Lets Fight!!! - Turnkey BRRR Service vs Build the Team BRRR Strategy

Buffalo, New York
BRRRR - Buy, Rehab, Rent, Refinance, Repeat
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Lets Fight!!! - Turnkey BRRR Service vs Build the Team BRRR Strategy

Matthew Irish-JonesBusiness Member
Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes

After 15 years of being of Property Management, Realty and now construction, I am 100% on the Turnkey side. I no longer believe its possible to "assemble the team" and pull off a BRRR. Pulling off a BRRR means a 5% or higher cash on cash return after refinance.

Reasons I don't believe its possible:

1. The Real Estate Agent Problem - no high performing Real Estate agent wants to run around looking at 50K-100K properties listed on the MLS that pay $1500 dollar commissions. The BRRR is highly complex, you need a ton of numbers, rehab, ARV, rental rates after construction and are 5X the work of a regular investor sale or residential sale. Maybe you can negotiate a higher flat fee for an agent, but then you are paying more for a property off the MLS. Unless that agent has GC knowledge and is spot on with projections (highly unlikely) you are overpaying and not receiving better service.

2. The GC Problem -  No GC wants to run around providing 10 quotes for properties you don't know if your going to buy or not.  No one cares that you are going to do hundreds of thousands of dollars of "potential work."  Good GC's have millions of dollars of work coming in and high close rates from reliable clients.  Nobody wants to work with an investor assembling a team that needs someone else to run numbers for him on his first 10 properties he might buy. 

3.  The Property Management Problem  - Property managers will provide some loose rental comps, but a leasing agent and a GC have WAY different standards for what rent ready means.  When the numbers do not work after rehab and you can't get the rent you thought...  you are headed towards finger pointing.  Who is to blame?  The rental comps from the PM?  They thought more work would be done.  Or is it the GC's fault?  You wanted to control costs so he didn't get to everything.

4. The Pro Forma Problem - BRRR's are complex. Quotes take time. ARV's are a moving target that move every time the Scope of work changes. The rental projections change with every amenity that gets added or skipped. Who is in charge of the Scope of Work? The Agent? The Investor? The GC? The Property Manager? All of these parts have to fit together like a puzzle. Otherwise the investor is left holding the bag with a bunch of separate companies and independent contractors pointing fingers.

Two asterisks to the above:  

*** There is one exception to this rule.  A local investor who manages all of the above subs himself, writes the SOW himself, and has a lot of experience doing so can pull it off.  

**** Most Turnkey BRRR companies are NOT actually turn key companies. They assemble the team and pretend to be turnkey. I am only referring to actual Turnkey companies that are fully staffed with W-2 employees and handle everything in house from Acquisition to execution.

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Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
2mo

OP I would take your discussion two different ways.

1.   Your first asterisk.  I would think this is 90% of all Brrrrr investors.  The out of state or passive hands off investors are built to lose money in a Brrrrr.  It’s not the GC or Realtors job to make you money.  If your local and not just a one and done deal, your team or contractors will gravitate to you.

2.  Move up in Market.  Who says it has to be a $50,000 to $100,000 unit.  Find the ugliest house in a great older neighborhood in the $400k to $800k range depending on market.  This leverages your and everyone’s effort on a unit.  

Change your buy box.  

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2mo

    their is a 3rd option hire a good broker and buy a house listed on MLS that is owner occupied and well maintained.

    I have 2 clients that do the BRRR for a fee but its their bizz model and they are pretty good at it in their markets.

    However you make extremely valid points with the lower value properties. 

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    • Matthew Irish-JonesBusiness Member
      OP
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      2mo
      Quote from @Jay Hinrichs:

      their is a 3rd option hire a good broker and buy a house listed on MLS that is owner occupied and well maintained.

      I have 2 clients that do the BRRR for a fee but its their bizz model and they are pretty good at it in their markets.

      However you make extremely valid points with the lower value properties. 


      Hi Jay, for the third option... How would you BRRR that opportunity?

      From my experience, and to your point, you need to find a company that specializes in this and is BRRR focused...  Those companies are rare and hard to find. 

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    • Jay HinrichsBusiness Member
      Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
      2mo
      Quote from @Matthew Irish-Jones:
      Quote from @Jay Hinrichs:

      their is a 3rd option hire a good broker and buy a house listed on MLS that is owner occupied and well maintained.

      I have 2 clients that do the BRRR for a fee but its their bizz model and they are pretty good at it in their markets.

      However you make extremely valid points with the lower value properties. 


      Hi Jay, for the third option... How would you BRRR that opportunity?

      From my experience, and to your point, you need to find a company that specializes in this and is BRRR focused...  Those companies are rare and hard to find. 


      what I meant is just look at owner occuppied homes that a retail buyer would buy to move into  well maintained get a good home inspection just like someone wanting to move into it would do and buy one of those.

      And yes on the BRRR your exactly right and as I stated I only have two clients that I have seen over the years that do this for a fee and do it well.. They are NOT full time realtors so they have the time find  then manage rehab and then give refi recommendations to the buyers and then sometimes the OOS buy will use me for the bridge / construction. 
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  • Henry ClarkPro Member
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    2mo

    OP I would take your discussion two different ways.

    1.   Your first asterisk.  I would think this is 90% of all Brrrrr investors.  The out of state or passive hands off investors are built to lose money in a Brrrrr.  It’s not the GC or Realtors job to make you money.  If your local and not just a one and done deal, your team or contractors will gravitate to you.

    2.  Move up in Market.  Who says it has to be a $50,000 to $100,000 unit.  Find the ugliest house in a great older neighborhood in the $400k to $800k range depending on market.  This leverages your and everyone’s effort on a unit.  

    Change your buy box.  

    5Reply
    • Matthew Irish-JonesBusiness Member
      OP
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      2mo
      Quote from @Henry Clark:

      OP I would take your discussion two different ways.

      1.   Your first asterisk.  I would think this is 90% of all Brrrrr investors.  The out of state or passive hands off investors are built to lose money in a Brrrrr.  It’s not the GC or Realtors job to make you money.  If your local and not just a one and done deal, your team or contractors will gravitate to you.

      2.  Move up in Market.  Who says it has to be a $50,000 to $100,000 unit.  Find the ugliest house in a great older neighborhood in the $400k to $800k range depending on market.  This leverages your and everyone’s effort on a unit.  

      Change your buy box.  


       All fair points.  

      I used the 50-100K as a reference, certainly BRRR's exist at every price point. However, the amount of money needed for a 400-800K buy + reno is significantly more than an entry level BRRR market. Most investors on BP do not seem to be starting in that price range.

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  • Henry ClarkPro Member
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    2mo

    OP 

    The main reason I would be hesitant on Brrrrrs are the trades people.

     To me there are less and they are aging out.  Luckily two of our electricians their sons took over.  A third is mid 40s but doesn’t want to add anyone although he is booked.  Makes more money with the two of them versus the headache of adding more.  

    Interest during rehab and rent up is higher now, although back to historical levels.  Puts pressure on the deal.

    Also you can’t control the trades.  We are replacing our small walk up deck.  We picked a contractor who does a lot of work in the area.  Got two quotes and they were in the same range.  He wanted 50% down to hold the spot which I thought was steep. Then he was 2 months past his start date.  I wanted to replace our Cedar deck and he was going to use treated wood.   Another $6,000 added, he wanted paid up front.  Then he just has the rails and to nail down the cap boards for the stairs and wanted $9,000 when he is only a few days from finishing.  We didn’t pay.

    My point on the above.   That is just one trade.  In a very simple project.  I think he is front loading his deposits or draws and is spending ahead.  When he hits a slow down his bills will catch up with him.  As long as it’s not on my project.

    I would again change your Buy box.  Do less structural Brrrrrs.  Do Roof re shingle, landscape, flooring, kitchen or bathroom, updated light fixtures, paint job.  No room movements, structural, foundation, etc.  Would also do 1970s forward which is hard in older communities.  Change the buy box. 

    1Reply
    • Matthew Irish-JonesBusiness Member
      OP
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      2mo
      Quote from @Henry Clark:

      OP 

      The main reason I would be hesitant on Brrrrrs are the trades people.

       To me there are less and they are aging out.  Luckily two of our electricians their sons took over.  A third is mid 40s but doesn’t want to add anyone although he is booked.  Makes more money with the two of them versus the headache of adding more.  

      Interest during rehab and rent up is higher now, although back to historical levels.  Puts pressure on the deal.

      Also you can’t control the trades.  We are replacing our small walk up deck.  We picked a contractor who does a lot of work in the area.  Got two quotes and they were in the same range.  He wanted 50% down to hold the spot which I thought was steep. Then he was 2 months past his start date.  I wanted to replace our Cedar deck and he was going to use treated wood.   Another $6,000 added, he wanted paid up front.  Then he just has the rails and to nail down the cap boards for the stairs and wanted $9,000 when he is only a few days from finishing.  We didn’t pay.

      My point on the above.   That is just one trade.  In a very simple project.  I think he is front loading his deposits or draws and is spending ahead.  When he hits a slow down his bills will catch up with him.  As long as it’s not on my project.

      I would again change your Buy box.  Do less structural Brrrrrs.  Do Roof re shingle, landscape, flooring, kitchen or bathroom, updated light fixtures, paint job.  No room movements, structural, foundation, etc.  Would also do 1970s forward which is hard in older communities.  Change the buy box. 


       This is why I am on the Turnkey side of things.  

      To be a true Turnkey provider you control the acquisition, your are not buying off the MLS under a time crunch. If the turnkey provider also controls construction, the entire team is getting into the property prior to, write up the SOW, provide a comprehensive quote, run rental comps, and control each individual trade.

      The package to an investor is a pro forma that has the entire team on board from acquisition to execution.  The internal GC has on staff carpenters, painters, etc... if he is outsourcing major plumbing or electric he has preferred vendors and knows their lead time.  The whole thing is wrapped up in a nice bow tie.  

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    • Henry ClarkPro Member
      Developer · Member since 2020 · 4k+ posts · 4k+ votes
      2mo
      Quote from @Matthew Irish-Jones:
      Quote from @Henry Clark:

      OP 

      The main reason I would be hesitant on Brrrrrs are the trades people.

       To me there are less and they are aging out.  Luckily two of our electricians their sons took over.  A third is mid 40s but doesn’t want to add anyone although he is booked.  Makes more money with the two of them versus the headache of adding more.  

      Interest during rehab and rent up is higher now, although back to historical levels.  Puts pressure on the deal.

      Also you can’t control the trades.  We are replacing our small walk up deck.  We picked a contractor who does a lot of work in the area.  Got two quotes and they were in the same range.  He wanted 50% down to hold the spot which I thought was steep. Then he was 2 months past his start date.  I wanted to replace our Cedar deck and he was going to use treated wood.   Another $6,000 added, he wanted paid up front.  Then he just has the rails and to nail down the cap boards for the stairs and wanted $9,000 when he is only a few days from finishing.  We didn’t pay.

      My point on the above.   That is just one trade.  In a very simple project.  I think he is front loading his deposits or draws and is spending ahead.  When he hits a slow down his bills will catch up with him.  As long as it’s not on my project.

      I would again change your Buy box.  Do less structural Brrrrrs.  Do Roof re shingle, landscape, flooring, kitchen or bathroom, updated light fixtures, paint job.  No room movements, structural, foundation, etc.  Would also do 1970s forward which is hard in older communities.  Change the buy box. 


       This is why I am on the Turnkey side of things.  

      To be a true Turnkey provider you control the acquisition, your are not buying off the MLS under a time crunch. If the turnkey provider also controls construction, the entire team is getting into the property prior to, write up the SOW, provide a comprehensive quote, run rental comps, and control each individual trade.

      The package to an investor is a pro forma that has the entire team on board from acquisition to execution.  The internal GC has on staff carpenters, painters, etc... if he is outsourcing major plumbing or electric he has preferred vendors and knows their lead time.  The whole thing is wrapped up in a nice bow tie.  


      OP your approach is “great” for Out of State or hands off investors.  To me though the value of a Brrrr for a starting investor is Sweat equity.  Even house hacking while you do it.   

      0Reply
    • Matthew Irish-JonesBusiness Member
      OP
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      2mo
      Quote from @Henry Clark:
      Quote from @Matthew Irish-Jones:
      Quote from @Henry Clark:

      OP 

      The main reason I would be hesitant on Brrrrrs are the trades people.

       To me there are less and they are aging out.  Luckily two of our electricians their sons took over.  A third is mid 40s but doesn’t want to add anyone although he is booked.  Makes more money with the two of them versus the headache of adding more.  

      Interest during rehab and rent up is higher now, although back to historical levels.  Puts pressure on the deal.

      Also you can’t control the trades.  We are replacing our small walk up deck.  We picked a contractor who does a lot of work in the area.  Got two quotes and they were in the same range.  He wanted 50% down to hold the spot which I thought was steep. Then he was 2 months past his start date.  I wanted to replace our Cedar deck and he was going to use treated wood.   Another $6,000 added, he wanted paid up front.  Then he just has the rails and to nail down the cap boards for the stairs and wanted $9,000 when he is only a few days from finishing.  We didn’t pay.

      My point on the above.   That is just one trade.  In a very simple project.  I think he is front loading his deposits or draws and is spending ahead.  When he hits a slow down his bills will catch up with him.  As long as it’s not on my project.

      I would again change your Buy box.  Do less structural Brrrrrs.  Do Roof re shingle, landscape, flooring, kitchen or bathroom, updated light fixtures, paint job.  No room movements, structural, foundation, etc.  Would also do 1970s forward which is hard in older communities.  Change the buy box. 


       This is why I am on the Turnkey side of things.  

      To be a true Turnkey provider you control the acquisition, your are not buying off the MLS under a time crunch. If the turnkey provider also controls construction, the entire team is getting into the property prior to, write up the SOW, provide a comprehensive quote, run rental comps, and control each individual trade.

      The package to an investor is a pro forma that has the entire team on board from acquisition to execution.  The internal GC has on staff carpenters, painters, etc... if he is outsourcing major plumbing or electric he has preferred vendors and knows their lead time.  The whole thing is wrapped up in a nice bow tie.  


      OP your approach is “great” for Out of State or hands off investors.  To me though the value of a Brrrr for a starting investor is Sweat equity.  Even house hacking while you do it.   


       Agreed for someone starting off.  But if you have a half million dollars to spend and a full time job, sweat equity is probably not an option.  Building a team seems like an impossible task.. at least to me. 

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  • Eric James
    Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
    2mo

    My approach is, I personally do everything on your list.

    1Reply
  • Matthew Irish-JonesBusiness Member
    OP
    Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
    2mo

    @Marcus Auerbach. Do you have an opinion?  I know you have paid your dues to the school of hard knocks. 

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    • Marcus Auerbach
      Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
      2mo
      Quote from @Matthew Irish-Jones:

      @Marcus Auerbach. Do you have an opinion?  I know you have paid your dues to the school of hard knocks. 


       I always have an opinion ;-)

      You raise very valid points: the Realtor problem, the GC problem, the PM problem and then bringing it all together. It's a LOT easier said than done. Especially at the bottom-of-the-barrel price point under 100k, that's the worst. The problem is that the rehab does not get cheaper, just because the property value is lower. When you have property value so far below replacement value, that basically means that the land value is negative (because the sticks and stones always have some value) - otherwise you won't get to a total of 100k for a house that would cost 400k to build. The ratio works a lot better at 200-300k, its much easier to find some equity in that math. And over 400k its basically a flip, because rents are not viable.

      But your main question is about trunkey vs DIY BRRRR - especially in 2026. The problem is that we are seeing compressed margins. And that compressed margin now has to get split up between a turnkey provider and the investor. What it probably really comes down to is how much more efficient can you complete a turnkey vs a DIY investor. If you can create a wide enough gap to pay yourself (or close to), then why would an investor not go that path? Most of us screw up so much on the first 10 deals - and that costs a LOT of money.. ask me how I know lol

      2Reply
    • Matthew Irish-JonesBusiness Member
      OP
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      2mo
      Quote from @Marcus Auerbach:
      Quote from @Matthew Irish-Jones:

      @Marcus Auerbach. Do you have an opinion?  I know you have paid your dues to the school of hard knocks. 


       I always have an opinion ;-)

      You raise very valid points: the Realtor problem, the GC problem, the PM problem and then bringing it all together. It's a LOT easier said than done. Especially at the bottom-of-the-barrel price point under 100k, that's the worst. The problem is that the rehab does not get cheaper, just because the property value is lower. When you have property value so far below replacement value, that basically means that the land value is negative (because the sticks and stones always have some value) - otherwise you won't get to a total of 100k for a house that would cost 400k to build. The ratio works a lot better at 200-300k, its much easier to find some equity in that math. And over 400k its basically a flip, because rents are not viable.

      But your main question is about trunkey vs DIY BRRRR - especially in 2026. The problem is that we are seeing compressed margins. And that compressed margin now has to get split up between a turnkey provider and the investor. What it probably really comes down to is how much more efficient can you complete a turnkey vs a DIY investor. If you can create a wide enough gap to pay yourself (or close to), then why would an investor not go that path? Most of us screw up so much on the first 10 deals - and that costs a LOT of money.. ask me how I know lol


       Amen... That is another reason that I think a legitimate turnkey provider is a better option.  They can bulk discount services.  If they know they are getting, wholesale fee, construction work, property management, realty fee if you ever sell, and a potential repeat customer... they can decrease their margins on the entire ecosystem and bet on a repeat customer. 

      Being a great customer with the ability to continue buying if the turn key provider hits on numbers also has a lot of value.  

      Be nice to your vendors folks... they will make or break your returns :) 

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  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    2mo

    If you have a local team or a good realtor with contacts its doable, I do it for clients all the time not on 100k places but on places typically 500k to 1.2 million 3 or 4 unit buildings so yes the commisions are worth my time. The bigger problem is that they just do not cashflow with a full refi and high ARV anymore, you can take out some partial equity to scale into another deal or just be happy you made a lot of equity and hold it in the property until eventually cash out refi as rents ramp up over time but its not fast full leverage scaling anymore like pre covid.

    2Reply
    • Matthew Irish-JonesBusiness Member
      OP
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      2mo
      Quote from @Henry Lazerow:

      If you have a local team or a good realtor with contacts its doable, I do it for clients all the time not on 100k places but on places typically 500k to 1.2 million 3 or 4 unit buildings so yes the commisions are worth my time. The bigger problem is that they just do not cashflow with a full refi and high ARV anymore, you can take out some partial equity to scale into another deal or just be happy you made a lot of equity and hold it in the property until eventually cash out refi as rents ramp up over time but its not fast full leverage scaling anymore like pre covid.


       How many times a year is all the time?  Don't these clients have to flip these due to the negative cash flow?

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  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    2mo

    The majority of my clients do some value add and hold the equity. Done roughly 5 million worth 2-4 sales so far this year. How many do the refi not sure but I know the one I close next week the client did the cash out refi to fund it. Our 3/4 units actually are pretty decent ratios after a value add for example after might be in $900k and rent $7-9k a month so how much can refi sustainably depends on each deal. 

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    2mo

    What about a "Turnkey BRRR"?

    We help clients find an ugly property, create a SOW, get bids and then once they buy the property we handle the rehab, documented with videos, and then rent it out and manage it.

    This way, the owner knows EXACTLY the repairs done or not done and had video evidence of what was done and the quality.

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  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    2mo
    Quote from @Matthew Irish-Jones:

    After 15 years of being of Property Management, Realty and now construction, I am 100% on the Turnkey side. I no longer believe its possible to "assemble the team" and pull off a BRRR. Pulling off a BRRR means a 5% or higher cash on cash return after refinance.

    Reasons I don't believe its possible:

    1. The Real Estate Agent Problem - no high performing Real Estate agent wants to run around looking at 50K-100K properties listed on the MLS that pay $1500 dollar commissions. The BRRR is highly complex, you need a ton of numbers, rehab, ARV, rental rates after construction and are 5X the work of a regular investor sale or residential sale. Maybe you can negotiate a higher flat fee for an agent, but then you are paying more for a property off the MLS. Unless that agent has GC knowledge and is spot on with projections (highly unlikely) you are overpaying and not receiving better service.

    2. The GC Problem -  No GC wants to run around providing 10 quotes for properties you don't know if your going to buy or not.  No one cares that you are going to do hundreds of thousands of dollars of "potential work."  Good GC's have millions of dollars of work coming in and high close rates from reliable clients.  Nobody wants to work with an investor assembling a team that needs someone else to run numbers for him on his first 10 properties he might buy. 

    3.  The Property Management Problem  - Property managers will provide some loose rental comps, but a leasing agent and a GC have WAY different standards for what rent ready means.  When the numbers do not work after rehab and you can't get the rent you thought...  you are headed towards finger pointing.  Who is to blame?  The rental comps from the PM?  They thought more work would be done.  Or is it the GC's fault?  You wanted to control costs so he didn't get to everything.

    4. The Pro Forma Problem - BRRR's are complex. Quotes take time. ARV's are a moving target that move every time the Scope of work changes. The rental projections change with every amenity that gets added or skipped. Who is in charge of the Scope of Work? The Agent? The Investor? The GC? The Property Manager? All of these parts have to fit together like a puzzle. Otherwise the investor is left holding the bag with a bunch of separate companies and independent contractors pointing fingers.

    Two asterisks to the above:  

    *** There is one exception to this rule.  A local investor who manages all of the above subs himself, writes the SOW himself, and has a lot of experience doing so can pull it off.  

    **** Most Turnkey BRRR companies are NOT actually turn key companies. They assemble the team and pretend to be turnkey. I am only referring to actual Turnkey companies that are fully staffed with W-2 employees and handle everything in house from Acquisition to execution.

     I've solved all of those problems by simply charging for those services. My team will look at 100 cheapo properties for a guy if he wants me to. I'll provide 100 bids too. But they gotta pay for each of um. 

    Been doing this for years and I post all of the numbers on the deals on a show called The MLS Search & Analysis Show on HoltonWiseTV. To date I've done 3,737 episodes. So yes, it can be done at scale.

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  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    2mo

    @Matthew Irish-Jones I have one better for you. It beats Turkey and it beats BRRRRs. BRRRLO. It's when you burn a property and you add a lease option to it. These options are much easier to manage than a regular rental. Additionally, a Tenant buyer brings in an option fee so if they don't exercise the option you can take the fee that they brought in, which for me I collect about $4000 or $5000, And you can use that money to rehab the house if they didn't take good care of it. And then you can bring somebody else in as a new tenant buyer With a new option fee.  

    I probably had well over 100 lease option properties and I only have one Assistant that only spends a quarter of her time managing my current portfolio of 60 lease option properties, I would say half of her time and spent on our flip projects and the other quarter of the time is spent on our five shorter rentals.

    I would say Lease Option strategy is much better than the BRRRR method, and definitely better than Turkey.

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    • Matthew Irish-JonesBusiness Member
      OP
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      2mo

      @Shiloh Lundahl I'm familiar with the strategy.  Why did you speak in past tense "had?"

      I know a lot of investors who have tried this, ultimately you are lending to a demographic that can't get traditional bank loans.  It can work, but the statistics are not on your side. 

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    • James Wise
      Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
      2mo
      Quote from @Matthew Irish-Jones:

      @Shiloh Lundahl I'm familiar with the strategy.  Why did you speak in past tense "had?"

      I know a lot of investors who have tried this, ultimately you are lending to a demographic that can't get traditional bank loans.  It can work, but the statistics are not on your side. 

       That's the model. Lease option guys find "tenant buyers" who can't get a loan, then they do the whole song and dance knowing they'll default, get evicted, and they get to keep the fatty lease option fee while also not having to do normal repairs and maintenance that they would have been required to do under a more standard landlord tenant relationship.

      The model is really just a circumvention of landlord tenant laws. The whole model is considered a problem by the government. The government is constantly going after these guys for predatory lending and things of that nature.

      Anybody telling investors they've reinvented the wheel with this b/s is just leading the investor into a hornets nest of problems from every possible angle.

      1Reply
    • Matthew Irish-JonesBusiness Member
      OP
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      2mo

      @James Wise not to mention the cost to regain access to the property after a default and repairs to get it back in rentable condition.  I have not seen anyone do this successfully. 

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    • James Wise
      Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
      2mo
      Quote from @Matthew Irish-Jones:

      @James Wise not to mention the cost to regain access to the property after a default and repairs to get it back in rentable condition.  I have not seen anyone do this successfully. 

       Well that is the whole rub actually. When you're a landlord you've got limits to how much you can charge as a deposit, and when your tenants jack up your unit you've got to spend the money to get it rentable again.

      This is where the grifters pitching this lease option B/S come in. They pretend they've reinvented the wheel and created a work around to the pesky problems us landlords have been dealing with forever. They call their tenants buyers and call their large deposits lease option fees.

      The theory is they get all this extra money to cover rehabs to get it rented again when they eventually default. 

      Problem is, it ain't all gravy like that. It sounds good in theory but the Government has spoken on this.....Many times. Government believes that if it quacks like a duck, it's a duck. Government believes these people are just tenants and they love hitting people doing this stuff with all types of predatory lending claims and things of that nature. 

      Now whether you personally, (or I personally) believe it's truly predatory, and not just smart business, that's a topic for another day. The reality is the Government thinks it is, so in the real world the whole thing being anything other than a dumpster fire is fugazi.

      1Reply
    • Jay HinrichsBusiness Member
      Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
      2mo
      Quote from @James Wise:
      Quote from @Matthew Irish-Jones:

      @James Wise not to mention the cost to regain access to the property after a default and repairs to get it back in rentable condition.  I have not seen anyone do this successfully. 

       Well that is the whole rub actually. When you're a landlord you've got limits to how much you can charge as a deposit, and when your tenants jack up your unit you've got to spend the money to get it rentable again.

      This is where the grifters pitching this lease option B/S come in. They pretend they've reinvented the wheel and created a work around to the pesky problems us landlords have been dealing with forever. They call their tenants buyers and call their large deposits lease option fees.

      The theory is they get all this extra money to cover rehabs to get it rented again when they eventually default. 

      Problem is, it ain't all gravy like that. It sounds good in theory but the Government has spoken on this.....Many times. Government believes that if it quacks like a duck, it's a duck. Government believes these people are just tenants and they love hitting people doing this stuff with all types of predatory lending claims and things of that nature. 

      Now whether you personally, (or I personally) believe it's truly predatory, and not just smart business, that's a topic for another day. The reality is the Government thinks it is, so in the real world the whole thing being anything other than a dumpster fire is fugazi.

      to me lease option is very market and asset specific.. In low value inner city hoody properties no question it can be deem preditory and failure rate is damn near 100% within 36 months. I have done L O to purchase in higher dollar markets and properties were the option fee is more in the 20 to 50k range and the properties are 350 to 600k.. Cant really do it to scale as the clients for these I have found are those relocting and dont want to live in a rental and want to buy the home when their home in another market finally sells.  @Shiloh Lundahl his market is higher end then were this would be done in Rust belt cities.. not So I would personally say his performance is not like what we see in Cleveland Detroit and other markets were i have seen a lot of this with C / D props.  There were huge abuses of this model in Texas to non english speakers and I believe that state created new laws to handle this type of transaction.

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    • Jay HinrichsBusiness Member
      Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
      2mo
      Quote from @James Wise:
      Quote from @Matthew Irish-Jones:

      @James Wise not to mention the cost to regain access to the property after a default and repairs to get it back in rentable condition.  I have not seen anyone do this successfully. 

       Well that is the whole rub actually. When you're a landlord you've got limits to how much you can charge as a deposit, and when your tenants jack up your unit you've got to spend the money to get it rentable again.

      This is where the grifters pitching this lease option B/S come in. They pretend they've reinvented the wheel and created a work around to the pesky problems us landlords have been dealing with forever. They call their tenants buyers and call their large deposits lease option fees.

      The theory is they get all this extra money to cover rehabs to get it rented again when they eventually default. 

      Problem is, it ain't all gravy like that. It sounds good in theory but the Government has spoken on this.....Many times. Government believes that if it quacks like a duck, it's a duck. Government believes these people are just tenants and they love hitting people doing this stuff with all types of predatory lending claims and things of that nature. 

      Now whether you personally, (or I personally) believe it's truly predatory, and not just smart business, that's a topic for another day. The reality is the Government thinks it is, so in the real world the whole thing being anything other than a dumpster fire is fugazi.


      One of our regular contributers also does the LOP only he his wrapping sub to.. now those can be a total can of worms if they unravel.  I have seen that model totally implode and great harm done to the orginal owner who deeded their home away but the mortgage stayed in there name.  So you sell sub to.. buyer finds a LOP purchase.. since the down payment is generally larger the option agreement gets recorded and is an encumberance  then the LOP fails and you have a tenant in sufferance who wont move you have a payment due to the underlying mortgage with no income to pay it and well you as the buyer are not personally on the hook so you just walk away .. or worse there are very bad actors that will do this as a scheme never pay on the underlying and rip rents until the bank finally forecloses.. 
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    • Shiloh LundahlPro Member
      Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
      2mo
      Quote from @Matthew Irish-Jones:

      @Shiloh Lundahl I'm familiar with the strategy.  Why did you speak in past tense "had?"

      I know a lot of investors who have tried this, ultimately you are lending to a demographic that can't get traditional bank loans.  It can work, but the statistics are not on your side. 

      You can invest however you'd like. You're comparing the BRRRR strategy with a turnkey rental. I'm stating that the BRRRLO model is better than both a regular BRRRR and a turnkey.

      I mentioned that I “had” 100 because I have sold many properties and I’ve divided my company with my partner so I am down to about 60 single family homes right now (that doesn’t include my commercial properties or mobile home parks or vacation rentals).

      I believe the percent of people that exercise. The option on average is 15%. That’s what I’ve heard. I think that my percentage is above 30% and I’m adding some things to my model to bring up to 50%.

      Unlike what @James Wise mentioned, I actually want my tenant buyers to exercise their options. I get paid more quickly when they exercise the option and I can 1031 exchange the profit into the next project. 

      From what you have written, it appears that you have not interacted a lot with individuals that not only do this strategy successfully, but that also help people become homeowners through this strategy.

      How many pictures or addresses of homes would you like me to post of where the tenant buyer has exercised their option so that you can have more context to see they this strategy is a legitimate investment strategy?

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    • Matthew Irish-JonesBusiness Member
      OP
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      2mo

      @Shiloh Lundahl why would I need pictures or addresses of homes?  We are debating real estate investing strategies.  If you have one that works by all means brother, have at it.  I hope you make millions.

      From what I have personally witnessed, it has not been a successful strategy.  That does not mean that no one can do it successfully.

      When it comes to Turn key BRRR vs build a team BRRR vs your strategy... I would still want to keep the asset long term. If I fully renovate a property in 2026 at 2026 prices, my property continues to appreciate and continue to get debt pay down.

      BRRRs are a lot of work and a lot of risk to move on from at the end of a BRRRLO.  

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    • Shiloh LundahlPro Member
      Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
      2mo

      @Matthew Irish-Jones let's do this then, let's run realistic projections going out 10 years. Pick a recent property that you've purchased. Have it be one of your average ones. Not your best one, not your worst one. And then let's run projections on that one. And then I'll do the same.

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    • James Wise
      Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
      2mo
      Quote from @Shiloh Lundahl:
      Quote from @Matthew Irish-Jones:

      @Shiloh Lundahl I'm familiar with the strategy.  Why did you speak in past tense "had?"

      I know a lot of investors who have tried this, ultimately you are lending to a demographic that can't get traditional bank loans.  It can work, but the statistics are not on your side. 

      You can invest however you'd like. You're comparing the BRRRR strategy with a turnkey rental. I'm stating that the BRRRLO model is better than both a regular BRRRR and a turnkey.

      I mentioned that I “had” 100 because I have sold many properties and I’ve divided my company with my partner so I am down to about 60 single family homes right now (that doesn’t include my commercial properties or mobile home parks or vacation rentals).

      I believe the percent of people that exercise. The option on average is 15%. That’s what I’ve heard. I think that my percentage is above 30% and I’m adding some things to my model to bring up to 50%.

      Unlike what @James Wise mentioned, I actually want my tenant buyers to exercise their options. I get paid more quickly when they exercise the option and I can 1031 exchange the profit into the next project. 

      From what you have written, it appears that you have not interacted a lot with individuals that not only do this strategy successfully, but that also help people become homeowners through this strategy.

      How many pictures or addresses of homes would you like me to post of where the tenant buyer has exercised their option so that you can have more context to see they this strategy is a legitimate investment strategy?


       Why would I care to see picture or address of 10, 20, 30, or 50 homes you've done bro? That doesn't change the fact that the entire model is widely scrutinized by the Government and regulators.

      On it's face it's a non starter. The benefit of this to the investor would be what? You get to keep all the money if they default. Ok, Government has a major issue with that. So going after that cheddar is eventually gonna become a problem.

      So if your claim is you hope your tenant buyer goes against trends and doesn't default like the overwhelming majority do, you actually hope that they buy the house, what is the benefit to the investor of selling the house this way? Why do you hope they buy the house, instead of default? If the investor truly wanted to sell their house, they'd just sell it to a buyer who brought in their own financing.

      0Reply
    • James Wise
      Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
      2mo
      Quote from @James Wise:
      Quote from @Shiloh Lundahl:
      Quote from @Matthew Irish-Jones:

      @Shiloh Lundahl I'm familiar with the strategy.  Why did you speak in past tense "had?"

      I know a lot of investors who have tried this, ultimately you are lending to a demographic that can't get traditional bank loans.  It can work, but the statistics are not on your side. 

      You can invest however you'd like. You're comparing the BRRRR strategy with a turnkey rental. I'm stating that the BRRRLO model is better than both a regular BRRRR and a turnkey.

      I mentioned that I “had” 100 because I have sold many properties and I’ve divided my company with my partner so I am down to about 60 single family homes right now (that doesn’t include my commercial properties or mobile home parks or vacation rentals).

      I believe the percent of people that exercise. The option on average is 15%. That’s what I’ve heard. I think that my percentage is above 30% and I’m adding some things to my model to bring up to 50%.

      Unlike what @James Wise mentioned, I actually want my tenant buyers to exercise their options. I get paid more quickly when they exercise the option and I can 1031 exchange the profit into the next project. 

      From what you have written, it appears that you have not interacted a lot with individuals that not only do this strategy successfully, but that also help people become homeowners through this strategy.

      How many pictures or addresses of homes would you like me to post of where the tenant buyer has exercised their option so that you can have more context to see they this strategy is a legitimate investment strategy?


       Why would I care to see picture or address of 10, 20, 30, or 50 homes you've done bro? That doesn't change the fact that the entire model is widely scrutinized by the Government and regulators.

      On it's face it's a non starter. The benefit of this to the investor would be what? You get to keep all the money if they default. Ok, Government has a major issue with that. So going after that cheddar is eventually gonna become a problem.

      So if your claim is you hope your tenant buyer goes against trends and doesn't default like the overwhelming majority do, you actually hope that they buy the house, what is the benefit to the investor of selling the house this way? Why do you hope they buy the house, instead of default? If the investor truly wanted to sell their house, they'd just sell it to a buyer who brought in their own financing.

       To further expand on why a few random pictures or stories of happy families you've made or something is irrelevant, take a look below. This is the kind of regulation hell going on with this stuff. No amount of happy stories you can share will negate this reality.

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      Pennsylvania v. Vision Property Management et al. — Pennsylvania, 2019–present. This is probably the strongest example for what you're researching because Vision expressly used “lease with option to purchase” agreements along with agreements for deed and mortgages. The PA AG alleged deceptive sales practices, undisclosed defects and unlawful terms involving more than 500 distressed homes. A 2021 default judgment ultimately resulted in more than 250 properties being deeded to occupants, and later settlements generated additional restitution.

    • ___

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      Pennsylvania v. Joseph F. John & Joseph F. John II — Pennsylvania, filed 2023. These landlords used rent-to-own and “lease with option to purchase” contracts. In March 2025 the AG obtained a ruling involving illegally high interest rates, seller-disclosure violations, and unconscionable late fees. The AG specifically invited former and current lease-option occupants to seek restitution.

    • ___

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      Pennsylvania AG v. Harbour Portfolio Advisors — Pennsylvania, 2018. Pennsylvania sued Harbour over its contract-for-deed program, alleging consumers were unfairly and deceptively targeted and led to believe they were purchasing homes under circumstances the AG considered unlawful. The litigation also involved allegations concerning property condition and allegedly usurious financing.

    • ___

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      CFPB v. Harbour Portfolio Advisors, National Asset Advisors & National Asset Mortgage — federal, 2020. The CFPB brought a separate federal administrative enforcement action over Harbour's contract-for-deed business. Thousands of consumers had entered these transactions. The CFPB found deceptive practices and credit-reporting violations and imposed civil penalties through a consent order.

    • ___

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      City of Cincinnati v. Harbour Portfolio Advisors — Ohio, 2017–2018. Cincinnati sued Harbour over its land-contract operation and the condition of properties being sold. Harbour eventually agreed to pay $125,000 and alter aspects of its operations as part of the settlement.

    • ___

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      City of Cincinnati v. Vision Property Management — Ohio, 2017–2018. Cincinnati separately pursued Vision over its rent-to-own/alternative-sale properties. Vision agreed to pay approximately $88,680, transfer several nuisance properties and bring others into compliance with city standards.

    • ___

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      Massachusetts AG v. AngleFund Inc. & DTH-REO Inc. — Massachusetts, resolved 2022. This is another very relevant lease-to-own case. Massachusetts accused the companies of orchestrating a lease-to-own scheme involving distressed houses and consumers with limited access to traditional mortgages. The resolution restricted future operations, required monetary relief, and gave some occupants an opportunity to obtain full ownership of their properties.

    • ___

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      Minnesota AG v. Chadwick Banken et al. — Minnesota, 2024–2026. The AG sued over what it called a predatory contract-for-deed scheme, alleging contracts structured to fail, inflated prices, consumer-protection violations and discriminatory targeting of Muslim homebuyers. In June 2026 a jury found Banken liable under Minnesota's Human Rights Act and made additional findings involving state consumer-protection statutes; remedies remained for the court to determine.

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      New Mexico AG v. Jesus Cano/JSS — New Mexico, 2016. New Mexico alleged a large-scale real-estate-contract and mortgage scheme affecting potentially hundreds of consumers. The AG sought restitution, fines and an injunction preventing Cano from offering real-estate and mortgage services.

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      Missouri AG v. Tri-State Holdings-32 LLC et al. — Missouri, 2015. Missouri sued Tri-State and its principals over what the state described as a contract-for-deed scam involving Kansas City properties. Reporting on the enforcement described consumers making payments toward homes that were frequently distressed and arrangements that allegedly failed to deliver what purchasers had been promised.

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      Indiana AG v. Rainbow Realty Group/Hotka — Indiana, 2012–2013. This one is extremely relevant to lease-option investors. Indiana's AG accused Rainbow Realty of operating a “rent-to-buy” scheme designed to avoid Indiana landlord-tenant law. The AG announced the action in late 2012 and a complaint was filed in Marion Superior Court. Interestingly, the Indiana Supreme Court later held in a separate private case involving Rainbow that its rent-to-buy agreement was a rental agreement subject to landlord-tenant statutes.

    • ___

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      State v. Wolford Corporation — Iowa Supreme Court, 2004. This is different because it involved an actual criminal prosecution, not merely civil consumer enforcement. Wolford was found guilty of one count of failing to timely record a real-estate contract; Iowa's courts concluded the statutory violation could be punished as a criminal misdemeanor.

      • ___

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      The next eight all arose from New York Attorney General Barbara Underwood's 2018 industry-wide investigation into manufactured-home rent-to-own and lease-option programs. The AG concluded that consumers commonly paid significant upfront amounts, took responsibility for repairs and maintenance, could lose their investment following default, and often were treated economically like owners while lacking title. New York reached settlements with eight companies.

      1. New York AG — Garden Homes Management Inc. (2018). Garden Homes was one of the eight companies that entered into a settlement following the AG's manufactured-home rent-to-own investigation.
      2. New York AG — Harper Homes Inc. (2018). Harper Homes was another settlement respondent in the same lease-option/rent-to-own enforcement initiative.
      3. New York AG — Hoffman Homes Inc. (2018). Hoffman Homes entered into a settlement stemming from New York's investigation of manufactured-home rent-to-own practices.
      4. New York AG — Horizon Land Company (2018). Horizon was another company subjected to the AG's rent-to-own enforcement and settlement requirements.
      5. New York AG — JKLM Communities Inc. (2018). JKLM was included among the eight companies that settled following the statewide investigation.
      6. New York AG — Kingsley Management Corporation Inc. (2018). Kingsley was another settlement target in the manufactured-home lease-option investigation.
      7. New York AG — Sun Communities Inc. (2018). Sun Communities entered into a settlement over the same category of rent-to-own practices.
      8. New York AG — UMH Properties Inc. (2018). UMH was the eighth company identified in the coordinated New York enforcement action.
    0Reply
  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    2mo

    @James Wise 

    Stating that the lease option model is widely scrutinized by the government and regulators which insinuates that it is shady and bad, is similar to stating that Cleveland, Dayton, and Cincinnati are ugly and bad. While it is true that you are going to have bad parts of town with high crime, trash, and graffiti, that doesn't mean that there are not beautiful neighborhoods in those cities. Just imagine that the way I do lease options, is like the beautiful neighborhood in a city that also has dirty areas with crime. Let me explain how I set up my lease options.

    1st - I find a house that I can buy under market value. I may fix it up or I may fix and updated the house. It depends on the numbers and it depends on the house and who I want to attract as a tenant buyer. I have had luck attracting many contractors or handymen or DIYers who would like to have lower rent and a lower strike price where they can fix up the house themselves rather than move into a house that is already fixed up and that costs more.

    2nd - I either fix up the house or not and then I put it on Zillow, Facebook marketplace, and I put signs in the yard. If I don't fix up the house, what I mean is I don't update the flooring or countertops or paint and if the house doesn't smell then I may not update those things. I do make sure all major mechanical things in the home are in good working condition.

    3rd - When someone calls me or my assistant, I send them a link to the ArizonaLeaseOptions website so they can watch an informational video on how the lease to own program works and they can read up on the qualifications and how to apply.

    4th - Let's say that they like the idea of a lease option and they want to move forward. They arrange a time to go look at the property and they send me a picture ID and I send them the lockbox code (truthfully, my assistant is the one communicating mostly with the potential tenant buyers).

    5th - After visiting the property, they need to qualify and apply. That means that they need to make at lease 3 times the monthly rent as a combined household income. So if the rent is $1500 a month, then they need to make at least $4500 a month in income. Their income also gets verified. They then pay for the option to purchase the home. Most of the time, the option fee is between $2900 (for less expensive homes that have not been updated) up to $5900 (for more expensive homes that have been updated).

    6th - When they sign the lease agreement and the separate option agreement I also add them to a google spreadsheet that I share with a banker who will then contact the tenant buyer to help them get ready to purchase the home within a 3-year period of time. And truthfully, almost anyone with a decent income that will work on their credit for 3 years can qualify to purchase a home within that time frame.

    7th - Then they move in and live in the home and work with the banker (if they are willing to) in order to qualify to buy the home. They also take care of all of the miscellaneous repairs during the time they live in the home, unless it is a major repair that should have been taken care of before they moved in. We will cover that cost.

    Benefits to the investor

    - Lower turnover

    - A little higher rent (mine is about $100 more a month)

    - Generally speaking, a tenant buyer keeps the property nicer than an average tenant because they are working towards owning and purchasing the home so they tend to treat the home nicer.

    - Takes less time to manage the property because the tenant takes care of the little things rather than contacting the landlord to do so. This also saves the owner money because they are not spending money on small repairs.

    - You get an option fee up front which lowers the amount that you need to leave into the deal and is also helpful to fix things if the tenant leaves without leaving the property in good condition and you need to put money into it to get it ready for the next tenant buyer. And the lease option fee from the next tenant buyer helps to recuperate money spent on turning the property.

    - The best financial incentives though are selling the property. I market my properties about 8% to 10% higher than current market value and we transact the sale with just the title company so I save 6% in realtor fees at the time of the sale. 

    Benefits to the tenant

    - The tenant buyer can plant roots and not have to worry about moving if the landlord decides that they want to sell the house. 

    - The tenant buyer can customize the home to meet their needs (within reason of course). 

    - The tenant buyer is connected to a banker to help them work towards qualifying to purchase the home. So they get a well designed path, with clear goals, and a mentor or coach to help them get there.

    - If the tenant buyer decides not to buy the home they don't have to and because they didn't buy the home, they don't have to worry about trying to sell the home and the costs associated with that.

    The lease option program is not for everyone. And no one is forced to do it.  It is an option for some people. And I would say It is an option for a specific group of people who want to buy a home and stabilize their lives but that can't get a loan to buy one at this moment. 

    Most of the people who don't end up purchasing the home is because they decide to move. Arizona is a pretty transient state in many areas.  A lot of people may only live in a place for a few years and then they want to upgrade or they move to a different area or state.  Very few times have I had someone leave the home who wanted to purchase the property but they needed more time.  It is usually that they leave themselves and I give them a good reference for their next place if they ask for it and they were a good tenant. 

    So I charge a relatively low option fee for the exclusive right to purchase the home within a 3-year time frame. Of the roughly 100 properties that I have had set up as lease options (not including the ones I have currently) about 30-35 exercised their options.  I am working at getting that higher through having the bank reach out to them right when they get into the property. And I have 2-3 that are on track to exercise their option before the end of the year.

    So James, I think you have done some great work in the past. I really like how you confronted Clayton Morris. I think that you were a pivotal person in shinning light on his dealings which probably helped save tons of trusting investors a lot of money by deciding to not invest with him. 

    But I do have a suggestion for you James if you are open to it. Before you jump to conclusions, do more research to get more context. Not just on a strategy, but on the person implementing the strategy (not just the city, but specific neighborhoods in the city). You may find out what you thought was bad, is actually good.

    You are welcome to look me up and see if you find anything negative about me with regards to real estate. I have been investing for 16 years, I have been doing lease options for 9 years and coaching for about 8 years. Certainly, if I were doing some things that are shady or taking advantage of people or hurting them over that time span, someone, somewhere, would have posted it online.  So before criticizing or defaming someone or the strategy they use, just take a few minutes to go online and do some research to get more context. Hey, you never know, but you may learn something.

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  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    2mo
    Quote from @James Wise:
    Quote from @James Wise:
    Quote from @Shiloh Lundahl:
    Quote from @Matthew Irish-Jones:

    @Shiloh Lundahl I'm familiar with the strategy.  Why did you speak in past tense "had?"

    I know a lot of investors who have tried this, ultimately you are lending to a demographic that can't get traditional bank loans.  It can work, but the statistics are not on your side. 

    You can invest however you'd like. You're comparing the BRRRR strategy with a turnkey rental. I'm stating that the BRRRLO model is better than both a regular BRRRR and a turnkey.

    I mentioned that I “had” 100 because I have sold many properties and I’ve divided my company with my partner so I am down to about 60 single family homes right now (that doesn’t include my commercial properties or mobile home parks or vacation rentals).

    I believe the percent of people that exercise. The option on average is 15%. That’s what I’ve heard. I think that my percentage is above 30% and I’m adding some things to my model to bring up to 50%.

    Unlike what @James Wise mentioned, I actually want my tenant buyers to exercise their options. I get paid more quickly when they exercise the option and I can 1031 exchange the profit into the next project. 

    From what you have written, it appears that you have not interacted a lot with individuals that not only do this strategy successfully, but that also help people become homeowners through this strategy.

    How many pictures or addresses of homes would you like me to post of where the tenant buyer has exercised their option so that you can have more context to see they this strategy is a legitimate investment strategy?


     Why would I care to see picture or address of 10, 20, 30, or 50 homes you've done bro? That doesn't change the fact that the entire model is widely scrutinized by the Government and regulators.

    On it's face it's a non starter. The benefit of this to the investor would be what? You get to keep all the money if they default. Ok, Government has a major issue with that. So going after that cheddar is eventually gonna become a problem.

    So if your claim is you hope your tenant buyer goes against trends and doesn't default like the overwhelming majority do, you actually hope that they buy the house, what is the benefit to the investor of selling the house this way? Why do you hope they buy the house, instead of default? If the investor truly wanted to sell their house, they'd just sell it to a buyer who brought in their own financing.

     To further expand on why a few random pictures or stories of happy families you've made or something is irrelevant, take a look below. This is the kind of regulation hell going on with this stuff. No amount of happy stories you can share will negate this reality.

    ___

    ___

    ___

    Pennsylvania v. Vision Property Management et al. — Pennsylvania, 2019–present. This is probably the strongest example for what you're researching because Vision expressly used “lease with option to purchase” agreements along with agreements for deed and mortgages. The PA AG alleged deceptive sales practices, undisclosed defects and unlawful terms involving more than 500 distressed homes. A 2021 default judgment ultimately resulted in more than 250 properties being deeded to occupants, and later settlements generated additional restitution.

  • ___

    ___

    ___

    Pennsylvania v. Joseph F. John & Joseph F. John II — Pennsylvania, filed 2023. These landlords used rent-to-own and “lease with option to purchase” contracts. In March 2025 the AG obtained a ruling involving illegally high interest rates, seller-disclosure violations, and unconscionable late fees. The AG specifically invited former and current lease-option occupants to seek restitution.

  • ___

    ___

    ___

    Pennsylvania AG v. Harbour Portfolio Advisors — Pennsylvania, 2018. Pennsylvania sued Harbour over its contract-for-deed program, alleging consumers were unfairly and deceptively targeted and led to believe they were purchasing homes under circumstances the AG considered unlawful. The litigation also involved allegations concerning property condition and allegedly usurious financing.

  • ___

    ___

    ___

    CFPB v. Harbour Portfolio Advisors, National Asset Advisors & National Asset Mortgage — federal, 2020. The CFPB brought a separate federal administrative enforcement action over Harbour's contract-for-deed business. Thousands of consumers had entered these transactions. The CFPB found deceptive practices and credit-reporting violations and imposed civil penalties through a consent order.

  • ___

    ___

    ___

    City of Cincinnati v. Harbour Portfolio Advisors — Ohio, 2017–2018. Cincinnati sued Harbour over its land-contract operation and the condition of properties being sold. Harbour eventually agreed to pay $125,000 and alter aspects of its operations as part of the settlement.

  • ___

    ___

    ___

    City of Cincinnati v. Vision Property Management — Ohio, 2017–2018. Cincinnati separately pursued Vision over its rent-to-own/alternative-sale properties. Vision agreed to pay approximately $88,680, transfer several nuisance properties and bring others into compliance with city standards.

  • ___

    ___

    ___

    Massachusetts AG v. AngleFund Inc. & DTH-REO Inc. — Massachusetts, resolved 2022. This is another very relevant lease-to-own case. Massachusetts accused the companies of orchestrating a lease-to-own scheme involving distressed houses and consumers with limited access to traditional mortgages. The resolution restricted future operations, required monetary relief, and gave some occupants an opportunity to obtain full ownership of their properties.

  • ___

    ___

    ___

    Minnesota AG v. Chadwick Banken et al. — Minnesota, 2024–2026. The AG sued over what it called a predatory contract-for-deed scheme, alleging contracts structured to fail, inflated prices, consumer-protection violations and discriminatory targeting of Muslim homebuyers. In June 2026 a jury found Banken liable under Minnesota's Human Rights Act and made additional findings involving state consumer-protection statutes; remedies remained for the court to determine.

  • ___

    ___

    ___

    New Mexico AG v. Jesus Cano/JSS — New Mexico, 2016. New Mexico alleged a large-scale real-estate-contract and mortgage scheme affecting potentially hundreds of consumers. The AG sought restitution, fines and an injunction preventing Cano from offering real-estate and mortgage services.

  • ___

    ___

    ___

    Missouri AG v. Tri-State Holdings-32 LLC et al. — Missouri, 2015. Missouri sued Tri-State and its principals over what the state described as a contract-for-deed scam involving Kansas City properties. Reporting on the enforcement described consumers making payments toward homes that were frequently distressed and arrangements that allegedly failed to deliver what purchasers had been promised.

  • ___

    ___

    ___

    Indiana AG v. Rainbow Realty Group/Hotka — Indiana, 2012–2013. This one is extremely relevant to lease-option investors. Indiana's AG accused Rainbow Realty of operating a “rent-to-buy” scheme designed to avoid Indiana landlord-tenant law. The AG announced the action in late 2012 and a complaint was filed in Marion Superior Court. Interestingly, the Indiana Supreme Court later held in a separate private case involving Rainbow that its rent-to-buy agreement was a rental agreement subject to landlord-tenant statutes.

  • ___

    ___

    ___

    State v. Wolford Corporation — Iowa Supreme Court, 2004. This is different because it involved an actual criminal prosecution, not merely civil consumer enforcement. Wolford was found guilty of one count of failing to timely record a real-estate contract; Iowa's courts concluded the statutory violation could be punished as a criminal misdemeanor.

    • ___

    ___

    ___

    The next eight all arose from New York Attorney General Barbara Underwood's 2018 industry-wide investigation into manufactured-home rent-to-own and lease-option programs. The AG concluded that consumers commonly paid significant upfront amounts, took responsibility for repairs and maintenance, could lose their investment following default, and often were treated economically like owners while lacking title. New York reached settlements with eight companies.

    1. New York AG — Garden Homes Management Inc. (2018). Garden Homes was one of the eight companies that entered into a settlement following the AG's manufactured-home rent-to-own investigation.
    2. New York AG — Harper Homes Inc. (2018). Harper Homes was another settlement respondent in the same lease-option/rent-to-own enforcement initiative.
    3. New York AG — Hoffman Homes Inc. (2018). Hoffman Homes entered into a settlement stemming from New York's investigation of manufactured-home rent-to-own practices.
    4. New York AG — Horizon Land Company (2018). Horizon was another company subjected to the AG's rent-to-own enforcement and settlement requirements.
    5. New York AG — JKLM Communities Inc. (2018). JKLM was included among the eight companies that settled following the statewide investigation.
    6. New York AG — Kingsley Management Corporation Inc. (2018). Kingsley was another settlement target in the manufactured-home lease-option investigation.
    7. New York AG — Sun Communities Inc. (2018). Sun Communities entered into a settlement over the same category of rent-to-own practices.
    8. New York AG — UMH Properties Inc. (2018). UMH was the eighth company identified in the coordinated New York enforcement action.

    I guess the obvious question would be, "How are these set up compared to mine." Are any of them similar to mine? I think it would be pretty difficult to prove or even credibly state that any of my practices are predatory. But you have a good point, you have a list of court cases against people who have done lease options or rent-to-own.  It would appear that some things that were done, were done in such a way as to motivate legal action.  I wonder if this is specific to lease options or if this occurs in any other area of real estate such as syndications or office buildings or apartment complexes or turnkey investments or even property management. I wonder if there's ever been any court cases against property managers?

    It looks like we can probably agree that there are some good apples and bad apples in any and all aspects of real estate. I guess my goal is just to be that good apple.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2mo
    Quote from @Shiloh Lundahl:
    Quote from @James Wise:
    Quote from @James Wise:
    Quote from @Shiloh Lundahl:
    Quote from @Matthew Irish-Jones:

    @Shiloh Lundahl I'm familiar with the strategy.  Why did you speak in past tense "had?"

    I know a lot of investors who have tried this, ultimately you are lending to a demographic that can't get traditional bank loans.  It can work, but the statistics are not on your side. 

    You can invest however you'd like. You're comparing the BRRRR strategy with a turnkey rental. I'm stating that the BRRRLO model is better than both a regular BRRRR and a turnkey.

    I mentioned that I “had” 100 because I have sold many properties and I’ve divided my company with my partner so I am down to about 60 single family homes right now (that doesn’t include my commercial properties or mobile home parks or vacation rentals).

    I believe the percent of people that exercise. The option on average is 15%. That’s what I’ve heard. I think that my percentage is above 30% and I’m adding some things to my model to bring up to 50%.

    Unlike what @James Wise mentioned, I actually want my tenant buyers to exercise their options. I get paid more quickly when they exercise the option and I can 1031 exchange the profit into the next project. 

    From what you have written, it appears that you have not interacted a lot with individuals that not only do this strategy successfully, but that also help people become homeowners through this strategy.

    How many pictures or addresses of homes would you like me to post of where the tenant buyer has exercised their option so that you can have more context to see they this strategy is a legitimate investment strategy?


     Why would I care to see picture or address of 10, 20, 30, or 50 homes you've done bro? That doesn't change the fact that the entire model is widely scrutinized by the Government and regulators.

    On it's face it's a non starter. The benefit of this to the investor would be what? You get to keep all the money if they default. Ok, Government has a major issue with that. So going after that cheddar is eventually gonna become a problem.

    So if your claim is you hope your tenant buyer goes against trends and doesn't default like the overwhelming majority do, you actually hope that they buy the house, what is the benefit to the investor of selling the house this way? Why do you hope they buy the house, instead of default? If the investor truly wanted to sell their house, they'd just sell it to a buyer who brought in their own financing.

     To further expand on why a few random pictures or stories of happy families you've made or something is irrelevant, take a look below. This is the kind of regulation hell going on with this stuff. No amount of happy stories you can share will negate this reality.

    ___

    ___

    ___

    Pennsylvania v. Vision Property Management et al. — Pennsylvania, 2019–present. This is probably the strongest example for what you're researching because Vision expressly used “lease with option to purchase” agreements along with agreements for deed and mortgages. The PA AG alleged deceptive sales practices, undisclosed defects and unlawful terms involving more than 500 distressed homes. A 2021 default judgment ultimately resulted in more than 250 properties being deeded to occupants, and later settlements generated additional restitution.

  • ___

    ___

    ___

    Pennsylvania v. Joseph F. John & Joseph F. John II — Pennsylvania, filed 2023. These landlords used rent-to-own and “lease with option to purchase” contracts. In March 2025 the AG obtained a ruling involving illegally high interest rates, seller-disclosure violations, and unconscionable late fees. The AG specifically invited former and current lease-option occupants to seek restitution.

  • ___

    ___

    ___

    Pennsylvania AG v. Harbour Portfolio Advisors — Pennsylvania, 2018. Pennsylvania sued Harbour over its contract-for-deed program, alleging consumers were unfairly and deceptively targeted and led to believe they were purchasing homes under circumstances the AG considered unlawful. The litigation also involved allegations concerning property condition and allegedly usurious financing.

  • ___

    ___

    ___

    CFPB v. Harbour Portfolio Advisors, National Asset Advisors & National Asset Mortgage — federal, 2020. The CFPB brought a separate federal administrative enforcement action over Harbour's contract-for-deed business. Thousands of consumers had entered these transactions. The CFPB found deceptive practices and credit-reporting violations and imposed civil penalties through a consent order.

  • ___

    ___

    ___

    City of Cincinnati v. Harbour Portfolio Advisors — Ohio, 2017–2018. Cincinnati sued Harbour over its land-contract operation and the condition of properties being sold. Harbour eventually agreed to pay $125,000 and alter aspects of its operations as part of the settlement.

  • ___

    ___

    ___

    City of Cincinnati v. Vision Property Management — Ohio, 2017–2018. Cincinnati separately pursued Vision over its rent-to-own/alternative-sale properties. Vision agreed to pay approximately $88,680, transfer several nuisance properties and bring others into compliance with city standards.

  • ___

    ___

    ___

    Massachusetts AG v. AngleFund Inc. & DTH-REO Inc. — Massachusetts, resolved 2022. This is another very relevant lease-to-own case. Massachusetts accused the companies of orchestrating a lease-to-own scheme involving distressed houses and consumers with limited access to traditional mortgages. The resolution restricted future operations, required monetary relief, and gave some occupants an opportunity to obtain full ownership of their properties.

  • ___

    ___

    ___

    Minnesota AG v. Chadwick Banken et al. — Minnesota, 2024–2026. The AG sued over what it called a predatory contract-for-deed scheme, alleging contracts structured to fail, inflated prices, consumer-protection violations and discriminatory targeting of Muslim homebuyers. In June 2026 a jury found Banken liable under Minnesota's Human Rights Act and made additional findings involving state consumer-protection statutes; remedies remained for the court to determine.

  • ___

    ___

    ___

    New Mexico AG v. Jesus Cano/JSS — New Mexico, 2016. New Mexico alleged a large-scale real-estate-contract and mortgage scheme affecting potentially hundreds of consumers. The AG sought restitution, fines and an injunction preventing Cano from offering real-estate and mortgage services.

  • ___

    ___

    ___

    Missouri AG v. Tri-State Holdings-32 LLC et al. — Missouri, 2015. Missouri sued Tri-State and its principals over what the state described as a contract-for-deed scam involving Kansas City properties. Reporting on the enforcement described consumers making payments toward homes that were frequently distressed and arrangements that allegedly failed to deliver what purchasers had been promised.

  • ___

    ___

    ___

    Indiana AG v. Rainbow Realty Group/Hotka — Indiana, 2012–2013. This one is extremely relevant to lease-option investors. Indiana's AG accused Rainbow Realty of operating a “rent-to-buy” scheme designed to avoid Indiana landlord-tenant law. The AG announced the action in late 2012 and a complaint was filed in Marion Superior Court. Interestingly, the Indiana Supreme Court later held in a separate private case involving Rainbow that its rent-to-buy agreement was a rental agreement subject to landlord-tenant statutes.

  • ___

    ___

    ___

    State v. Wolford Corporation — Iowa Supreme Court, 2004. This is different because it involved an actual criminal prosecution, not merely civil consumer enforcement. Wolford was found guilty of one count of failing to timely record a real-estate contract; Iowa's courts concluded the statutory violation could be punished as a criminal misdemeanor.

    • ___

    ___

    ___

    The next eight all arose from New York Attorney General Barbara Underwood's 2018 industry-wide investigation into manufactured-home rent-to-own and lease-option programs. The AG concluded that consumers commonly paid significant upfront amounts, took responsibility for repairs and maintenance, could lose their investment following default, and often were treated economically like owners while lacking title. New York reached settlements with eight companies.

    1. New York AG — Garden Homes Management Inc. (2018). Garden Homes was one of the eight companies that entered into a settlement following the AG's manufactured-home rent-to-own investigation.
    2. New York AG — Harper Homes Inc. (2018). Harper Homes was another settlement respondent in the same lease-option/rent-to-own enforcement initiative.
    3. New York AG — Hoffman Homes Inc. (2018). Hoffman Homes entered into a settlement stemming from New York's investigation of manufactured-home rent-to-own practices.
    4. New York AG — Horizon Land Company (2018). Horizon was another company subjected to the AG's rent-to-own enforcement and settlement requirements.
    5. New York AG — JKLM Communities Inc. (2018). JKLM was included among the eight companies that settled following the statewide investigation.
    6. New York AG — Kingsley Management Corporation Inc. (2018). Kingsley was another settlement target in the manufactured-home lease-option investigation.
    7. New York AG — Sun Communities Inc. (2018). Sun Communities entered into a settlement over the same category of rent-to-own practices.
    8. New York AG — UMH Properties Inc. (2018). UMH was the eighth company identified in the coordinated New York enforcement action.

    I guess the obvious question would be, "How are these set up compared to mine." Are any of them similar to mine? I think it would be pretty difficult to prove or even credibly state that any of my practices are predatory. But you have a good point, you have a list of court cases against people who have done lease options or rent-to-own.  It would appear that some things that were done, were done in such a way as to motivate legal action.  I wonder if this is specific to lease options or if this occurs in any other area of real estate such as syndications or office buildings or apartment complexes or turnkey investments or even property management. I wonder if there's ever been any court cases against property managers?

    It looks like we can probably agree that there are some good apples and bad apples in any and all aspects of real estate.


    in the FWIW file.. I have seen this model in the rust belt A LOT and Texas Generally speaking this model is to sell these houses with sweat equity IE AS IS were is and the folks buying them need to fix them up.. I will go out on the limb here and say very few if any of these cases the homes have had a full remodel with new to newer equipment roofs etc etc.. I dont know the level of Shiloh's rehabs however I suspect or highly doubt he is selling these on lease options in an very poor condition as noted in these complaints these kind of buyers simply dont have the means or knowledge to rehab homes.  

    The guys I would do bizz with did this a lot in Detroit they did not need me to fund them as they bought these dilapidated houses for 1 to MAYBE 10k then sold them LOP for 20 to 50k and the folks moving in would then just canabalize the empty houses on the block to get the things they needed to make them habitable led to a lot of theft .  

    Done properly and record the LOP so its an encumbrance and the seller has to do a court action to get the home back those seem to work.. Or as in my case with higher end homes IE above the median and retail buyers and retail ready I just get decent option money 20 to 50k and those folks all but one i believe bought.  One I had sold on LOP in rural Oregon a property I logged so my basis was pretty much zero ( why I love the logging bizz) but 40 acres very nice house value over 400k.. my LOP buyer spent 20k on a pole barn and gave me 20k.. But being the bozo many folks can be goes out and buys a 50k Back Hoe 1 month before he was to close on my deal  HIS DTI went out of wack could not qualify and He had to move.. I of course got the option money and the Pole Barn.. Resold and well as stated logging in those days ( 90s) The logs paid for the entire property and it was a 400k plus gain for us. 

    If your doing this in LOW value areas with highly distressed property and the scheme is like described in the citations James quoted those are companies that are for sure loan to own or set up the deals to fail and well you see the State AG's they no like that crap.
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  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    2mo
    Quote from @Shiloh Lundahl:

    @James Wise 

    Stating that the lease option model is widely scrutinized by the government and regulators which insinuates that it is shady and bad, is similar to stating that Cleveland, Dayton, and Cincinnati are ugly and bad. While it is true that you are going to have bad parts of town with high crime, trash, and graffiti, that doesn't mean that there are not beautiful neighborhoods in those cities. Just imagine that the way I do lease options, is like the beautiful neighborhood in a city that also has dirty areas with crime. Let me explain how I set up my lease options.

    1st - I find a house that I can buy under market value. I may fix it up or I may fix and updated the house. It depends on the numbers and it depends on the house and who I want to attract as a tenant buyer. I have had luck attracting many contractors or handymen or DIYers who would like to have lower rent and a lower strike price where they can fix up the house themselves rather than move into a house that is already fixed up and that costs more.

    2nd - I either fix up the house or not and then I put it on Zillow, Facebook marketplace, and I put signs in the yard. If I don't fix up the house, what I mean is I don't update the flooring or countertops or paint and if the house doesn't smell then I may not update those things. I do make sure all major mechanical things in the home are in good working condition.

    3rd - When someone calls me or my assistant, I send them a link to the ArizonaLeaseOptions website so they can watch an informational video on how the lease to own program works and they can read up on the qualifications and how to apply.

    4th - Let's say that they like the idea of a lease option and they want to move forward. They arrange a time to go look at the property and they send me a picture ID and I send them the lockbox code (truthfully, my assistant is the one communicating mostly with the potential tenant buyers).

    5th - After visiting the property, they need to qualify and apply. That means that they need to make at lease 3 times the monthly rent as a combined household income. So if the rent is $1500 a month, then they need to make at least $4500 a month in income. Their income also gets verified. They then pay for the option to purchase the home. Most of the time, the option fee is between $2900 (for less expensive homes that have not been updated) up to $5900 (for more expensive homes that have been updated).

    6th - When they sign the lease agreement and the separate option agreement I also add them to a google spreadsheet that I share with a banker who will then contact the tenant buyer to help them get ready to purchase the home within a 3-year period of time. And truthfully, almost anyone with a decent income that will work on their credit for 3 years can qualify to purchase a home within that time frame.

    7th - Then they move in and live in the home and work with the banker (if they are willing to) in order to qualify to buy the home. They also take care of all of the miscellaneous repairs during the time they live in the home, unless it is a major repair that should have been taken care of before they moved in. We will cover that cost.

    Benefits to the investor

    - Lower turnover

    - A little higher rent (mine is about $100 more a month)

    - Generally speaking, a tenant buyer keeps the property nicer than an average tenant because they are working towards owning and purchasing the home so they tend to treat the home nicer.

    - Takes less time to manage the property because the tenant takes care of the little things rather than contacting the landlord to do so. This also saves the owner money because they are not spending money on small repairs.

    - You get an option fee up front which lowers the amount that you need to leave into the deal and is also helpful to fix things if the tenant leaves without leaving the property in good condition and you need to put money into it to get it ready for the next tenant buyer. And the lease option fee from the next tenant buyer helps to recuperate money spent on turning the property.

    - The best financial incentives though are selling the property. I market my properties about 8% to 10% higher than current market value and we transact the sale with just the title company so I save 6% in realtor fees at the time of the sale. 

    Benefits to the tenant

    - The tenant buyer can plant roots and not have to worry about moving if the landlord decides that they want to sell the house. 

    - The tenant buyer can customize the home to meet their needs (within reason of course). 

    - The tenant buyer is connected to a banker to help them work towards qualifying to purchase the home. So they get a well designed path, with clear goals, and a mentor or coach to help them get there.

    - If the tenant buyer decides not to buy the home they don't have to and because they didn't buy the home, they don't have to worry about trying to sell the home and the costs associated with that.

    The lease option program is not for everyone. And no one is forced to do it.  It is an option for some people. And I would say It is an option for a specific group of people who want to buy a home and stabilize their lives but that can't get a loan to buy one at this moment. 

    Most of the people who don't end up purchasing the home is because they decide to move. Arizona is a pretty transient state in many areas.  A lot of people may only live in a place for a few years and then they want to upgrade or they move to a different area or state.  Very few times have I had someone leave the home who wanted to purchase the property but they needed more time.  It is usually that they leave themselves and I give them a good reference for their next place if they ask for it and they were a good tenant. 

    So I charge a relatively low option fee for the exclusive right to purchase the home within a 3-year time frame. Of the roughly 100 properties that I have had set up as lease options (not including the ones I have currently) about 30-35 exercised their options.  I am working at getting that higher through having the bank reach out to them right when they get into the property. And I have 2-3 that are on track to exercise their option before the end of the year.

    So James, I think you have done some great work in the past. I really like how you confronted Clayton Morris. I think that you were a pivotal person in shinning light on his dealings which probably helped save tons of trusting investors a lot of money by deciding to not invest with him. 

    But I do have a suggestion for you James if you are open to it. Before you jump to conclusions, do more research to get more context. Not just on a strategy, but on the person implementing the strategy (not just the city, but specific neighborhoods in the city). You may find out what you thought was bad, is actually good.

    You are welcome to look me up and see if you find anything negative about me with regards to real estate. I have been investing for 16 years, I have been doing lease options for 9 years and coaching for about 8 years. Certainly, if I were doing some things that are shady or taking advantage of people or hurting them over that time span, someone, somewhere, would have posted it online.  So before criticizing or defaming someone or the strategy they use, just take a few minutes to go online and do some research to get more context. Hey, you never know, but you may learn something.

     You really seem to be missing the point. To be clear, I do not care about you specifically. I do not care about learning about you. I do not care about any success stories or failures or anything related to what you are doing. I do not care if you are a "good apple."

    What I am stating is that the lease option strategy is clearly a strategy that the Government views with a much higher than average amount of scrutiny. Any perceived benefit that an investor would have in doing one of these deals over just renting out their property, or selling it in a more traditional way, is completely negated by the fact that the government considers it predatory. Whether you agree with that, whether I agree with that, who gives a F***? That's just how it is. It's well documented and essentially common knowledge.

    Things like making the tenant do repairs, collecting large option fees, high default rates, buyers who could not otherwise qualify for their own loans etc....All things that the regulators love going after. So the very benefits the investors gets, poof they are gone.

    So again, I cannot state it any clearer ---- Total dumpster fire bro. Especially for investors who have no idea what's going on. One would need a legal team and legal expense budget at such a massive scale to enter this space and succeed in any meaningful way. Even then, they'll be spending massive time and money battling the government. 

    There is tons of research out there that says magic mushrooms done in certain ways can have many health benefits. If you were selling people on running a magic mushrooms health clinic and you were like the best guy ever making your patients all much healthier because of it, would it be a good investment for other investors to hop in on? No.....Because the Feds are still gonna kick in your door and shut you down. Your happy patients would be irrelevant, just like you talking about your happy tenant buyers is irrelevant.

    0Reply
  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    2mo

    @James Wise for someone who affirms that they don't care a lot, you seem to care enough to continue to comment. Why is that? This isn't another example of investing in the way that I think is right is the only right way and investing in ways that I don't is the wrong way is it?

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  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    2mo

    @James Wise so just so I am clear, is it the strategy that is bad? Or is it that everyone who uses this strategy is bad? Is there any situation in which the lease option strategy could be good? Is it possible to be good for the tenant? Or is it just good for the shady investor?

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  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    2mo
    Quote from @Shiloh Lundahl:

    @James Wise so just so I am clear, is it the strategy that is bad? Or is it that everyone who uses this strategy is bad? Is there any situation in which the lease option strategy could be good? Is it possible to be good for the tenant? Or is it just good for the shady investor?

     Who said it's good the investor? I sure didn't. Only one who claims it's good for the investor is you. I assume you do this to generate investor interest in your business. Unfortunately for your business, it sucks for the investor.

    The simplest way I can explain why it sucks is as follows.....

    .....The Government says it's bad for the tenant. So then the Government made it bad for the investor.....

    0Reply
  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    2mo

    @James Wise so I'm an Investor That Does Lease Options. Are you saying that lease options are bad for me as an investor? Or are you saying that the government says that they're bad for tenants and therefore they are bad for me as the Investor? Or are you just saying that they're bad for tenants and because I do lease options therefore I am bad? Who exactly is bad in the situation?

    480-206-1209Podcast Guest on Show #287
    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    2mo
    Quote from @Shiloh Lundahl:

    @James Wise so I'm an Investor That Does Lease Options. Are you saying that lease options are bad for me as an investor? Or are you saying that the government says that they're bad for tenants and therefore they are bad for me as the Investor? Or are you just saying that they're bad for tenants and because I do lease options therefore I am bad? Who exactly is bad in the situation?

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    2mo
    Quote from @James Wise:
    Quote from @Shiloh Lundahl:

    @James Wise so I'm an Investor That Does Lease Options. Are you saying that lease options are bad for me as an investor? Or are you saying that the government says that they're bad for tenants and therefore they are bad for me as the Investor? Or are you just saying that they're bad for tenants and because I do lease options therefore I am bad? Who exactly is bad in the situation?


    0Reply
  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    2mo

    @Matthew Irish-Jones What risks to you see at the end of a BRRRLO?

    480-206-1209Podcast Guest on Show #287
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    • Matthew Irish-JonesBusiness Member
      OP
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      2mo

      @Shiloh Lundahl  that the tenant defaults, you need to evict, and there is extensive property damage. 

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    • Shiloh LundahlPro Member
      Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
      2mo
      Quote from @Matthew Irish-Jones:

      @Shiloh Lundahl  that the tenant defaults, you need to evict, and there is extensive property damage. 

       Would you state that the risk is any greater with a lease option property over a regular rental property?  I would suggest the risk is lower for 2 reasons. 1) the tenant buyer on average usually has more resources and tends to be more responsible as evidenced by the fact that they have money enough to pay an option fee, compared to people who are frantically living day by day. And 2) the option fee that you receive can be used to help do repairs on the property to get ready for the next tenant buyer so you are not out as much money. 

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    • Matthew Irish-JonesBusiness Member
      OP
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      2mo

      @Shiloh Lundahl I would say there is not a definitive answer of which is more risky because it comes down to individual screening procedures. Systematically I am an advocate of holding real estate for the long term. Doing comprehensive BRRR's up front, hitting all major mechanical systems, major CapEx items, and using higher end materials with a longer shelf life.
      This allows for predictable maintenance costs, low vacancy, and a better product to market than the competition.

      Long term I want to hold the RE for tax purposes, increased cash flow over time, appreciation and debt pay down.  
      Due to the amount of mitigated risk up front and the large scale renovations we do, selling the property to a tenant after 3 years would change our renovation strategy.  

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  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2mo

    @Matthew Irish-Jones

    entertaining thread!  I think I agree with you.  but what's the question?  =)

    in my opinion and experience BRRRRs are incredibly difficult and a huge pain and maybe some people are effortlessly doing them, but i am effortfully doing them.

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    • Matthew Irish-JonesBusiness Member
      OP
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      2mo

      @Nicholas L. 
      is an investor better off finding a turn key company or building a team of people/companies to pull off a BRRR?

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  • Joseph ScoreseBusiness Member
    Banker · Philadelphia · Member since 2009 · 2k+ posts · 634 votes
    2mo

    Matthew makes several valid points, particularly around accountability, execution, and the challenges of coordinating multiple parties throughout a BRRRR project.

    I’m not convinced that assembling your own team is no longer viable. I believe the larger issue is determining who ultimately owns the numbers and is accountable for the outcome.

    The agent evaluates acquisition and ARV.
    The contractor evaluates construction and scope.
    The property manager evaluates rents and operations.
    The lender evaluates the completed asset and refinance.

    But the investor has to understand and validate all of it.

    A legitimate, vertically integrated turnkey BRRRR company can certainly provide value by bringing acquisition, construction, leasing, management, and execution under one roof. Having one organization responsible for the entire process can reduce communication gaps and eliminate some of the finger-pointing that occurs when projections miss.

    However, turnkey does not eliminate investment risk. The investor still needs to independently underwrite the purchase price, scope of work, rehab budget, ARV, projected rents, financing terms, fees, and post-refinance cash flow.

    For an experienced local investor with construction knowledge, established relationships, and a strong understanding of the market, building and managing your own team can still be very effective—and may provide greater control over costs and equity creation.

    For an investor entering an unfamiliar market without those relationships, a truly vertically integrated operator may be worth the additional cost.

    Ultimately, I don’t view it as Turnkey vs. Build the Team.

    I view it as control, accountability, and execution.

    Whichever strategy you choose, you cannot outsource the responsibility of knowing your numbers and protecting your capital.

    1Reply
    • Matthew Irish-JonesBusiness Member
      OP
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      2mo
      Quote from @Joseph Scorese:

      Matthew makes several valid points, particularly around accountability, execution, and the challenges of coordinating multiple parties throughout a BRRRR project.

      I’m not convinced that assembling your own team is no longer viable. I believe the larger issue is determining who ultimately owns the numbers and is accountable for the outcome.

      The agent evaluates acquisition and ARV.
      The contractor evaluates construction and scope.
      The property manager evaluates rents and operations.
      The lender evaluates the completed asset and refinance.

      But the investor has to understand and validate all of it.

      A legitimate, vertically integrated turnkey BRRRR company can certainly provide value by bringing acquisition, construction, leasing, management, and execution under one roof. Having one organization responsible for the entire process can reduce communication gaps and eliminate some of the finger-pointing that occurs when projections miss.

      However, turnkey does not eliminate investment risk. The investor still needs to independently underwrite the purchase price, scope of work, rehab budget, ARV, projected rents, financing terms, fees, and post-refinance cash flow.

      For an experienced local investor with construction knowledge, established relationships, and a strong understanding of the market, building and managing your own team can still be very effective—and may provide greater control over costs and equity creation.

      For an investor entering an unfamiliar market without those relationships, a truly vertically integrated operator may be worth the additional cost.

      Ultimately, I don’t view it as Turnkey vs. Build the Team.

      I view it as control, accountability, and execution.

      Whichever strategy you choose, you cannot outsource the responsibility of knowing your numbers and protecting your capital.


       All good points.  No organization, no person, no company, nothing can eliminate risk for an investor, including doing nothing but putting your funds in a savings account.  You have the risk of inflation. 

      The investor has ultimate liability and is responsible for thoroughly vetting whatever strategy, company, market, and other variables that come with investing.  

      If I am an investor and comparing a legitimate Turn Key provider who has built out every aspect of investing, including and most importantly the acquisition portion, I would prefer a Turn Key provider.  They can provide bulk discounts, streamlined communication and the buck stops with them.  If they do not perform, they do not get repeat business. 

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  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2mo

    @Matthew Irish-Jones

    got it. I think we agree that building a team to perform a BRRRR is difficult but possible. are there really companies that "do a BRRRR" for an investor and hand them the equity at a reasonable fee? or is that your point?

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    • Matthew Irish-JonesBusiness Member
      OP
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      2mo
      Quote from @Nicholas L.:

      @Matthew Irish-Jones

      got it. I think we agree that building a team to perform a BRRRR is difficult but possible. are there really companies that "do a BRRRR" for an investor and hand them the equity at a reasonable fee? or is that your point?

       Yes there are really companies that build in all fee's, wholesale, realty, GC, Property management, etc... and leave the investor with a great asset, equity, and long term positive cash flow.  

      The fact is if a Turnkey company has a customer that can become a wholesale customer, realty customer, GC customer, and long term property management client, that provider can provide bulk discounts because they are making money on the entire ecosystem. 

      A great company has enough volume, business systems, and personnel that they can handle the BRRR and leave the investor with equity.

      What is ironic about an elite Turnkey provider is they actually have to be a big enough company with enough over head that their rates come back down due to volume.  Its a strange dichotomy that also exits in independent real estate brokerages.  

      @Bruce Woodruff could probably add some insight to this.  If a construction company goes from 3 million to 5 million, but their overhead only increases by 20% their mark ups actually can come down.  

      So an elite turnkey provider not only has wholesale inventory, time to run construction numbers, rental rates calculated, but has volume discounts that come back to the investor.  

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  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2mo

    I do it myself and don't buy the nonsense if they have a full time job, they can't do it.

    Everything comes down to incentives. I align mine to the outcome I want and have done plenty in the last 3 years with very little hiccups.

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  • Pete Cordero
    Rental Property Investor · San Diego, CA · Member since 2016 · 13 posts · 12 votes
    1mo

    @Matthew Irish-Jones great thread and question. I have 8 out of state long term SFHs and was starting to research doing my first BRRRR, but simply don't have the team. I have heard of TK companies that do the BRRRR for you, I am sure for a fee.

    I may have missed above, but were any mentioned? I found a couple online like Turnkey Properties (TurnkeyInvest.com), but not sure if you or anyone else have come across any. I mainly focus on Oklahoma, Little Rock and Memphis, but open to other sunbelt areas.

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  • Dean HarrisBusiness Member
    Real Estate Agent · Memphis, TN · Member since 2015 · 1k+ posts · 1k+ votes
    1mo

    @Matthew Irish-Jones I run around and chase 50-100k deals all day long in Memphis, TN that we BRRRR here!! I'm happy to source deals for you here!!

    I also host a podcast where I discuss the BRRRR strategy! Its called The Investors Guide To Memphis Real Estate

    Best of Luck!

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    • Matthew Irish-JonesBusiness Member
      OP
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      1mo
      Quote from @Dean Harris:

      @Matthew Irish-Jones I run around and chase 50-100k deals all day long in Memphis, TN that we BRRRR here!! I'm happy to source deals for you here!!

      I also host a podcast where I discuss the BRRRR strategy! Its called The Investors Guide To Memphis Real Estate

      Best of Luck!


       Thanks Dean, but that doesn't give us any indication on what strategy you are using.  Do you run around chasing 50K deals for investors and take whatever commission is being offered?  

      Do you assemble a team to do a BRRR or do you have everything in house?

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    • Dean HarrisBusiness Member
      Real Estate Agent · Memphis, TN · Member since 2015 · 1k+ posts · 1k+ votes
      1mo

      I have personally BRRRR'd over 50 times and my clients have completed it hundreds of times. I have two GC's that are incredible to work with, I have mgmt. companies that I personally use as well and we have a title company used to handling mail away closings. My entire business is set up for the OOS investors.

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    • Matthew Irish-JonesBusiness Member
      OP
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      1mo
      Quote from @Dean Harris:

      I have personally BRRRR'd over 50 times and my clients have completed it hundreds of times. I have two GC's that are incredible to work with, I have mgmt. companies that I personally use as well and we have a title company used to handling mail away closings. My entire business is set up for the OOS investors.


       Sounds like you are successfully pulling off "building a team."  You are on the opposite side of the tracks on opinion from me...so now we must give the people what they want and... FIGHT!!

      In all seriousness:

      1. How do you make money as a Realtor looking at 100K houses that require a tone of admin work to set up as a BRRR?

      2. How do you get accurate enough estimates on a walk through to give your client the green light?

      3. Who owns SOW?

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  • Josh HandlerPro Member
    Contractor · Memphis, TN · Member since 2026 · 67 posts · 78 votes
    1mo

    Matthew, your number 2 is the one I can speak to from the inside, because I'm the GC in this equation. I'll disclose up front that I own a construction company in Memphis, so I'm biased, but the bias runs the opposite direction of what you'd expect.

    You're right that no GC wants to bid ten houses somebody might buy. But the reason isn't that we don't want the work. It's that a pre-purchase bid is worthless to both of us. I haven't been in the crawlspace, the power is off so I can't test anything, the water's off so I can't run a fixture, and half the time the seller won't let me pull the panel cover. So what I'd hand you is a guess with a number on it. Then you underwrite off that guess, buy the house, I get in there for real, and the number moves. Now I'm the guy who "raised the price" and the relationship is dead on house number one.

    What I will do all day, for free, is walk a house someone actually has under contract during their inspection period, and tell them what's in front of them. Distinguishing those two requests is most of the GC problem. Investors ask for the first one and think they're being told no when what they're actually getting is a guy protecting them from a fake number.

    The other half of your point 4 is the real one though. Nobody owns the scope of work. In an assembled team the SOW is written by whoever the investor talked to last, and it drifts every time somebody has an opinion. That's not a vendor problem, it's an org chart problem, and it's why the integrated version works. Not because the pricing is better. Because one person's name is on the scope and there's no seam to point at.

    Pete, on your question about how to tell a real one from an assembled one pretending: ask who signs the checks for the plumber. If the plumber is a sub they found, the "vertical integration" is a phone list. Then ask to see a line-item scope from a job they finished, not a pro forma. A company that actually does the work has hundreds of those and can show you one in five minutes. A company that brokers the work will send you a summary. Also worth asking what happens on a change order, specifically whether you approve it before it's done or find out at invoicing. That question separates people fast.

    And to Henry's point about trades aging out, that's real and it's the actual constraint. The reason to have people on payroll isn't margin, it's that you know who's showing up Monday.

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    • Matthew Irish-JonesBusiness Member
      OP
      Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
      1mo
      Quote from @Josh Handler:

      Matthew, your number 2 is the one I can speak to from the inside, because I'm the GC in this equation. I'll disclose up front that I own a construction company in Memphis, so I'm biased, but the bias runs the opposite direction of what you'd expect.

      You're right that no GC wants to bid ten houses somebody might buy. But the reason isn't that we don't want the work. It's that a pre-purchase bid is worthless to both of us. I haven't been in the crawlspace, the power is off so I can't test anything, the water's off so I can't run a fixture, and half the time the seller won't let me pull the panel cover. So what I'd hand you is a guess with a number on it. Then you underwrite off that guess, buy the house, I get in there for real, and the number moves. Now I'm the guy who "raised the price" and the relationship is dead on house number one.

      What I will do all day, for free, is walk a house someone actually has under contract during their inspection period, and tell them what's in front of them. Distinguishing those two requests is most of the GC problem. Investors ask for the first one and think they're being told no when what they're actually getting is a guy protecting them from a fake number.

      The other half of your point 4 is the real one though. Nobody owns the scope of work. In an assembled team the SOW is written by whoever the investor talked to last, and it drifts every time somebody has an opinion. That's not a vendor problem, it's an org chart problem, and it's why the integrated version works. Not because the pricing is better. Because one person's name is on the scope and there's no seam to point at.

      Pete, on your question about how to tell a real one from an assembled one pretending: ask who signs the checks for the plumber. If the plumber is a sub they found, the "vertical integration" is a phone list. Then ask to see a line-item scope from a job they finished, not a pro forma. A company that actually does the work has hundreds of those and can show you one in five minutes. A company that brokers the work will send you a summary. Also worth asking what happens on a change order, specifically whether you approve it before it's done or find out at invoicing. That question separates people fast.

      And to Henry's point about trades aging out, that's real and it's the actual constraint. The reason to have people on payroll isn't margin, it's that you know who's showing up Monday.


       Thanks for the comment.  That is the issue with the "assembled team" you have an agent who just worked for a 3K commission handling SOW, follow up, preliminary projections, facilitation, etc... for an investor... An agent with that skill set is hard to find... Once they develop that skill set they are no longer chasing 50K deals. 

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  • Josh HandlerPro Member
    Contractor · Memphis, TN · Member since 2026 · 67 posts · 78 votes
    1mo

    Matthew, I'd sharpen that one step further. It's not a skill problem, it's an incentive problem, and that's why it doesn't get solved by finding a better agent.

    Look at who eats the miss when the scope of work is wrong.

    The agent gets paid at closing. If the rehab number in the preliminary projection is light, they've already been paid by the time anybody finds out. Their scope work is unpaid labor done to win a commission, so it is optimistic by construction. Not dishonest, just unpaid.

    The GC gets paid to do the work. Our number is real, but it only becomes real after the investor is committed, which is exactly the point at which they can't act on it anymore.

    The PM gets paid on collected rent, so their rent comp is the most conservative number in the file, and it's the only one nobody argues with.

    So the scope of work in an assembled team is written by the person with the least exposure to it being wrong, and reviewed by people who each have exposure to a different part. That's not a coordination failure you fix with better communication. Everybody is behaving rationally.

    The integrated version doesn't win because of bulk pricing. It wins because the acquisition number, the scope, and the execution hit the same P&L, so a light scope costs the same company that wrote it. That's the whole argument, and I think it's a stronger one than the discount argument because a buyer can verify it. Ask who eats it if the rehab runs 20% over. If the answer is a subcontractor or the investor, it isn't integrated, whatever the website says.

    Where I'll push back on my own side of it: that alignment only works if the same firm is also holding the acquisition price honest. A vertically integrated shop that sources its own inventory can quietly move margin from the rehab to the purchase price and still look clean on the construction line. So a buyer should be asking for both numbers separately, not just the all-in.

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