All Forum Posts by: Chris Clothier

Originally posted by @Luke Mitchell:

Hello everyone! Hope everyone has a Merry Christmas! 

Has anybody used Kent Clothier's Find Cash Buyers Now or Find Motivated Sellers Now Programs? I am looking to buy both and would love some feedback. Thanks!

 Luke,

You have to take my response with a grain of salt because Kent Clothier is my older brother.  

He founded REWW a few years ago and has been steadily building it into a legitimate interfacer with active real estate investors who want to dig deeper and get better at their craft.  I personally think he and his team have done a phenomenal job and I say that because I have often assisted real estate entrepreneurs who work with REWW by offering my expertise.  So I know how hard he is trying to help active investors through REWW and specifically how good FCBN and FMSN are.

We, Memphis Invest, use both of those programs specifically in our direct marketing programs.  This year we are on pace to purchase roughly 775 properties in five different markets and the data we get from FCBN and FMSN is the reason we are able to operate so efficiently.  The cash buyer program was built specifically on processes that Memphis Invest used and Kent built the system behind it so it could be done push button.  We spent hours on the work each week and he created a system to do it automatically.

One quick thing to understand, these systems are designed to help people who are going to be successful - to be successful faster.  It shortens the curve.  They are designed to save you time doing a time consuming process.  They also require you to send direct mail.  That is the primary purpose or each program though they have some other incredibly good uses for the data.  

Just wanted you to understand that it does work.  We use it every day.  However, you have to be committed and put the time, dollars and work in to turn the data into dollars on the other side.

Feel free to reach out.

Originally posted by @TJ Walker:

If I want to know how a REIT or any mutual fund in any sector has performed relative to the market and relative to its peers in the last 1 year, 3 years, 5 years or 10 years, I can find this out through a rating service like Morningstar, which can't be easily gamed. Past performance is of course no guarantee for the future, but it at least lets me avoid dog funds that have lost money for years and/or have high fees. Is there anything comparable to this for Turnkey real estate companies? If not, why not (and is this something BP could start)? I am confused as to how to select a turnkey company on a rational ROI basis. Please don't say "pick a market first" as I have no rational basis for selecting a market other than anticipated ROI. What is best way to get best due diligence? Many investors seem happy as long as there are no problems, tenants are kept, and there is at least some minimal cashflow, as if they didn't realize it would still be possible to have negative ROI even while seeming to have positive cashflow in first few years. Help!

 I think you've already figured out that there is no rating service nor a central location to get a 3rd party rating.  It's difficult to know who the quality companies are and what the differences are between companies.

Asking about Turnkey specifically is even more difficult, because the term has been marketed to death by everyone.  Turnkey should describe a property that is owned by a company outright.  They have purchased that property themselves.  Then they undertake a full renovation - a HIGH LEVEL renovation eliminating deferred maintenance.  The property is then marketed and a resident is placed by a management company that is under the same roof as the company.  Lastly, you will not be required to use that management company, but it is offered as a bolt-on service for you as an investor.  One company, one voice, one call for you as an investor - all with the same company.

There are very, very few companies that operate that way.  You can divide those companies out by size, city and number of houses under management.  That will give you an idea of who has the experience you are looking for in a partner and who offers high-level of service for a passive investor.

Unfortunately, your ROI is not determined on a sheet of paper. It is determined by the things I listed above. If a company fudges on any of those areas and you accept it as an investor, then you are raising the level of risk.

What you listed as a response of what investors are happy with is true.  Many Turnkey investors are happy with a lower return as long as it is consistent.  There are many good markets you can invest in and they will all look very similar from a data standpoint.  The difference will be the company you work with, their experience and specifically what they do to make your experience consistent.

Fo due diligence, you have to interview the companies you want to work with.  Here are some questions I specifically tell investors to ask.  I will also link to a previous thread on BP where this was discussed.  https://www.biggerpockets.com/forums/311-buying-selling-real-estate/topics/200098-questions-to-ask-turnkey-providers

Key questions to ask a Turnkey company. Pay close attention to the answers they give you and take notes. If they do not want to give you the time to answer your questions, then you do not want to do business with them. If they are irritated by the questions, definitely move on.

These are the KPI's that any quality turnkey company will measure and track and should be able to give you an accurate and correct answer at any given time. If you pay close attention to the answers, you can do simple math to determine if they were just giving you answers you want to hear to sound smart or if they actually know how their company is performing for clients.

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? And then ask them if they will put the guarantee on year three. Guarantee are used as a sales technique and should be a red flag for an investor.

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 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 # of months occupancy per property?

Three most important questions you can ask to learn a little about their mindset as business owners and how they are going to treat your investments:

What programs do you have in place to keep tenants 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?

@Billy Maloney  Nice post!  You share a story that is common among many new investors.  While its' not unique among some of my clients, it is unique that you are sharing it and so openly showing the reality of learning "how-to" invest in real estate.

Turnkey is simply a form of passive investing.  But, it can teach you a lot about some of the workings of investing if you pay attention.  There are a lot of investors in your shoes who want to get started and choose this form of passive investing to do it.  From there, they branch out and get active in local meet-ups to find others they can learn from.  So often, when you are not an investor, it is hard to walk up to someone at a real estate meet-up and ask for help learning.  It takes getting started to really "get started".

You've shared a lot of good tips here and the reality that everything will not go perfect.  However, you will miss 100% of the shots you don't take, so if you truly want to invest, you have to get started somehow.  

On a personal note, nothing makes us happier as entrepreneurs with a family-owned business than when a client moves past buying a passive portfolio and says they are going to build an active business.  We have a great relationship with many investors like you who bought a first property with us and then branched out and grew other companies.  @Haim Mamane Palman is one example one an investor on here who comes to mind.  I have had nothing to do with your success as a passive investor, but it makes us very proud to know that you bought a property from us to get started and have moved on to bigger things.  As always, let me know how I can assist you as an entrepreneur and active investor.

Sincerely, all the best to you and we hope to continue to read about your success!

Originally posted by @Stacey Marsh:

@JD Martin, thank you for the feedback.  Here are the images he provide that show the roof. 

Hi Stacey,

I know you've received excellent feedback and advice already and are moving forward with hiring an inspector, however, I wanted to give you one more piece of advice.

You might consider not hiring an inspector at all and simply moving on to a different company offering different opportunities.  In Huntsville or elsewhere, you will absolutely find better opportunities and better companies.

This is an example of something being marketed as Turnkey, and in my eyes, not being anywhere close to actually a Turnkey investment opportunity.  

As an investor, when you purchase a property passively (which, Turnkey is simply one form of passive investing), if you defer needed maintenance items to a later date, you will often spend between $2 and $4 over time for every dollar saved on the front end.  This property has not been properly renovated (if it has been renovated at all) and deferring roof maintenance and replacement will absolutely cost you more than the price of a roof replacement today.

The reason I find this so egregious, is that you are thousands of miles away and had you not had the property inspected in the first place, you may have closed on a property that is in need of immediate roof replacement.  The company you are buying from or your management company, would have been sending you bills constantly to replace and repair roof leaks on the property.  Roof leaks lead to water damage on ceilings.  Caved-in ceilings and leaks lead to paint repair, sheetrock repairs, flooring repairs, etc...

For a company to even have the gumption to tell you that the roof has 10-12 years left and that there is no rafter or decking damage after you have received those pictures means you cannot trust a single thing you have been told by them to this point or going forward.  

So, even if you hire a 3rd inspector, you have to ask yourself is that money well spent when you know the vendor you are working with cannot be trusted to make decisions that save you money as an investor and insure you have a quality experience.

I'm not in that market and Im not giving advice on who to work with, I am simply pointing out that you can and should expect better from a company.  A lot of people use the word turnkey to market their properties or services and you have to be very, very careful.  This is a great example of what, in my opinion, Turnkey passive investors need to avoid.

Originally posted by @Eunice L.:

I have invested with Memphis Invest. Their prices are higher but they do have integrity and reputation. I had no problems with Memphis Invest throughout the purchasing process. Having said that, I do want to point out that on the property management side with Premier Property Management, there has been frustrations with lack of communication. The average time it takes for my person, Jill, to get back to me about my issues and questions has been 4-5 days.  That is way too long in my opinion. And that is after calling 3 times, emailing twice and texting a her a few times as well in my most pleasant and professional manner, not hounding her in a rude or entitled fashion. So far, I'm not at all impressed with the property management side of things with Memphis Invest. They are either overloaded or perhaps my representative is just not on top of things and/or lazy. 

Hi Eunice,

I appreciate your taking the time to voice your experience here on BP and taking the time to speak with our team a short while ago.  

I have viewed the notes in our system on all communications and unfortunately, some of the communications recently and the efforts of our team member do not meet our expectations.  We have a higher standard of excellence that we hold ourselves and our team to and I apologize that our failure led to a frustrating experience for you.  

While they are outside the norm, these are great opportunities for us to learn as a company and to teach our team to always hold ourselves to a higher standard.  I promise we can do better.

Again, thank you for taking the time to talk to speak with Nate and if I can be of service, please feel free to reach out.  Best - Chris

Originally posted by @Finny Chacko:

Other than Morris and Memphis, Is there any good turnkey companies in Midwest areas you guys suggest?

 Finny,

I would reach out to @Mike D'Arrigo  to learn more about Indianapolis and Kansas City.  For midwest and Indy especially, I think Mike is a high quality connection and much better option for Indianapolis.  There is a gentleman named @Ryan Mullin who is also an excellent source for information on the Indianapolis market if that is where you are interested in looking.

JWB is a full-service Turnkey company in Jacksonville, not exactly midwest, but they are a high-quality company as well.  Those will be good connections for you to start with.

Best - Chris

Originally posted by @Mark S.:

@Chris Clothier,

Very interesting post and stats.  Hearing that Kentucky is on your list is very exciting. Do you know where in  Kentucky you'll be focusing and at what price points?  Would be very interested in learning more.  Feel free to PM if you'd rather not post publicly yet.

Hey Mark,

We are investigating the Louisville market and just up the road in Cincinnati.  They are both third or fourth tier cities with populations in the top 50 of the U.S., but still relatively under the radar.  Getting licensed to manage property in each of these states is the first step and then entering the market on a small scale is the second step. Slowly and methodically, but definitely with a plan. Let me know where you are are Kentucky! 

We feel confident now that we have a formula to enter a market and achieve scale quick enough to make it profitable for us as a company and competitive enough to deliver the results our clients expect.  Using the spoke and hub model, Louisville is close enough for our team to be able to get up to speed quickly and then build our team on the ground shortly thereafter.  We'd love to connect with you as we start into a market and learn whatever you can share about your area (not sure if you are in the Louisville area or not).

As a side note, we are also looking at Atlanta, St. Louis, Birmingham, Nashville, San Antonio and Kansas City as next markets so there are a lot of options.  We are already licensed in several of these states, so we'll see how exactly where we go next.  We feel strongly that our model can disrupt a market and create demand from residents for the way we manage properties and the way we manage relationships.  So long as we can meet the expectations of our clients by providing quality investments, then we'll look to move into a market.    Best to you ~ 

Originally posted by @Matt R.:

You really blew up Dallas quick. It is amazing CA is so heavily represented and I guess there is an investing culture here. Have you tracked any appreciation rates for the Dallas stock? 

 Hey Matt. Yes, Dallas grew very quickly, but it is where my father started as an entrepreneur and where my brothers and I were all born and raised.  So, we knew the market very well and had a lot of business and family connections there.  It was easy to grow quickly in such a big market that we knew well.

California investors will probably lead the number of investors lists no matter the company or the location or even really the type of investment.  My brother lives in Southern Cal and I am out there quite often for lots reasons.  Whether business or personal I am always amazed by the culture and mindset.  Investing seems like a built-in endeavor.  Plus, with 38 million people and the next biggest state being Texas with 29 million, it makes sense that those two states are the two biggest represented on our client list.  Populations are big, mindset already exists and whether it is income, existing wealth or even home equity, these two states have a lot of each and investors that want to see opportunity.

Appreciation, like any city, depends on which part of the city we are talking about.  Some parts seem to have doubled in value over the last five years.  Others, more moderate like 20-30% in five years.  Rents have not appreciated as quickly, but also have risen pretty steadily across the metro.

As for investors, most are simply riding the rent appreciation and, for lack of a better way to put it, appreciate the value appreciation.  We have had some who have sold their properties on the open market and then turned around and re-invested with us.  Right now, investors are absolutely investing for return of capital first in a market like Dallas and return on capital second.  

Originally posted by @Jay Hinrichs:

Chris super report you can add one more buyer to your list.. someone I talked to last week asking me about you.. I told them darn right pull the trigger... !!!

 I appreciate that Jay.  As a side note -  you have actually been to Memphis and took time to sit with us and learn about our team, processes and company (along with several other Memphis companies).  Unlike a lot of commentators with no reference, you have a unique perspective as someone giving their thoughts.  

I also appreciate any feedback or thoughts you have on the data itself.  

Memphis Invest – 3rd Quarter Review & Update

I used to write these updates each quarter and post them here on BP, but to be fair, I put my focus on other tasks and projects and rarely got around to it these last few quarters. With a lot going on over here and A LOT of discussion going on in the forums about Turnkey real estate, this felt like a good time to do another update. We have also been made aware of several trolls reaching out to our clients through DM and even harassing them offline by email. If someone is willing to troll my clients in private, who knows what other BS they are peddling in private to other investors. Hence, a good time for a little transparency.

We are going to post this on our Blog as well with a little more in-depth detail.

I want to be clear about this data and what it is and what it is not. We have a pretty clear and very high expectation of ourselves, our team and our company in general. Just because we post this does not mean we are necessarily better than any other company nor does it mean we are better fit for individual investors than other companies. At the same time, not everyone in our space is capable nor willing to publish this kind of data. So, take this as an indication of our company and don’t try to read more into it about the industry or other companies.

As of 11/1/17

Property Management

Properties under management at Premier Property Management and PPMG:

Memphis – 3,147

Dallas – 1,103

Houston – 163

Little Rock – 25

Oklahoma City – 25

Total Properties – 4,462

Total Rents paid out to clients – approx. $30,250,000 (this number annualizes at roughly 7.9% to 8.1% of total asset value under management).

Total Properties that have gone vacant in 2017 – 688 (on pace to turnover approximately 19.5% of the total portfolio). This will represent six straight years of having 21% or less of the entire portfolio experience a turnover.

Less than 1/4 of the owners whose properties are managed by our company experienced a vacancy so far and that number will end at less than 1/3 by year end. Put another way, almost 70% of our owners have not had a vacancy this year.

Total evictions across all 5 cities year to date – 54

Total Lease renewals – 1,026

How big of a deal is the 1,026 lease renewals?

A common knock thrown around about buying Turnkey real estate by those that clearly have no idea what they are talking about is that they never work in the investors’ best interest. Those 1,026 lease renewals are a direct alignment of interest. The average rent on our global portfolio is close to $1,200. We charge 1st month’s lease up fee.

So, in essence, by doing the right thing and working hard to KEEP residents in our clients’ properties, we have given up over $1.2 Million in revenue year to date. That money flows directly to an investors bottom line rather than our bottom line.

Purchases and Renovations

So far in 2017, our entities have contracted 733 properties for us to buy, closed on the purchase of 642 properties and transacted to clients 565 properties.

Our renovation departments have paid $20,091,597 year to date in material and labor to renovate those homes. That is an average of $31,295 spent per property. A rough estimate would be $21.50 spent per square foot on renovations inside and out.

We have recently been licensed in additional states. Expect to hear in the near future from Memphis Invest on growth into Alabama, Georgia, Missouri, Kentucky and possibly Ohio and Kansas.

Investor Breakdown

This one has always been of interest to a few of my friends here on BP (@Matt R. and @Jay Hinrichs) . It is always fascinating to look behind the curtains and see where the demand for something like this originates. Unlike popular belief, interest and demand for Turnkey investments is not relegated to the uneducated, brand-new, west-coast real estate investors. More to the point, satisfied investors who are having their expectations met, do not continue to build their portfolios.

Year to date, 238 investors have purchased their first property with Memphis Invest. That group of investors has purchased an additional 151 properties this year.

80 new properties have been acquired by investors who have owned for two years.

37 new properties have been acquired by investors who have owned for three years.

17 new properties have been acquired by investors who have owned or four years.

10 new properties have been acquired by investors who have owned for five years.

35 new properties have been acquired by investors who have owned for longer than five years.

647 investors own one property

413 investors own two properties

193 investors own three properties

97 investors own four properties

212 investors own five or more properties – this group has a special designation within our company. They are in the WOW Group and this group of 212 own a total of 1,423 properties.

425 Investors reside in California

155 investors reside in Texas

107 Investors reside in New York

70 Investors reside in Tennessee

58 Investors reside in Florida

52 Investors reside in Colorado

52 Investors reside in New Jersey

Massachusetts, Hawaii, Virginia and Pennsylvania have over 35 investors each

I figured these were a few of the metrics that actually mattered!

A quick sidetone about Turnkey real estate (I am working on an article for BP on this right now....)

As with any industry, Turnkey real estate works really well and provides a perfect solution for some investors. For other investors, the idea of buying Turnkey is a complete turnoff. However, there are actually turnkey real estate investors who don’t care if you think they are making a mistake or if you think you know more about real estate than they do! I happen to have a couple of trolls here on BP who have been sending unsolicited direct messages and harassing emails to some of my clients who would dare to mention that they are having a good experience here on BP.  That is going to come to an end very quickly.

Just like any industry, there are good companies and bad companies. There are good individuals and bad individuals. I'm not here to point out who is good and who is bad.  We have a very particular way that we operate and what we believe.  We receive over 12,000 inquiries a year into doing business with our company and we are very particular about the type of client fits best with our company.  So, make no mistake, the passive investment industry in general and the concept of buying property labeled as Turnkey specifically is not going away. It is simply a matter of each buyer being properly educated and willing to dig deep into due diligence to make sure their expectations will be met.