All Forum Posts by: Kenneth Dai

James Wachob thanks, James. I'll keep you in mind for future visits. I definitely plan to go back to Memphis, even with the family.

Diane G. Admittedly, this has not been a great experience so far, but I don't think it is proof there is NO turnkey, just that each buyer must perform and trust their own due diligence. I think this points more to an error in my own judgement. Mark Ainley yes, I do hope my experience gives others some insight into one experience and some lessons on what to dig into. Ronan M. I hope this gets stabilized, as well. Seems like things are moving in the correct direction, so I'm still hopeful the current team can make things right. My main error was proceeding with the purchase thinking it wouldn't be much trouble stabilizing things after purchase, when I should have stopped and had everything brought up to par before closing. I shouldn't have been so easily swayed when the inspection came back with major findings... And no, I don't want to buy a bridge from anyone.

Insurance comes to $110 per month. Taxes come to $190 per month.

After looking through the RentManager portal some more, it appears that both units are now under abatement.  Looks like CHA took back the rent payment for the unit that just went into abatement.  On a positive note, it does appear that this same unit passed its inspection today!

A bunch of folks have asked me how my experience with Memphis Invest has been going.  It has been great!

I closed on two properties last year, and both have been performing about the same, so I'll provide details on one just so folks who are considering can know some details.

Purchase price $98,900, ~25% down, 4.375% interest rate 30 year fixed mortgage

The assessed price for the properties were lower than the purchase price, so I had to provide additional cash during closing (which is why the downpayment turned out to be more like 25% rather than 20%).  This particular property had a deed restriction, so I couldn't close on it for 2 months after it was ready.  The property rented under a two-year lease for $900 a month.

The property inspection turned up pretty clean, just a few items like pushing insulation back into place or removing some pending inspection/certification labels.  I used Jason Lovelace at Precision Home Inspections.

Closing was very straightforward, and I received access to the PropertyWare website where I could view property information after resolving an issue with my login ID being incorrect.  Since then, I've been steadily receiving owner distributions.

There isn't actually all that much more to tell because the properties have been doing find since then.  I had a weekly call with one of the investor-facing staff at Memphis Invest, and that has leveled off to a monthly call.

The best part of it all was having a really excellent team helping me through the whole process.  Someone from Memphis Invest made sure I was getting routine updates about the property, checking that I had my mortgage paperwork moving along, and confirming that I had inspections done.  I also had a chance to ask any questions, and could always reach someone at the office.

About a month after closing on the first property, I received a note from the Shelby County folks - it was a charge for cleaning up litter and waste on my property from before I purchased it.  I forwarded the letter onto Memphis Invest, and they took care of it.  Just like that.

To be a bit understated... I was not happy.  Still, this is all part of owning real estate, and part of the learning process, right?

I contacted Letts to work out how to get the various issues taken care of and paid for under the property warranty (PFR properties come with 6 month warranty for work).  I also contacted Justin to find out how the warranty works.  Turns out I did not read my paperwork carefully enough, and the warranty was actually between me and the seller of the property (not PFR).  Somehow, though, some funds were transferred to my account with Letts to pay for the work on the sewage backup.  I think that was Justin helping in the background.  The sewage work came to $3000 (the catch basin had collapsed and plumbers thought it should be removed, dug to standard 5 feet depth, and replaced).

Also, the other CHA inspection issues required repainting both units, along with some fixes that had been observed during the due diligence property inspection.  I'm still working with Letts and Justin to figure out what should be covered by warranty on those items.  Lesson # 3 - if purchasing a turnkey property, I should have only accepted it with all inspection items addressed or with a good reason for not addressing.  The paintwork and other fixes have come to $2000 between the two units.

During this time, one unit has not been receiving CHA allowance (nor has the tenant been paying portion).  All in all, an additional $6000 in work has been put into the property so far.  The property has cash flowed -$3000.

I got a bunch of questions about a property I purchased in Chicago through Profit from Rentals (PFR), so I thought I'd put down some of the facts here.  I'll attempt to keep this as a running post, so folks who are curious can see the history of a turnkey deal.

The basics:

Purchase price $185,000, 25% down, 4.875% interest rate

Closing costs $6000

Pre-pays (insurance/tax in escrow, pre-pay on interest) $5000

2-flat in Chicago south side, one 4 bed, 1 bath and another 3 bed, 1 bath

The neighborhood seemed OK, neighborhoodscout calls it the S King Dr / E 71st St neighborhood.  The appraisal came back right at the purchase price.  This home was rehabbed in 2015, and I was purchasing from another investor who had worked with PFR.

All seemed well until the property inspector (I used Rick Sabatino at Premium Home Inspections) couldn't get into the units during the first scheduled inspection.  Something about the tenants not being available.  Then, once inspection was completed, several issues were noted, mainly around a furnace that seemed close to 20 years old, a damaged vanity, deteriorated paint, a bad sewage smell coming from the basement, and some brickwork that was breaking down.  Lesson # 1 - I probably should not have closed on this property without a better understanding for how much the repairs would cost.

Justin from PFR helped me work out a price reduction of $3700 to cover the cost of getting that work re-done, so that we could close on time (December)

After closing, I needed to get another inspector in the units for insurance purposes.  When I contacted Letts Property Management, they pointed out I needed to set up a new property management agreement with them.  Once that was done, they took care of the inspection, and got access to the Rentmanager portal that they use.

That's when I realized lesson # 2 - I should have asked for a profit and loss statement or actual collections versus expenses report or something on the property, since it had already been rented for close to a year.  Turns out one unit had been under abatement since August, and there had been an on-going sewage and rodent issue for months.

On top of that, both units came up for CHA inspections - the one unit that had been under abatement for four months had actually lost its housing voucher, while the other unit was due for annual inspection.  Sure enough, both failed in late January.  Since that time, I have come to a greater appreciation of how the CHA system works, and gotten much more familiar with their website (I highly recommend reading through the landlord section of the website, for anyone wondering about how the program is supposed to work).  Not sure that would have helped me, but at least all the words make sense now.

Story continues in next post.

Will Jo I invested in turnkey in Memphis, and still plan to do some more. I also want to look at other areas like Kansas City or Jacksonville, FL this year. What was nice about Memphis was a number of turnkey providers with excellent reputations who are also active on BiggerPockets. In terms of lenders, I got competitive rates from the lenders who specialized in working with investors, and who had previously worked with the turnkey operators. Didn't bother asking local banks in Memphis and Chicago, so I couldn't tell you if they would have been more competitive.

@Jason Treadwell I saw an older post about exterminators and Chicago.  Maybe this one will help you.  Not an expert myself, but I've heard that mice will chew through the foam, and it helps to have some sort of steel wool stuffed in first.

I'm hoping the exterminator figured out the best/safest solutions for a rental property I own in Chicago, as well.

https://www.biggerpockets.com/forums/52/topics/419...

Glad to see the good news about backpayment of the Section8 payments.  I thought I had read that CHA does not do backpay when property is in abatement, but I'm still going through all the information on CHA (I'm getting a bit of a trial by fire with first property in Chicago).

In terms of the reserve fund, I recall for financed properties something about keeping 3 months of principal, interest, tax, and insurance payments available for each property, but I can't seem to find where I saw/read that.