All Forum Posts by: Chris Clothier

Nick,

You should be able to ask about any particular company right here on BP.  You can also search for names of particular companies and read previous threads here on BP.  After doing that, you can send a PM to a poster who has advice on companies - good or bad - and politely ask if they can share details.  There shouldn’t be an issue with that.  Best of luck to  you

@Brad Eckhardt

@Curt Davis did a nice job of differentiating the two companies and mentioning that third option of speaking with a company directly.  I wanted to add that I have been a skeptic of Roofstock in the past and voiced some concerns over process and control for buyers on that platform.  However, we’ve been consulting with Roofstock for a few months now and working closely with them on developing an API and I have to give them credit for making big strides in this space.  They are still a marketplace, but are working hard on transparency, data aggregation and reporting for buyers and trying to offer a nice alternative for investors who want to go the passive route.  Especially for those who are comfortable using technology to compare and review offerings to find the right property and manager.  Which, let’s face it, is the future.

 I have spent a lot of time on the phone with them and they genuinely want to improve what they are offering for investors.  I was particularly impressed with their desire to separate opportunities for investors based on experience.  They recognize that some opportunities are better than others and price is not always the best differentiator and they learned that from their experiences operating over the last few years.  As someone who was skeptical, they impressed me enough to get off the sidelines and connect my IT team and head of our portfolio team to work with them.

One final divergence between the two particular companies is cost.  I’m not sure that either cost anything for the buyer, but there is a big difference in cost to a vendor that sells a home.  In some cases it may cost a vendor half as much to work with Roofstock as opposed to other promotional companies. That is a huge savings for home providers and allows for lower sales prices.  Those costs factor into the investment and I think technology is going to go a long way in reducing the costs for vendors, lowering the costs for buyers and helping Roofstock bring about a better experience for the investor.  They are simply too well-funded and have too many brains working on bringing about improvement and innovation.  They are going to surpass other i-options for investors and providers alike, in my opinion, if they haven’t already.

Like you, I make a lot of recommendations to other companies especially those that I know are good companies and try to operate the right way.  I even recommend other Memphis and Texas companies when i know their product fits a client better than mine.  So, I’m always researching new companies that I hear about to learn a little bit about them.  I don’t knock other companies, but i do want to be aware.  When I saw that name today and just felt something looked a little off, I just thought it was best to put the heads-up to the OP to do good homework and understand what the history is.  That makes a better investor in my opinion.  

Keep up the good work on your end.  Good reputations are hard-fought-for!

Andrew, 

I was intrigued when reading through the thread by the name SDIRA Wealth because I had never heard of them before.  After reading Josephs’ response that he was confused by there site, I checked it out.  I’m not a mud slinger, but after 20 years in the niche, I’ve met or spoken with just about everyone in the industry and seen a lot of companies come and go.  I’ll be interested to see how long they leave up their team profiles, but apparently this is the new company selling Morris Invest properties.  Multiple profiles discuss their new partnership with Morris Invest or describe joining the team after the new partnership was set up.

They talk about an exclusive relationship/partnership where they are now partnered with Morris Invest to work with Morris Invest clients building portfolios.  If the name Morris Invest is unfamiliar to you, look them up online and here on BP. Regardless of who is at fault for the debacle that cost so many investors all of their life savings, I see zero reason to ever trust someone who at a minimum put their trust in the people that were involved with Morris Invest.  You definitely need to do a lot of due diligence on this company before you purchase and I would suggest a site visit at a minimum.

Lastly, when you cannot find outside sources on a company, that is a read flag.  

Another tip is to ask if they are getting paid for their endorsement.  You would be surprised how many people post the same positive comments or are always the same reference because they are getting paid.  Doesn't mean they're not a client or even that they are not happy.  It just means they are getting paid to say nice things, so be sure and ask if someone is getting paid for referrals or endorsement and not disclosing it is a serious red flag on the poster or reference and the company.

Hey Mitchel,

I posted the below answer on someone who had the same question a couple of weeks back https://www.biggerpockets.com/...

Hope you don't mind that I cut and pasted it - it was a long answer!

-----

As an actual provider, I can't give you advice on experience although I originally started investing passively back in 2003 in essentially turnkey properties before the marketing of the name really took off. I wrote a book called the Turnkey Revolution and based a lot of it on advise I've given here on BP. Here are some questions that I have posted many, many times here on BP that you should be asking a property management company and absolutely asking any Turnkey company you are going to do business with. I'm happy to give what I think are the best answers to these as well. Again, I made this list based on my own experiences.

Two important things to remember. One, if they don't have time to spend with you and answer your questions in detail and discuss them, in my opinion, move on. Two, a key about asking questions is to ask a mirror question. Many companies have learned how to sell and how to market and certainly how to answer questions like this. Often answers are scripted and your job as an investor is to ask the right questions in the right way to answer for yourself whether you can trust what you re hearing. It is also important to remember that investors like myself always advise meeting who you're going to do business with. That is important because it allows you to see for yourself if the answers you heard match what you see on the ground. A mirror question is where you ask what is the average vacancy rate each month. Write down the answer. Sometime later in the conversation you ask the mirror question of what is your average occupancy each month. Write that answer down.

A high quality company will be on top of their KPI's and their numbers will match. A 3.5% vacancy number will match a 96.5% occupancy number.

Lastly, after you have their numbers research what you were told. I'll never forget a conversation with an investor who was amazed that a turnkey company had a 1.5% vacancy rate and a 98.5% occupancy. It sounded amazing. He asked how many properties they managed and the answer was roughly 1500. He then went onto their website online and researched their property management online and was shocked. Their website listed 198 properties for rent. They had an ad online for prospective tenants advertising 200+ vacant rentals. Their true vacancy rate was roughly 13% not 1.5%. But they felt like they had to market a low rate to "keep up with the Joneses". So ask your questions, get your data and do your research.

Are you an investor?

Do you own in the exact neighborhoods you are selling?

How many investors do you work with?

Do you own all facets of the operation?

Do you offer rental or maintenance guarantees? If they answer yes, ask them why. Then ask them if they will put the guarantee on year three.

Do you defer maintenance?

How many properties do you manage?

Do you own the properties you sell?

How long have you been in the business?

What is your average vacancy rate?

What percentage of expiring leases will renew their lease each month?

What percentage of signed leases fulfill their full term?

What is the average number of days a property is vacant between tenants, move-out to move-in?

What percentage of billed rent do you collect each month?

What is the cost of an average repair bill after move-out?

What are your management fees?

What percentage of collected rent goes to yearly maintenance on average?

What is your average number-of-months occupancy per property?

What is your average occupancy rate?

What programs do you have in place to keep residents happy?

What customer service programs do you have in place?

Will you call me every month with an update on my portfolio?

How many team members are dedicated solely to providing service to your clients?

What has been your biggest mistake as an investor? How do you protect your clients from making the same mistakes?

Hey Mitchel,

I posted the below answer on someone who had the same question a couple of weeks back https://www.biggerpockets.com/...

Hope you don't mind that I cut and pasted it - it was a long answer!

-----

As an actual provider, I can't give you advice on experience although I originally started investing passively back in 2003 in essentially turnkey properties before the marketing of the name really took off. I wrote a book called the Turnkey Revolution and based a lot of it on advise I've given here on BP. Here are some questions that I have posted many, many times here on BP that you should be asking a property management company and absolutely asking any Turnkey company you are going to do business with. I'm happy to give what I think are the best answers to these as well. Again, I made this list based on my own experiences.

Two important things to remember. One, if they don't have time to spend with you and answer your questions in detail and discuss them, in my opinion, move on. Two, a key about asking questions is to ask a mirror question. Many companies have learned how to sell and how to market and certainly how to answer questions like this. Often answers are scripted and your job as an investor is to ask the right questions in the right way to answer for yourself whether you can trust what you re hearing. It is also important to remember that investors like myself always advise meeting who you're going to do business with. That is important because it allows you to see for yourself if the answers you heard match what you see on the ground. A mirror question is where you ask what is the average vacancy rate each month. Write down the answer. Sometime later in the conversation you ask the mirror question of what is your average occupancy each month. Write that answer down.

A high quality company will be on top of their KPI's and their numbers will match. A 3.5% vacancy number will match a 96.5% occupancy number.

Lastly, after you have their numbers research what you were told. I'll never forget a conversation with an investor who was amazed that a turnkey company had a 1.5% vacancy rate and a 98.5% occupancy. It sounded amazing. He asked how many properties they managed and the answer was roughly 1500. He then went onto their website online and researched their property management online and was shocked. Their website listed 198 properties for rent. They had an ad online for prospective tenants advertising 200+ vacant rentals. Their true vacancy rate was roughly 13% not 1.5%. But they felt like they had to market a low rate to "keep up with the Joneses". So ask your questions, get your data and do your research.

Are you an investor?

Do you own in the exact neighborhoods you are selling?

How many investors do you work with?

Do you own all facets of the operation?

Do you offer rental or maintenance guarantees? If they answer yes, ask them why. Then ask them if they will put the guarantee on year three.

Do you defer maintenance?

How many properties do you manage?

Do you own the properties you sell?

How long have you been in the business?

What is your average vacancy rate?

What percentage of expiring leases will renew their lease each month?

What percentage of signed leases fulfill their full term?

What is the average number of days a property is vacant between tenants, move-out to move-in?

What percentage of billed rent do you collect each month?

What is the cost of an average repair bill after move-out?

What are your management fees?

What percentage of collected rent goes to yearly maintenance on average?

What is your average number-of-months occupancy per property?

What is your average occupancy rate?

What programs do you have in place to keep residents happy?

What customer service programs do you have in place?

Will you call me every month with an update on my portfolio?

How many team members are dedicated solely to providing service to your clients?

What has been your biggest mistake as an investor? How do you protect your clients from making the same mistakes?

Elisa, Tom will be notified of your question if you use the @ symbol in front of his name instead of the #.  It will highlight it in blue and he will get a notice. 

In the meantime, I will answer your question and he can add to it when he sees it.  

The specific reason most consider the set-up he described as a true turnkey experience is the linear experience you have as an investor.  When issues arise with the property such as early maintenance issues or occupancy issues, rather than having two companies pointing the finger at each other as who is responsible, there is one point of contact responsible for everything.  One company that selected the property, oversaw the renovation and is responsible for the on-going management.  It is true that not all companies providing these passive, virtual investing services are created equally and having everything in house is not a guarantee that things will be done correctly.  However, throughout my 18 or so years in this niche, the most common complaint is missed expectations and often those expectations are set by the company selling the property and missed by the company doing the management.

So, having one point of contact to handle issues or missed expectations can remove a lot of headaches for investors.  Hope that helps.

best to you ~

To be fair, I would not categorize these as cap ex although I don't want to take the conversation down that rabbit hole.  These are maintenance costs and cap ex is usually bigger item that you expect to repair, replace on a more routine basis.  

Have you seen the property in person?  Have you met the company that you purchased these form in person or the management company?  My advice would be to see how the company you purchased form responds and how the management company responds.  From their responses, depending on if you've met in person or seen the house yourself, you may want to make a quick trip to lay eyes on the property.  From what you've shared, there may be no issue at all with the house or the companies.  It could just be honest mistakes and they may take care of it with no argument.   On the other hand, you want to make sure that everything is buttoned-up on all of your properties so you know this is just a one off and not going to a continuing issue with the other properties.

Shoot me questions if you run into any questions.  The bottom line is that you should bot expect 3000 of maintenance every year per property.  At this point, so early in your investment, you just want to make sure you've got good partners who are going to communicate and have your best interest as well as theirs.  We'll take the word turnkey out for now because these don't meet my definition of turnkey, but as a passive investor, you have to be really good at managing your management company.  A good one will meet you half way and make that relationship feel very much both ways.  So, until you get to that point, you're going to need to be extra diligent.  We call it inspecting what you expect.  You are the customer so keep that in mind keep your expectations high. 

Reach out as you start making your calls and let me know if you need any advice on the answers you get.  Best to you - 

@Jonathan Allen,

Have you spoken with the company you purchased the property from?  I think your approach should be from the standpoint that this is not the experience you expected to have in your first year.  Having a bad resident that doesn't treat the property right is always a risk, but you should have some confidence that the house is renovated correctly, the right paint has been used and if the resident is a little rough on it, it won't fall apart.

I would ask from some relief from the company you purchased from (at a minimum pay for the deck repair).  I would also ask the management company for a second quote on the sliding door.  That is a steep price and may be perfectly inline, but without a picture of the door, it is hard to know if that is a good price or not.

As for going forward, these types of things happen.  Sometimes they are not the fault of anyone.  It is imply the nature of some properties.  I don't know what price you paid or what the condition and rents of the properties are, but some price points can tend to present these types of problems more often.