Out of the blue I am receiving messages about a company called Strongbrook and how great they are and that I should refer all of my clients to this great and ethical company. Seriously, that was the message. I have never heard of them and really have no need for their services, I simply wanted to ask if anyone else on the site knew who they were. I find it odd that one of the messages I received had an imbedded referral code almost like an MLM code to track levels of investors.

all the best, Chris

Chris - We've had several people come on the site and post ads for the company along with some kind of referral / tracking code. I know nothing about them, but we don't allow affiliate marketing here, and these folks are quickly shown the door.

Just a little snippet I found after Googling them:

Strongbrook Direct is a Direct Sales Company promoting REIC. REIC is a company that transacts Real Estate for their clients through Professional Service Agreements. Once a client of REIC you are assigned a coach for life that you can interact with at anytime. Coaches advise our clients on proper Cash Flow Real Estate Investment techniques and strategies. Cash flow Real Estate is about creating a passive residual income stream.

Sounds like the same old song and dance. Maybe like lifestyles...

Why anyone would think Memphis Invest would want to send their clients that way I couldn't even begin to imagine. Funny that they would have the gall to ask..... I think the "Turnkey" approach is much safer.

Funny, I just got an email from them as well. Currently waisting a little time evaluating what they offer. I try to keep an open mind. Is a Real Estate MLM legal without a broker lic or agent lic?
Aside: I am used to seeing properties in the 10-16% Cap, turnkey. I think what they have might be ok, but their cap rates are low due to all the padding/commissions. Now this is based on only one sample property, but that is all I have access to right now.

I have buyers all the time. What they all need is good financing at good rates below 7%. Finding great deals from solid trust worthy partners, is easy. Financing for Real Estate Investors on the other hand takes time and effort to build relationships. I am curious if anyone has used them to finance any deals. They seem to have a financial/funding section.

I had someone reach out to me as well about this, so was doing research. Landed here, great posts everyone. Chris Clothier, are you any relation to Kent Clothier?

@Tracy Royce - Kent Clothier is my older brother.

Cool I got invited to an event his group is hosting here in Scottsdale this weekend, recognized the name. Family business, I see :)

Strongbrook was at our REI club with a presentation. I think they're legitimate, but 8-10% or so return on a passive investment doesn't interest me. Same thing everybody else is doing.

I'm not against MLM's or turnkey RE for arm-chair investors; there's a place for each. Not my cup of tea but they are what they are for those that are into those type of business models.

Sorry folks - I had to clean this thread up.

Please note: ANYONE found using BiggerPockets to recruit for any MLM will be removed from the site.

Several people in my REI club are involved with this group too. Thank you for your input everyone. If anyone else can shed more light on it without a sales pitch, that input would be greatly appreciated as well.

I am a client of Strongbrook and, in full disclosure, I am also part of their direct sales team. But, no sales pitch - I'll just tell you my experience as brief as I can.

I'm a software engineer, not a Real Estate guy. When I first heard them, I was quite skeptical. With research I became more confident. After some of this I received a "10 year game plan", a free (and required if you want to become a client) outline of how they can help you retire in the next 10 years if you choose to join. I liked what I saw and I signed up.

The biggest difference I see between them and a Real Estate education company is that they help people all the way through doing a deal, from finding to financing to purchase to leasing to selling, etc. rather than "here's some information on REI, go get 'em tiger!"

I own one home with them so far and have reasonable hope to purchase another in 2013. It's been great for me because it's passive and I have a 10 year plan to retire.

Brief, but hope that was helpful to someone. :)
-Matt

@Matt Parks - You say you 'own one home with them.' I thought they were selling education, not properties. Can you clarify?

Also, care to share the numbers on the property you own with them?

Thanks.

I hope the passive folks look at more than just current cash flow. A high current cash flow can be the result of a great deal - or - deferred maintenance, structural problems, declining neighborhood, functional obsolesence, etc. In other words a 12 percent current cash return is not good if your property value is declining 10% per year due to the above factors.

@Joshua Dorkin Sorry for the delay, and yes, I'd be happy to.

Strongbrook is a client based real estate investment company. The reason I say "client based" is because they sit down with each client and map out a 10 year strategy (or Game Plan) that will build or enhance their investment or retirement goals. With this strategy in place, Strongbrook can now go acquire homes that fit specifically into their Game Plan.

Strongbrook operates mostly in three hot markets, specifically Phoenix, Las Vegas, and Orlando (Florida). On average they are buying homes for significantly less than the cost to rebuild them. It's these discounts that are creating a lot of excitement right now.

You asked about my home - here are the details:
Location: Phoenix
Purchase price: 83k
Rebuild cost: 165k (set by insurance company)
Rents for: $875 / mo.
Cash flow after expenses (not including repair/maint.): $252.06 / mo.
Year Built: 2007

The homes they buy are all generally the same: Single family homes, less than 20 yrs old, 3/2, in a master plan community, within 30 miles of a major metro area and work sectors that will insure high rents and low vacancies. They've made it into a widget, if you will.

They do not encourage their clients to flip properties, but use a short term by and hold, cash flowing strategy on assets with a huge future upside, like mine shown.

Strongbrook owns the Real Estate Company, the Mortgage Company, the Property Management Company, has licensed insurance agents, and access to 3rd party custodial agents that can assist with self directing 401ks or IRAs. They're a one stop shop for a person like me - a software engineer wanting the financial benefits of real estate investing without wanting to spend a life time learning it, let alone being elbows deep in a toilet in the middle of the night.

Do they offer education? Yes. But hopefully this paints a picture that they help people actually *do* REI. 70% of new clients have purchased a home with them within their first 6 months. For me, it took me a year to save up the funds to purchase.

That was a lot of info, and again I hope it wasn't too sales pitchy. But... how can I explain what they do without, well, saying what they do? It's cool stuff! :)

Cash flow after expenses (not including repair/maint.): $252.06 / mo.

@Matt Parks that's a pretty significant expense to leave out. I'd be curious what items actually are included in "expenses".

Rebuild cost: 165k (set by insurance company)

True almost everywhere now. That's not a very meaningful metric. A more meaningful metric is the value vs. similar properties that have recently sold nearby. Independently verified by you or an appraiser, not a value given to you buy this company.

I have no strong opinion on Strongbrook. I am not affiliated with them nor do I anticipate purchasing properties from them. I'll share some of my recent experience with them:

Before they would send me examples of properties I could purchase, other than old deals they had done that they have posted as examples on their web site, I had to speak with three different people. The first referred me to them. The second was on their sales team and read from a script. The last was one of the owners, a really nice genuine guy who I'm sure is a phenomenal salesmen. After speaking with the owner, who was, to his credit, upfront and honest about his service offering, I was sent 5 examples of current deals. After doing some research I found them all listed on the local mls for at or a little above the strongbrook asking price. After this, I was no longer interested. You have to pay them some sort of retainer fee of $4k before you can purchase from them. There was also some benefit to referring others to them but I didn't get the details. For active investors, I see no value. For passive investors, they may have some benefit.

@Jon Holdman - After expenses, in my first fiscal year of owning the home, including repairs, maintenance and initial vacancy, it brought in $710.96. So a little over $50 / mo. I purchased it at the beginning of August 2011.

I'm interested why you think rebuild cost is not a useful metric. If you were flipping a house, I would agree. I plan to hold onto it for 3 to 5 years or however long it takes until they start building again in the area. No builder is going to sell a home for less than it costs to build, so that seems like a logical metric to use when estimating what it may sell for in that time. My risk (that I see) is that this requires population to increase in the area so that building becomes necessary. Do you see something I don't? (Again, I'm a software engineer, not a Real Estate pro.)

@Brian H. - It's certainly not for everyone. They are quick to say that. One thing I appreciated in their sales model is they were very low pressure (unlike some REI education seminars I've attended).

Yes, there is a retainer fee to work with them, which varies in price depending on how many homes you'd like to do with them, be it 1 home, 4 homes, or unlimited homes. I signed on in the unlimited program and can say that I've never been upsold since (again, unlike some REI education seminars). For me, the retainer was not a hard decision because, when I saw that they could help me retire in 10 years using their provided game plan, the value proposition was a no-brainer. Again, that's for me though, not necessarily someone else.

IMHO, there is zero chance prices will double in the next 3-5 years. I actually don't think that will happen in the next 20 years. The three "hot" areas you mention - Vegas, Phoenix, and Orlando were incredibly overbuilt during the bubble. Prices will rise over the next 20 years. Historical (based on the long term Case-Shiller data) overall housing prices roughly match inflation. When will builders start building again in these areas? When there is demand. Will they spend double what your house' replacement value is? Doubtful. Replacement cost is what it would cost YOU to rebuild the exact same house in the same spot. Even during the boom, a builder wouldn't spend anything close to that amount to build a similar house in a new development. Inflated "replacement costs" are simply insurance companies way to raise your premium. Thats why this is a useless metric.

SFRs are valued based on comps. If you're paid the same through this company as you could just off the MLS, then they're adding no value. I've looked at a number of these turn key companies, including one (not this one) in Phoenix. What I found is the price they were charging was above what other prices were right on realtor.com. It took me 15 minutes to find those comps and realize these turnkey outfits were targeting people out of the area with inflated prices that looked good compared to the area where the investor lived, but were overpriced compared to other houses in the same area. Now, that may well not be the case in your situation. But the fact you quote replacement value leads me to think someone has convinced you that's meaningful vs. current comps.

I don't believe in short term real estate, unless you're flipping. If you're buying to hold, plan to hold forever. If you're flipping, get in and out quick. Three to five years is, IMHO, a no-mans land. You need 10% appreciation just to cover your transaction costs. If the market is like it is now in 3-5 years, you need more like 15%. And if you look back to the market 3-5 years ago, its worse now than many areas. If you bought in 2007 and tried to sell now, you would be in serious trouble. 2009 would be slightly better, but you would still very likely have a loss.

I'm a strong believer in the 50% rule. That says that, if you use a PM, expenses, capital, and vacancy will eat up 50% of the gross scheduled market rent. If you manage yourself, you can earn the PM's cut, and reduce that percentage to 35%. When you're in this for the long haul, capital is a real expense. That's things like roofs, furnaces and major appliances. If a roof lasts 20 years and costs $5000, that's $21 month. If a furnace (or, in Phoenix, AC) is $2000 installed, that's $8 a month. ETC. Those are real expenses you really will have to pay. Carpets a requirement in your rental area? Those are good for three years. $27 a month. Can you charge the tenant for that? Maybe, but if you try to charge a tenant the full cost of replacing a three (or more) year old carpet, good luck making that stick in front of a judge.

So, evaluate your propert vs. current comps. Not some speculative future number that might happen. Aliens might nuke Washington DC tomorrow, and that would affect home prices, too. But both scenarios are just guesses.

Evaluate your prospects of future cash flow with the 50% rule. Given your location and the property's location, I suspect you're using a PM. One years actuals on one property may differ radically, just like one roll at the roulette table differs radically from the long term results. A one dollar bet either pays me back $36 (one time out of 38) or $0 (the other 37 times). 1000 $1 bets, OTOH, is very likely to leave with with about $950. You may dispute my gambling analogy, but owning rental property is absolutely gambling. You're betting you will get your $850 a month. You're betting the tenant won't do $5000 or $20,000 of damages. You're really betting that you win the $850 enough months in a row to make up for the eventual costs, whether those are a new roof, tenant damages or routine maintenance.

Originally posted by Matt Parks:
Jon Holdman - After expenses, in my first fiscal year of owning the home, including repairs, maintenance and initial vacancy, it brought in $710.96. So a little over $50 / mo. I purchased it at the beginning of August 2011.

If you're making only $50/month now when it's relatively new to your portfolio, you're likely going to be losing a lot of money later.

Remember, every 20 years or so you're going to have to replace the roof, the HVAC system, a couple water heaters, siding repair, electrical/plumbing upgrades, etc. These capital costs can easily be $10-20K every 20-30 years or so.

That means you should be budgeting $500-700 per year for these things, even though they may not hit for quite a while. That takes your cash-flow to near $0.

In other words, you may see small positive cash-flow every year for quite a while, and then one year you may be out $5K...a couple years later, another $5K...a couple years later $1K...etc. Those negative years will negate the positive years, and maybe more.

Thank you @Jon Holdman for your thoughts and input. You bring up some excellent considerations about replacement cost that I hadn't considered. I find helpful any information that helps me set my expectations ever more realistically (for better or worse).

I've written and erased here a dozen times in consideration of one item or another, but I don't want to write a novel. I could try to speak to each of them, but for one I'm not an expert, and secondly the conversation could go on forever in the details of it all. In the end, much of it would likely be one person's educated guess against another.

In the end, the proof is in the pudding, right? As yet, I have little pudding. I spend perhaps 30 minutes a month on my property and it's making me money. I have reason to hope it will continue to do so, but am not so naive as to think it guaranteed. There is always risk, and I feel like Strongbrook has helped to mitigate it quite well through their strategy.

Here's a core principle of this all: if you want something done right, don't do it yourself.

Now you can say this is blind trust if you wish. Perhaps it is to a degree, and that's kind of the point. I'm not looking for a side job to be a RE investor; I'm not looking to spend 10,000 hours to become an expert of it. It's not Real Estate that I care about, but what it can do for me financially.

I'm happy with my results thus far and I've seen the results of many who have been using their system longer than I. If all I had was "education" and had to go at this on my own, I'd never do it. Strongbrook held my hand via a personal coordinator helping me through each and every step of the process.

Hopefully this answers the questions about what Strongbrook is and what they do. They are a legit company now in their 6th year of business. Their message and method will not resonate with everyone, but it does for me and for many others. I've done sufficient due diligence in this company to personally feel comfortable and confident with their program.

And so, as I'm not the expert of it all, I would refer you to them and they can answer even your most detailed questions, including why's and how's and all.

Folks, Ive been in the real estate and mortgage biz for 33 years. Ive been around all the blocks. There are many wanna be companies like this, all with the same gameplan but little twists. I looked at them because I was recruited to be a recruiter. Many of the people attached to them are paid simply by bring others into the fold. Ther is a three tierd BUY IN for that, by the way.

Yes they talk about future appreciation but you all have to know that the media is full of bull**** and that we are not cvoming out of any recession. The media hype saying things like 'Turned the corner---sales up 75% over last year!!' Well, if that market had been selling 25,000 units a year but dropped to TWO, then last year went to FOUR---thats 100% increase, right? Except for certain spotty areas because their is always an exception, real estate isnt going up over the next five years. Some of it will still go down. Now, this was a SURE thing until recently when reporters started announcing that huge money concerns are now planning to buy tens of thousands of REO units directly from the banks/servicers to be kept as corporate owned rentals!!! Thgis will mean fewer homes on the open market. Fewer real estate agent listings, etc. Now you would normally think that would increase other properties but consider value. What is true value? You go and buy a home for $75000 that used to be 'worth' $500,000!!~ Wow what a deal! You forget that its greatest 'value' was super super inflated because of STATED INCOM liars loans, usually low start adjustables. That buy you just made for $75000 is worth $75,000---MAYBE. In any market in any state---what determines most values? Simple.What Joe and Jane verage wage earner can qualify for now that we actually have to quailfy. And, its even harder to qualify now than it was when people had to before. I dunno---these people hadme starting to look butthe few at the top are makinbg the bucks and when I saw that they also sell courses and do MLM referral fees, it turned me off big time. The ONLY thing they initially said that made sense was that they had private money to buy and fix units for resale. I see nothing like that now that Ive been in their site. They calim to purchase 30% or more under 'value'. Whose value? This is like trying to catch a fly. I appraise homes for banks who are foreclosing. Its getting harder and harder to establich value with so many variables and changes to the market. Court cases, siuts, lender policies, now big money sniffing about all the REO, etc. WHat is value?? Who the heck knows. Its bottom line ROI. If your rents give a return on your money that is favorable---doesnt matter about the price, does it? It sure does if you used appreciation in your long term goals. In geberal, forget about appreciation. Thats the safe way to invest in real estate.

Folks -
I was emailed the following link from a user today. Thought I'd share it:

http://www.sec.gov/litigation/litreleases/2012/lr22437.htm

Joshua Dorkin, In my humble but experienced opinion, you do out industry a great disservice to alienate MLM's, and network marketing opps. The industray has drastically changed in the last 5-7 years, as has the American Economy, thus the way of doing business in general has changed. You have more professionals looking for a way to make passive/ residual income and even a daily living doing MLM's and Network Marketing, with Real Estate, education, coaching, etc as the product line. Further, the milk and cookie parties in homes and hotels are a thing of the past with MLM. Internet marketing has taken the lead, and you can now promote one, without chasing your friends and family and being that guy that's a constant nag to those around you. Internet marketing has opened up the opportunity to advertise your biz opp on the internet and attract like minded professionals to your opportunity in a very non-invasive way. There is nothing at all in-compliant about Strongbrook, and bottom line is it works WELL! I've been a very successful wholesaler/ investor for a decade. I've become a pretty decent internet marketer in the last year. I can tell you, it's where the investing side of real estate is headed. If you don't open your mind to it, and allow your users here to do the same on your site, you'll lose traction exponentially as time goes on. http://strongbrookdirect.net is the real deal!

Anthony Parker - Our members are welcome to get involved in any MLM they want. They just aren't allowed to use our platform to market it. It is as simple as that.