timely manner. Their work was very transparent, and I never felt like anything was being hidden from me. If a problem arose, TCS was pretty much on top of it.
2. Josh was my primary contact and gives a strong impression to have a passion for his work, which certainly helped with building trust during my first project with them.
3. Leasing process was easy considering I’m remote, and the leasing agent was extremely helpful with explaining each application, what he liked/disliked about each potential tenant, etc.
4. We didn't go over budget, the ARV was accurate to the actual appraised value, and it rents for the estimated rent on the original proforma.
Things I did not like:
1. The contractors handling the renovation cut a handful of corners on this project. These cut corners were caught by the home inspector. Some were real head scratchers and upsetting.
The positive side: I shared the report with Josh who called me from the property two hours later after walking through it himself and provided an action plan for cleaning things up. We joined a call with his project manager that week and they explained their action plan and timeframe for repairing these items. They made no excuses and focused on how to get the property ready for a tenant. This (home inspection, punch list, follow-up inspection, couple more repairs) is where the 30-day delay was introduced to the rehab.
Headache? Yes. Deal breaker? No. Why not? I was impressed by how recovering from it was handled. I was also promised that TCS would not work with these contractors on future projects. Finally, TCS owned up to the late completion of the renovation and reimbursed me one-month’s rent for the additional 30-day delay.
2. After the property was leased, it wasn’t very clear who I could contact within the management team with questions or concerns about the tenant or property. The main number and prompts didn’t make it very clear either.
The positive side: Owners now have a point person (Meg) in TCS who acts as their liaison, and so far, the experience I’ve had has been night and day with the liaison being easy to reach, willing to help, and on top of concerns I bring to her.
Final comments:
Overall, I was happy with the final product – we never went over budget, had the property leased quickly, and I appreciated how easy it was to discuss my questions and concerns with TCS throughout the process. I felt they gained more of my trust by how well the renovation issues were found. It was handled with a sense of urgency.
Pre/Mid-renovation photos: https://imgur.com/a/76vOY8Y
Post-renovation photos: https://imgur.com/a/a0YZXsf
=============================================
Property #2 – Duplex
Summary
The second property was a two-story multi-purpose building in Cobbs Creek with retail on the 1st floor and a residential unit on the 2nd floor. The rehab included a complete demo to the brick and studs and a redesign of the layout to accommodate two 2-bed/1-bath units. The 1st floor had smoke damage and needed to be re-framed. For peace of mind, and to be more responsible with my potential investment, I hired a structural engineer to inspect the damage and give the all clear before closing on the deal. TCS met the engineer on site for access to the property. I closed on the property a couple weeks after.
Some items off the SOW include a new roof, new windows throughout, electrical and plumbing rough-in, new kitchens and bathrooms, move the 2nd floor entrance to new location, sidewalk repair, 200 AMP panel and separate electric and gas meters, forced air heating, and new 12 mm laminate flooring throughout, among other items on the 3-page list. Speaking of utilities, I’m handling water but charge a flat $25 fee to tenants. I also pay for common electric for outside motion-activated lights. Payments were made over five separate draws.
Time Frame
Estimated time to completion for the rehab was 115 days.
Actual time to completion for the rehab was about 120-130 days.
Cost & More Details
Like the previous project, weekly e-mail updates were sent on Fridays or Mondays with progress photos. This time around is where I started to notice the growing pains I mentioned in my TLDR above. There were a few times where I had to give a friendly reminder about sending an update and it became a bit more difficult to reach Josh directly. The positive side: TCS has since hired a couple more people to work with Josh. I now have access to more people on Josh’s team who can answer my questions and concerns about the renovation.
Purchase Price: $65,000
Estimated Renovation Cost: $65,000
All-In Including Title Insurance, Transfer Taxes, etc.: $135,000
Estimated ARV: $165,000
Actual Renovation Cost: $65,000
Actual Appraised Value: Originally $160k – Disputed due to missing items on report and new value at $165,000
This time around I visited the property three times throughout the renovation process. I took the advice of a good friend and fellow RE investor, and became more part of the process, attentive to the work, and critical/inquisitive to the whole project. I felt more responsible this time around and Josh’s team made themselves available for my questions and visits and were very open to my concerns during each walk through, adding my requests to their to-do list (within reason).
Again, like before, I hired a home inspector as the rehab wrapped-up and shared the inspector’s report with TCS. Items on the report were added to the final punch-list and tackled within approximately two weeks.
The property was transitioned to the leasing department once the renovation was completed. Both units were shown to several interested renters, and the leasing agent walked me through about five applications. She discussed her conversations and impression of each applicant, and which ones she recommended. I received background information and the applications for all five and decided on two tenants.
The leasing process from marketing to selecting a tenant took about two weeks. The units were fully rented out with moved-in tenants within four weeks of completing the renovation. The leasing agent was superb throughout the whole process and helped coordinate and communicate a lot between me and the tenant before the move-in date.
Fast forward six-months after purchasing the property and I closed on a cash-out refinance, 30-year conventional loan with a 70% LTV with the same lender.
Additional Numbers
Annual cash-on-cash return after all expenses and reserves: 25%
Cap Rate: 8.4%
I’m saving 8% for repairs despite all new mechanicals and roof with the intention of using a considerable reserve for numerous mechanical and cosmetic updates in ~10-years – same as first property.
Things I liked:
1. The four items I listed under “Things I liked” for property #1 remain the same for this property, so I won’t repeat myself here (see above).
2. I could tell their processes were more refined and the contractors were more professional. I told Josh that was not going to proceed with this project if the previous contractors were used. The home inspector found no instances of contractors cutting corners on this project (isn’t to say report contained no items to fix) and the finished product was of higher quality.
3. I really enjoyed that TCS was happy to meet with me on multiple occasions for my on-site visits and walk through.
4. The management side of TCS adjusted their team and made communication with them easier during this period (Meg), and the leasing agent was fantastic (Trena). I also was more in contact with another member of Josh’s team (Mike) who was always up-to-date with the rehab and was more than happy to take my questions.
Things I did not like:
1. It wasn’t initially made clear on when or whether the units were marketed after being handed to leasing and marketing. I reached out to TCS and asked for an update on this one week after I was told it would be on the market. The positive side: This was more annoying than a problem, but once I spoke with the leasing agent, it was clear they were on top of marketing and showing the units, it was just the transition from rehab to leasing that wasn’t the smoothest.
2. Josh himself was not as easily accessible as he was in late 2017. I rather enjoyed that we could reserve time aside every week for an update-follow-up conversation, but I could tell his schedule was making this more difficult to happen. I understand this simply wasn’t scalable for him, but still something I enjoyed before. The positive side: Josh recognized he was a bottleneck and opened our communication to additional people (Mike and Elyse) who’ve been helpful in answering my questions after each update. I also recently heard Josh hired another person on his team, but I haven’t worked with him yet.
Pre/Mid-renovation photos: https://imgur.com/a/Fi9JHuS
Post-renovation photos: https://imgur.com/a/rdmW4NI
==========================================
My next steps…
I closed on my loan for property #2 just a couple weeks ago and am currently in the middle of another project with TCS. The latest is a SFH converted to duplex located in the Kingsessing area. The renovation is like property #2 only we're creating a new entrance for the 2nd floor unit and both floors are being reframed as 2-bed/1-bath. I’m expecting the renovation to complete by late February. I can update this review with that property if anyone is interested.
Final comments…
I wrote this in hopes of contributing something to the community, and I do hope someone finds this helpful. I also tried being as honest as possible – giving both the good and bad – but the good certainly has outweighed the bad for me. So far it seems that everything is falling into place very well and I’m looking forward to what 2019 brings. Feel free to post any questions you might have, and I’ll do my best to respond.
Thanks for reading!
Daniel P.