All Forum Posts by: Account Closed

@Jeff Hallenbeck Those are both very white glove, quality services. The inherent truth about that is that you do pay a little bit more to have the work done for you, the property pre-vetted, etc...

My biggest recommendation would be to have your own pro-forma and run their numbers against yours like such:

1. Make sure the value of the property is correct. Look for nearby comparable sales online to verify.

2. Make sure the rents they are advertising are rents that could be had without a long vacancy period when it comes time to renew the lease. Try using rentometer.com to do so, or look at other property listed for rent nearby.

3. Verify the property taxes. See what % you're taxed at as a non-owner occupant in that area and confirm the tax assessed value so you can subtract this from your monthly rents. 

4. Make sure the management cost is factored it. I often see TK companies offer "1st year of management free"- a very clever way of removing the management fee from their 1 year pro-forma which temporarily boosts your ROI. After 1 year passes, now you're paying that fee. That reflects your ROI.

5. Cost of insurance. It's usually cheap, but make sure it's included at accurate.

6. Is there a maintenance/cap ex reserve? I usually use 10% for a property in excellent condition, 15% for one that isn't "brand new" for the most part.

7. Is there a vacancy reserve? 5% to 8% depending on the quality of neighborhood, quality of your property, and rental demand in that market. Also, rent being priced right plays a big role in this. Some providers will place a tenant who pays too much to show you a better pro-forma, but this results in (usually) a crappy tenant and higher vacancy since the property is above market rental value.

Those are the major considerations I would factor in when making a purchase decision from a turnkey service!

@Joe Kim it looks like that's working well for you! You must have the propensity to select tenants well.

I think it just depends on the investors philosophy. I want to delegate as much as possible so I can reallocate my time towards acquisition mode. I'm personally spread very thin with my investment business, and most of my efforts are going towards buying property to either resell or keep for myself, and I make sure to get them at a steep enough discount to be able to afford all of the services of my team.

I'd trade the 6k/year all day for the level of service my property manager gives me. My vacancy has literally been 0% over the past year with over 10 doors. I even had an electrical wiring issue and she had a guy on staff fix it for $50 (my electrician would charge me way more). 

The goal is important too. I think if your goal is to have 5 rentals and you don't mind putting in the extra effort, learn how to manage properly and go for it. If the goal is to buy 10 rentals a year consistently, find out how to buy them cheap enough to pay someone to help. As a business grows, it needs employees.

I personally use yellowletters.com and only send postcards. After the biggerpockets discount it's like 42c/mailer and only takes me like, 15 minutes to set up a campaign of 1000's

**I'm not affiliated with yellowletters.com in any way.

The market I invest in is known for low appraisals. It's a challenge, but the turnkey investor has to be getting a good enough deal to still get the cash on cash ROI expected from the property. If you're using debt, you're going to be paying a larger downpayment since the lender will only base their LTV on the appraised value... factor that it.

I had an appraiser recently look at a nice property of mine, had 2 comparables at 65 and 72 that recently sold nearby... and threw in one at 40k as the third! The third property wasn't rehabbed at all though, and mine was BRAND NEW. In this event I wasn't upset, I know the appraisal is erroneously low. I know I can sell the property for a higher dollar amount. 

Funny thing, they only do this for non-owner occupied purchases where I'm at. For owner occupied, I've observed them to always appraise RIGHT AT THE PURCHASE PRICE. Ridiculous.

One more thing. An appraisal doesn't dictate a property's true value... but what someone is willing to pay for it does. If other investors will pay a higher price for this property, they've now set a new market value. Even if they may be inflating their purchase price.

Final note- careful with turnkey providers. I strive to be one some day soon, so I won't generalize. I know many reputable, honest provider. Just have your own pro-forma, and be conservative about rents, value, and operating costs. 

@Jack Srimani don't try to save money by eliminating the property manager. Even if my investments are local I would hire one.

For 10% my PM:

-Finds GOOD tenants for me. FAST. She has a waiting list ready and often fills my units in 24 hours.

-Has a full time maintenance staff who receive an hourly wage from her. She charged me 10$ to fix a wobbly toilet and empty a clogged drainage line recently. Way cheap.

-Advises me on prospective deals I'm looking into- has major market expertise.

-She even opened a non-profit where she collects funds to provide hardship assistance to her quality tenants that have come upon rough financial situations. Her NFP PAYS WHEN MY TENANTS CAN'T. 

-Maintains PNL statements and other administrative duties related to my properties.

A good manager is gold. You need one on your team!

I've been able to get lines of credit to purchase property at 5.25%, 20 year amortization, interest only payments from a local bank in my market, and "cash-out" refi as soon as tenants are in place, with no seasoning period. Usually it takes me 30-45 days to get a property fixed and have a tenant in place.

The key is LOCAL bank. Local banks work with other investors in your market. They will know your property manager if you have a good one. They will know the value of the property... and they know if it will rent well. They also do all of their underwriting in house. It's not easy to find this, but go look! Cold call a bunch and see who's got the best lending package. Don't ask about the credit line over the phone. I've experienced that they withhold their best terms for investors they feel they can have a successful ongoing relationship with.

Now my banker was more inclined to give me the business LOC to purchase property because I our business shows a substantial revenue from property sales.. this might have warmed them up to me. But try. Get a list of every single one in your market and put on a shirt and slacks. Shine your shoes too... and bring a set of PNL's or pro-formas at least.

I mean if the problem with sub 30k properties are taxes and capex being disproportionately high... I would say the way to get around that is to be multi-family at around the 20k/unit price point. Economies of scale will counterbalance the risks of high capex (for a 4plex, 1 roof at 8k vs 4 roofs at 5k). 

If you go 5+ units and find a local bank they can give you a commercial loan! If you're not in a TERRIBLE D class neighborhood and go 5+ units you can go to a conventional lender and get an FHA low-balance multifamily loan and only put 25% down. 40k down + closing costs will get you 10 units at 20k/unit... 30 year amortization, 7 year balloon, 4.75% interest, NON RECOURSE.

Boom! 

@Tariq B. try REI Guard. I've found them to be far more investor friendly than typical providers, and less expensive in my experience. I wouldn't be surprised if your premium were cut in half. Check them out and let me know what you think.

***I'm not in any way affiliated with REI Guard. Just a happy customer.

Update everyone! I have started a successful wholesaling business that has MORE than replaced my excellent job's income since that last message. I quit my job recently too... and one word of advice here:

DON'T PRINT YOUR OWN DIRECT MAIL PIECES. DON'T STUFF THEM IN ENVELOPES. DON'T PUT STAMPS ON THEM.

PLEASE PLEASE PLEASE pay a service to do it. Your time is SO valuable. It's not worth it.

Many lessons learned. Think of getting more deals, not spending less money. Cheers!

@Nicole B. if you want to learn an out of state neighborhood decide what the bad neighborhoods are (this is easy, look at recent sales with super low prices).. find out what the rents are in those neighborhoods... then use the estimated rents on a typical property, maybe a 2 or 3 bedroom house to compare against the rents in the BAD areas. 

Example: I invest in Indiana.

-A small 3 bedroom house in a D-class part of my market rents for $750/mo-$850/mo in good condition.

-I know an area where a small 3 bedroom home rents for $1000-$1100 is a C neighborhood.

-$1200-1350 is usually a B neighborhood (and the houses are usually a tiny bit bigger in these areas)

-$1500ish is an A neighborhood. 

Now there are other ways to determine neighborhood class - schools, crime rates, demographics... etc... but if you're actually SERIOUS about investing in a market you're going to be getting your best info from talking to your team anyways. It sounds like your research is preliminary right now... so don't overthink it. Find a place where you like the laws, the taxes, and of course... the rent:value ratio... then go out and find referrals for a good investor friendly realtor and property manager. Emphasis on GOOD. Spend more time on this than you do researching the market. If the ROI is feasible, don't stress school ratings. You might not even be renting to tenants who are affected by that.

I make a killing in C neighborhoods. My vacancy and maintenance rates are just like they would be in B neighborhoods because my property manager is a rockstar, and I get killer deals.

Hope this puts a twist on the typical advice you'd get! Take more action to learn!