All Forum Posts by: Drew Sygit

@Kay M. 

The biggest challenges with Turnkey providers:

1) Terrible renovation work - we've taken over many properties that investor bought turnkey and they were shocked to learn the true condition of their property from our TakeOver video.
---So, get a GREAT property inspector NOT recommended by the turnkey company to avoid bias.

2) Misrepresenting Property Class - have seen many turnkey providers in Metro Detroit area sell OOS investors Class C properties as Class B.
---So, learn the neighborhoods where you plan to invest and use Google Streetview to virtually explore them.

3) Poor Tenant Screening - they typically can't sell a property until they place a tenant. So, they have a conflict of interest in waiting for the right tenant.
---So, insist on them providing the rental application and supporting docs for your review. This means YOU need to learn how to evaluate a rental application!

4) Poor Property Management - Where do you think a turnkey provider will put their best staff, on selling properties and making $5k+/transaction or on property management and making $80/month transactions?
---So, ask about their standard operating procedures and make sure your management contract has an easy termination clause.

What are your options if you experience one of the above? Everyone thinks they can sue to solve the problem.

Do you realize how much it will cost to hire an OOS attorney to sue the turnkey company?

Unfortunately, the majority of investors that experience terrible service from turnkey companies, figure out that it's not worth spending tens of thousands of dollars suing their turnkey provider and just move on - which allows the turnkey provider to not change their ways and stay in business:(

You should also check out this BP thread about the topic:

https://www.biggerpockets.com/forums/88/topics/976647-turnkey-company-suggestion?highlight_post=5648876&page=1#p5648876

@Anna Wang You need to look into as it is a health & safety issue. 

While the tenant probably can't use this issue to stop her eviction, she may be able to use it to file a lawsuit against you!

Suggest you take a friend with you, or if you send someone have them bring a friend. The purpose of the friend is to have another party that can testify in court if the tenant tries anything. Otherwise it's just one person's word against the other's. Also, HIGHLY recommend the friend use their camera phone to VIDEO the visit, starting at the front door. This will document and protect everyone from a lawsuit.

How well did you screen this tenant?

You may want to hire a PMC that can do a better job than you:)

@Chris Seveney we won a case like that! Tenant claimed bedbugs came from a vacant lot next door!

We've also lost a case or two where judge was way too tenant-friendly:(

@Stefan Gray If you buy this one, how will you buy the next one? 

Waiting and saving up more money? How long will that take?

Focus on finding better deals!

Are you thinking of living in one of the units? If so, look into an FHA 203k loan and buy an ugly 2-4 family that you'll have les competition to buy, which means lower price and better deal.

Be sure to brush up on NY eviction requirements and then hope you never have to do one!

Why buy it?

The market is resetting and many investors that bought based upon appreciation may be in for a rude awakening.

Get a card with lots of perks!

Who pays for remediation depends on who caused it.

@Amanda Lizana Please note you CANNOT self-promote here on BP.

Your posts will most likely be deleted by moderators.

It all depends on available time and experience. How much is needed depends on the Class of Property => Tenant.

Many investors set themselves up for failure because they don't truly take the time to understand:

1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.

2) The Class of the PROPERTY they are buying - which is relative to the overall area.

3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.

4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.

5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.

6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.

7) That OOS property Class rankings are often different than the Class ranking of the local market they live.

8) Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.

9) Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.

10) Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.

11) Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.

https://www.biggerpockets.com/forums/776/topics/960183-what-they-dont-tell-you-about-cheap-rental-properties?highlight_post=5562799&page=3#p5562799