Originally posted by @JC Wu:
@Amit M.Lol!! You can always come up with those astute 3-word summaries? "Less is more" from your profile, I like it. Impressive investment strategy you've been pulling off!
@Account Closed"Barriers to entry", that's the term. After reading your posts, it seems that what I need is a mentor. Those occasional lunch/coffee sessions probably won't be enough unless some experienced investor is willing to be harassed by me every single week. The learning curve definitely looks steep and the viable local strategies come with high barriers to entry.
The worst investment decision I've made to date actually has nothing to do with REI. I was gonna invest 1M in bitcoins when the price was $220/piece a few years back. An "investment advisor" from a Bank of America branch strongly advised against it with a passion, which successfully deterred me at the last moment. Thinking back, if he was so good at making investment decisions, he wouldn't be working at a cubicle relying on his 6 figure salary to make a living. I only have myself to blame as it was my ultimate decision to take his advice. I feel that timing matters more than strategy when it comes to investment; but when I miss the timing, I can only play with tweaking strategies which is easier said than done. :(
@Chris Clothier Aren't you the biggest TK provider in Memphis? How do you feel about @David Song thinking that TK promoters on BP try to tell ppl that OOS TK is easier and better than local investing is BS?
Good Morning JC! I apologize because this is going to be long. I am going to go into a few details and it is probably not the right forum, but you asked the question and I am going to answer. In short, I believe that Turnkey is a great option for many investors. It fits their needs. At the same time, I think the industry in general is a mess and David is right that many investors will get hurt. That is both the fault of the companies and the investors. In the end, the investor is responsible for making good, informed decisions and for knowing precisely what their needs are as investors.
I have followed David Song's posts on here for a while and I respect him and his points of view. If his profile is correct, then I have been commenting and connecting on BiggerPockets with investors longer than he has been investing in real estate. Since the beginning, the same (sometimes lazy) opinions about buying Turnkey real estate have been posted on here. All investment opportunities that get marketed as Turnkey and all investors who choose that passive route are not the same and cannot be lumped into the same definition.
From day one, I have always advised investors to look locally first. It reduces the risk for the investor if they stay local. Not to mention, for investors who really want to dig deep and understand the fundamentals of real estate, hands-on is the best way to get there. That is why I have always advised investors to be sure that their reasons for looking out of state match their needs and ultimate desire as an investor. For those that realize they would really rather be hands-on, I give the same advice that Saj gave. Find someone local (and you can almost always make that connection here on BP) and ask for the opportunity to connect and pick their brain. Attend your local REIA and start connecting.
To be direct, I give this same advice to investors who ultimately realize they want to be passive. Find someone local that is successfully investing passively out of state and ask for the opportunity to ask questions. Often times the cost of a cup of coffee can reduce your learning curve and greatly reduce your risk.
So, I give the advice that has helped me in so many different stages of life from being a husband, father and entrepreneur. I have always sought out those that I respect and asked for the opportunity to talk. It has helped me get further faster more than anything else.
As for the lazy comments that all out of state investing is bad and all turnkey investments are bad. That is not true and it ignores the fact that an overwhelming majority of real estate investors do so passively. When Memphis Invest teamed with BiggerPockets in 2012 to survey real estate investors nationwide, the results were overwhelming that most investors bought property passively. A majority bought out of state, owned just over one property and had plans to continue building their portfolios. A majority were single-family investors. As for Turnkey, the bad reputation was earned over the years by companies that used the word to attract investors with no intention of actually helping them be successful. To this very day David is right that there are companies here on BP who are taking advantage of out of state investors, using the word turnkey to market and even using marketers/promoters here on BP to push more investors to them. In the end, are they doing it on purpose? That is not for me to say. But, there are plenty of horror stories where investors buy properties and they fail fairly quickly and then no one is there to help them. I think a vast majority of the time the problem is that the companies are poor business people who do not know how to run a business.
The other problem is that new companies pop up daily and the simply cut and paste marketing copy. From day one they promote themselves as high-quality, safe, service oriented and experienced. We have had many companies come to us for advice and very few of them want to do the hard work that it takes to earn a good, solid reputation. I recently saw a company pop up with a slick website and promotional copy that looked remarkably similar to Memphis Invest. They even touted themselves as having over 50 years investment experience. They sound like a great company and their website is slick. Unfortunately, like many other companies there is very little truth to it. In this case, we know they have no investment experience, no real company and not much more than a dream of working for themselves. I admire them for their moxie in starting a company, but the fact is that investors who buy from them sight unseen are taking a massive, massive risk. They are buying into a promotional story that may not be true. Unfortunately, this happen daily with new companies popping up.
What happens next with many of these companies is they agree to pay a promotional company anywhere from $5,000 to $10,000 per property for an investor because they don't know how or aren't willing to put the time in building relationships on sites like BP to build their reputations. Those fees add to the price of the property and many companies choose to cut other areas like renovations rather than increase the value of their product. They want the easy, short road to building a company and someone has to pay for that short cut. It is often the investor who failed to do their proper due diligence, failed to be patient and ultimately didn't ask the tough questions they need to ask that pays for those short cuts.
Turnkey is just a promotional word and it, just like passive investing, require the same due diligence that any other investment requires. Do you have to know all of the ins and outs of real estate? No. Do you need to know the ins and outs of your investment? Yes! The best advice I can give to passive investors who are interested in looking outside their local areas and like the idea of a Turnkey investment is to be patient. Spend time getting to know your investment objectives. Spend time getting to know why you want to invest in the first place. Ask yourself if you want to understand all the terminology of real estate or simply want the safest route to passively investing in real estate you can take. Either way, the investor who spends time and patiently makes an investment plan, will give themselves the best chance for success.
Lastly, Memphis Invest is not just the largest company in Memphis, but in the Turnkey industry as a whole. We have been in business longer than any other company out there and have earned our outstanding reputation over 6,000 property transactions with 2,000 investors. Our first investors were FedEx workers, pilots, engineers, line workers, etc. who attended the local Memphis REIA and heard our founder and CEO, Kent Clothier, Sr. speak about his portfolio. Our out of state investors first came directly from our circles of influence in Denver where I lived and Florida where my older brother lived. Through referrals, investors from other areas of the country began to contact our company. Today, our five biggest states for where investors live mirror the five most populous states in the US. California, New York, Texas, Florida, Illinois and followed by Tennessee. The idea that every investor comes from California and all of those investors are dumb for investing passively outside of California is silly.
I feel like I've typed enough. My post is probably too long as it is and for that I apologize. Just know that I respect the opinions of everyone. I don't always agree, but I've spent my entire time on BiggerPockets connecting with people, listening to opinions, sharing my opinions and having debates - all in the name of adding my voice to those trying to help us all be successful. Hopefully on some level I've hit my mark~!
