RTR - New constructions

[Lakshminarayanan Vijayaraghavan]

Hi all,

I am new to investing and I am looking into RTR website and ther inventories. The deals look pretty good - but I understand I need to do a thorough due diligence as the projections are way too optimistic (based on other forum posts). I also noticed that property management fees is 0% and capex/vacancy is a little lower than what i would plugin, but thats okay, I can do the math and I will only proceed is if it is a conservatively cash flow property. However, I am more curious about their new construction as opposed to their turnkey rehab. 

I was going through their new construction inventories and I am wondering  -

1. If there is a significant markup of the house value as opposed to buying it directly from the builder?

2. If yes, what benefits do RTR offer for that markup?

3. Is it better to buy it directly from the builder?

Thanks,

Lak

[Zach Lemaster]

@Lakshminarayanan Vijayaraghavan

Thank you for all the questions about RTR.  As I mentioned in the PM you sent to me, I highly recommend you speak to our team to ask specific questions about numbers and other items you are looking to better understand on the pro forma.  Feel free to ask about our company on the BP forums, but please understand no one is going to be able to best understand and explain our properties and business process like we will be able to.  I sent you a link to schedule with our team last week when you reached out to me via PM.  Please use that link to schedule a call with our team to answer all your questions in great detail.

Short answer to your questions are:

No, houses are not marked up.  It's quite the opposite actually as @Chris Seveney mentioned. We buy hundreds or thousands of homes from national and regional builders, which means we get institutional type discounts that we pass on to our investor clients. So you would have access to better pricing than you would be able to access on your own due to economies of scale and cannot access on your own (because you are not personally buying hundreds or thousands of homes from the same builders). Typical discounts are in the 6% to 10% range, meaning you would usually get 6% to 10% of a price discount buying through our network (that you would not get access to on your own). On a $300K home, that would be $18,000 to $30,000 discount. The most strategic aspect is that you get the choice to use that discount as a price reduction, cash back or rate buy down (or combination). So the choice is yours. For example, if you put 20% down, you could get up to 10% back, to cover half of your downpayment and skyrocket your ROI. You will not find this option anywhere else, and you most certainly will not find this option being provided by the builder if you were to buy direct. This is one of RTR's largest value adds to our clients. This is where our pro formas get confusing as we are automatically applying the RTR discounts how we think it makes the most sense (which is usually a combination of rate buy down, cash back, mngt cost coverage and sometimes price reduction). However, you do not have to apply the discounts how we show in our website. That is why it's absolutely necessary to speak with our team as I recommended so you can fully understand how this process works. No one else on BP or elsewhere will be able to explain this to the same level of detail as our team will.

We look forward to hopefully speaking with you in the near future to answer all your questions.  

Zach Lemaster - CEO RTR