All Forum Posts by: Cliff Harrison

 Sounds like a good decision to me!  I would amend your comment slightly - Turnkey will get the property rented (sometimes at above market rate for sales optics and rent ratio buyer screening) and get the property in the best shape possible (at least to the extent and expense necessary to facilitate a sale, depth beyond which will vary with your provider).

Turnkey pricing seems to be more based on the rent income, not the value of the asset. $850 rent? Sell if for $65,900. $950 rent? Sell it for $78,900. Reviewing MLS properties will keep you grounded on the market value of the property, and recognize the turnkey deals where you start with large negative equity and more favorable turnkey deals. Knowledge helps!

 I do this also.  My MO rentals with Foremost Insurance average around $600-$700 range.  I only insure a value to cover my costs in the property, no lost rent or replacement if destroyed.  It meets bank requirements.  I also have a hefty deductible.

I just turned over a judgement to a collection agency for a 50% commission.  I figured if they collect anything at all, that is better than nothing.  Stay tuned to see if they collect anything.

I think you should check move in ready listings and view with realtor after you identify the areas you want to be in.  It will help you understand turnkey pricing better so you are informed on that side.  The main thing is having a good PM to work with, if you have a good property in a good area and a good PM then after two months time you will be in the same position as you had bought turnkey, but you have more negotiation scope and inventory options and potentially more equity in your property.  And you will better tell a poor turnkey deal from a good one.  In my opinion.  Plus you will be expanding your network of contacts in an area and be building towards the more profitable models which would be controlling your own repair process allowing you to take on, remotely, the cosmetic updates which allow for more equity capture. That is just based on what you wrote, you seem to be down for taking a more active role.

Platinum Title is very good.  Great communication. I have used them many times.

I use rentometer.com to quickly get rent comps. Also when you are narrowed down to a specific property, leave the 50% rule behind and plug in actual/estimated numbers for PITI, PM (even if you self manage), vacancy, repairs, CapEx, admin overhead and see what your actual cash flow will be. I invest in Kansas City also - mostly South KC.

Good luck!

Cliff

Welcome to Bigger Pockets. KC is a great place to invest in RE. We are fortunate to live here. Feel free to contact me if you are interested in one-on-one mentoring or second opinions/deal analysis. I have been hitting REI very hard over the past 18 months and have a lot of lessons learned.

Just FYI I hope everyone uses their own numbers and not just the turnkey provider proforma.  At a glance I think you may be overestimating the cash flow.

In this price range I recommend $100 for maintenance, $125 for capex, 10% annual vacancy/make ready, 5% annual releasing fee.  

Also be sure to run your address in rentometer.com or use other comps to make your own assessment about what you will be able to get in rents going forward.  The turnkey provider will want to show the highest possible rent they can secure, because that allows them to make more profit (courtesy of you) but you may not always be able to get that rent if the market is actually lower and the 'new' wears off your rehab.  Also since the rehab is just completed it's easy to overlook the capex layaway account but unless you plan to exit (most likely at a loss) in the next couple years it's best to start accruing for all of those down the road items.

Thanks for sharing info about your deal, and best of luck to everyone with your REI.

Hedging? I keep minimum 25% equity and only enter deals that cash flow enough to drop rents 25% and I don't plan to need to sell. Nothing is guaranteed - if rents go down even more than that for an extended period of time and values go down making exit expensive, I will be bleeding my net worth off like a sacrificial goat but my strategy is to hold long, long term. Plus I do have a nest egg in traditional IRA that will never go into REI that will keep me out of the cat food isle unless RE AND equities go into a very long term depression.

Hello.  Welcome to the forum.  I am in the KC area, mostly invested in south kc/grandview area.  I do offer in person mentoring sessions based on what I have experienced, something I do on a very small scale because i enjoy it and like making real connections.  In my opinion, it's worthwhile in the early stages to get rolling and not make major mistakes starting out.