All Forum Posts by: Chris Clothier

 Strictly first-come, first-serve - there is no bidding and we've never entertained trying to get prices bid up.  They are fair prices for both us and the investor so no need to encourage bidding that ultimately will make them an unhappy investor and hurt their experience with us.  

Also, all are sold through one-on-one interaction so there is not a listing of properties or an email blast with the houses.  When we have a property ready to be marketed to investors, there may be several investors who are good matches for the properties - maybe investors who have been waiting longer than others or are in a scenario (1031 exchange) that they need to take priority.  We then take that property to those investors personally and at that point they are on a first come, first served scenario.  In some cases, properties are not purchased right off the bat and then our team will expand and offer that property to other investors, but never on a mass blast scale. 

Most investors never know all of the properties that are available.  In some small way, that is protecting investors from just jumping onto a property as soon as they see it or as soon as it is emailed out without knowing details or having an opportunity to learn a little about the property before they go to contract.  It is funny how real estate investors especially seem to be in a real hurry to buy and that can lead to unhappy clients.  

Remember that as Turnkey company we keep clients for the life of the investment, so we really need to avoid scenarios that ultimately lead them to a bad experience.  To be fair, that already happens (you can never make everyone happy all the time) so it is smart to avoid those cases as much as possible.

 Well, in his case and I suspect the same with most investors with such a high number of turnkey properties, they are diversified into other passive investments.  They are invested in the stock market, bonds, mutual funds, private lending among other things.  The investor with 22 is also an active investor as well having bought and retailed some property in the past and he owns commercial buildings.

Are you wondering why they would use a TK provider to buy so many properties as opposed to investing in some other way that may provide a better or even similar return?  Because, just having that many properties TK does not necessarily mean that is the only real estate investments they have.

I can say that so many of my clients are simply looking for a hassle free way of investing.  Most do not know how to actively invest in real estate and do not want to spend the time to learn.  They view time as an asset and they don't want to spend it learning something when they can spend money instead to get their desired result in a shorter period of time.  They give up money to gain time.  Lets not kid ourselves though.  They are not giving up much in their eyes.  They give up equity to gain a return and they want to do it quickly.  They find value in the trade-off of having a professional handle the heaviest lifting and they gain a quick - but lower - return.  Again, most if not all have other investments

That will be a common theme among investors who have built sizable portfolios especially with a passive investment.  

 At one point, I was one of the top 10 referrers to BP.  Not sure if that is still the case, but not all of them were my clients.  A number of BP members are clients of Memphis Invest and some have introduced themselves although I am not sure how many are actively participating on BP.  Many simply are not active investors and posting comments or answering questions is just not their thing, but I am always pushing BiggerPockets as a resource and will do it again and encourage participation.

I can tell you a few commonalities to those investors that have more than 10 properties and some would gladly spend a few minutes talking with you about how they built their portfolio.  Send me a PM and I will certainly try ot put you in touch with them.

Here is what they have in common.  Most if not all already have wealth.  They have disposable assets either in other investments or in active income.  They have W-2 incomes so they take full advantage of qualifying for GSE sponsored loans.  To get beyond the GSE limits, they have local banking relationships.  The gentleman with 22 lives in northern Mississippi and had multiple sources income including being an airline pilot as well as an entrepreneur.  He had local banking relationships and we helped develop more.  He had several who would finance 3-5 purchases for him in a year.

One other trick he used, was structuring his loans for early pay-off.  Very early.  He owns most of his portfolio free and clear and will retire as a pilot with full pension before his early 50's.  

So they have existing wealth or high income, access to local bank funding and a plan for early pay-off, which induces a bank to want to lend you more money over and over to build the portfolio.

I and other members of my family have used this same approach and we have a little over 100 properties between us and several commercial buildings.  Local banks and creatively structuring the payoffs are going to be the keys to building a larger portfolio, IMO.  

@Charles Worth - you made a couple of great points to Petra's post.  Those are certainly very valid reasons that any seller might not negotiate on a property - time is still on their side before they have to sell.

On the other post, it certainly plays a part.  We have been managing one house for some investors for a long time.  They may have other investments and other houses elsewhere, but only one with us.  I don't really have the data on how big the financing issue is with these investors.  But, alluding back to the study that Josh and I conducted with a professional surveying service.  They found that self-identified real estate investors listed lower interest rates, tax incentives and the removal of financing limits as the best incentives to induce them to buy more (I know - that is not exactly ground breaking research).  

So I do think the lending environment, for better or worse, limits some investors who want to pursue more.  In some ways though, I think those limits are good and as it relates to this topic - it prevents TK companies from just signing up and selling to anyone who can fog a mirror as a way of generating sales.  Some of the restrictions have actually helped strengthen todays real estate investors.

 There is no one answer - that is going to be up to each company.  I'll give you our companies answer in a second.

One MAJOR thing to keep in mind. There is no definition of turnkey. You have no way of knowing who you are dealing with or what their processes are without really interviewing them and drilling down. So, there are many companies that market themselves as Turnkey because it is a great buzz word. That does not mean they own what they sell. Often times they do not. Often times they may have a contract to buy it - they may be selling another companies inventory or worse - they are just marketing the MLS. So they are not in control and couldn't lower a price anyway.

With my company, we have a pretty standard answer of we do not negotiate.  We feel we offer a tremendous value for the price listed.  However, with existing clients who have built up or are building up a portfolio and they ask for some concession, we are always open to reviewing it and do often work with them.  If it were a first time buyer just wanting to buy lower, we probably would not make many - if any - concessions.  We are lucky in that we have no issues with selling the properties we own and this has been our policy for a number of years so it has not hurt our ability to operate.  

Very good question Petra.

@Matt R., @Kyle Scholnick - 

Here is a rough update to the numbers that Matt posted earlier.  Again, we have no investors with 30 plus properties and only 1 in 5 or so own five properties or more.  I don't think that really means anything - that is probably the same ratio of non-TK investors that own 5 or more.  I think @Jay Hinrichs is correct in the reasoning as well.  Most of it is due to
1. its' an immature niche,
2. mostly new investors without the resources or experience in real estate, 
3. poor financing choices,
4. bad property management, 
5. lack of quality leverage choices
6. and maybe biggest of all a poor setting of short and long term expectations.  

But then again, those are the same reasons that all investors stop at one or two properties.  Nice thread Kyle.

1 with 22 - 22 properties

1 with 15 - 15 properties

2 with 14 - 28 properties

1 with 13 - 13 properties

2 with 12 - 24 properties

2 with 11 - 22 properties

5 with 10 - 50 properties

5 with 9 - 45 properties

21 with 8 - 168 properties

19 with 7 - 133 properties

41 with 6 - 246 properties

39 with 5 - 195 properties

62 with 4 - 248 properties

122 with 3 - 366 properties

287 with 2 - 574 properties

473 with 1 - 473 properties

I am going to speak up for @Ali Boone because I have a tremendous amount of respect for her.

I began to read her articles that she was writing for the BiggerPockets.com blog several years ago.  Not several weeks, but several years ago.  She is not some flyby night, one house investor who suddenly turned into an overnight expert.  She also is not a forum poster who has never bought a property, but thinks they can give e everyone else advice.  Her story was fascinating to me because she was very successful in her field, which happens to be Aerospace Engineering!  In her blogs she told the story of buying real estate because she was passionate about it and she purchased across the country and even in central america.  She bought everything passively and most of it turnkey.  She told the story of making good decisions, bad decisions, making money and losing money and her writing style and story telling were excellent.  

That is why I reached out to her through BP and met with her when I was in Los Angeles - again - several years ago.  She is an impressive person when you meet her personally with a great personality and she is very intelligent.  More than that, she knows what she is talking about as an investor.  She has done it and she tells her story very plainly.  All you have to do is go back and read the over 100 articles she has written for the BP blog.  Take the time to read her personal blog at hipster investments.  

She left her job as an aerospace engineer because she was passionate about designing her own lifestyle and creating her own business.  She has done it.

AND....I say all of this even though she does has never sent a client to one of my houses nor has my company ever paid her or her company a referral.  In fact, I disagree with some of what she says about the markets I operate in.  But, that is her opinion as a professional real estate investor and if she wants to promote other cities and companies that she has invested in, then that is her choice.  

However, that does not diminish my respect for her.  She is a class person and if she wants to give details fantastic.  If not, no big deal.  As someone looking to passively invest, if that makes you uncomfortable - do not do business with her.  I am sure she will be ok.  She has told her story and it is in black and white and it is easy to find.  No sense in attacking her or her credibility - just do your due diligence and learn her story.  

 Anish, you are spot on - the averages are always figured by those that do better....and those that do worse.  That is why PM companies have a hard time keeping one house owners happy.  If, by chance, they are part of the crowd performing worse then its hard to remedy their unhappiness. 

 I meant the FCC since running an ad on BP guaranteeing satisfaction as a way of soliciting investors would fall under their juristiction.

It made me laugh.......
Thanks for the compliments though and don't sell yourself short!  I get a ton out of your posts - including laughs!