All Forum Posts by: Chris Clothier

@Josh Smalley, If you are wanting to invest close to what you know in the Northwest and Idaho is a market you would consider, then @Jonna Weber is an excellent resource to connect with.  She was very upfront in that she does not have the TK format set up, but you would be hard pressed to find someone who will work as hard for you and knows the market any better.  That is as much a part of the best definition of TK as anything else!

Good luck to you - 

@Dave Lin - When you get through all of the ads hawking for your business, connect with the users who reacted by telling you that they would welcome your decision to give up and give in so quickly on building your buy & hold portfolio.

You have to be careful - your words have power.  What you believe is available and what you tell yourself everyday, is exactly what you will get.  I have been investing for 14 years now through the run-up in the early 2000s, the financial crisis and the rebound.  I invested then and invest today in multiple markets around the country.  I lost money, made money, still have some of the original properties and sold others.  There is no national market so there is always - always - opportunity.  It just may be disguised!  

Bottom line, you can make money in any city during any market and you can absolutely build a long-term buy & hold portfolio in this market.  Be patient because you are going to have to work to find what you are looking for right now - there is no need to rush, but you can absolutely find success right now in this market. 

However, as long as you believe it is dead and you have no avenue to buy & hold there in your city, or in other areas for that matter, then you are right.  

@David Zheng, Do you actually have a business or are you managing your own portfolio of properties? You've gotten some excellent input from @Alexander Felice and @Rogers Smith from the business valuation piece, but in reality, you may not really have a business.  I love the way @Andrew Johnson addressed that issue with the term "practice".  My families' company went about taking the steps a few years ago to actually build value in our company and much of what Rogers mentioned is what we have done.  There are now multiple layers of leadership, redundancy of process, fine-tuned marketing including the use of the word residents instead of tenants (you'd be surprised at how big a difference something like that makes), hundreds of thousands spent in infrastructure and IT systems, and a fully marketed brand that is beyond the owners and even beyond just a name.  It is actually a Brand that conjures up an image and a feeling.

Those are all things that raise the value of a company.  That being said, we are not selling and have no intention of selling and the be fair, would probably "value" what we have built way more than a 3rd party buyer would value it should someone want to purchase the company.  But we have some pretty solid value-adds to boost our value up.  If you want to actually build a business and build value, you will need to replace yourself in every process as soon as possible and look to continue to replace over and over and over again as you grow.  Best of luck as you go. ~  

@Andrew Kewley,

One of your first thoughts after deciding that San Diego was too expensive, was to look out of state.  Have you thoroughly researched the state of California?  The coastal cities may be very expensive and may feel like they are too expensive to invest for cash flow in particular, but what about the rest of the state?  What about further in-land?  Have you taken the time yet to reach out to other local investors about tackling long-term investments in the state of California.  You will find that there are many investors here on BP who invest there in California and do not have to go out-of-state necessarily to achieve cash flow.  The inland-empire area is one that comes to mind immediately where you can find properties, comparatively priced to out-of-state cities that can also provide cash flow.

My point is that you do not have to automatically go out of state to invest in long-term buy & hold properties and earn a monthly return.  You live in a state that has always provided opportunity.  There are a lot of active investors on this site who I am sure will be happy to answer some questions for you and provide direction about investing in California, but they will write you off completely if you tell them that they only place to make money monthly is out of state.  That simply is not true.  You may not find what you want in California, but you really should look first, in my opinion.

@Will Barnard, as to the TK post, I had to re-read it and agree with most everything you are saying.  However, understand that they first person to suggest using a tk company was a local San Diego investor.  He may work for a tk company or he may just be an investor, I don't know, but that is what alerts many to the thread.  That suggestion is what then leads to the responses from tk companies.  If you look at patterns, you see the same posters with the same cut and paste response over and over.

The constant advertising to "let me help you" can be annoying and may - I stress MAY -  work in some cases, but I will also say that as BP has progressed, those types of ads and cut and paste responses only hurt those posters.  As annoying as it may be, they are not doing themselves any favors by not offering real advice and cutting and pasting the same response including links over and over. 

@Matt R. and Will, my suggestion on the best way to end the nonsense, is to look to create a FAQ addressing it for all users to understand what makes a quality post and what does not.  Even give examples.  This is a public forum and if someone is doing themselves a disservice in the eyes of the moderators, they need to be shown.  Then, remind users in a forum like this that soliciting your business with offers of "helpful tips" should raise caution rather than lower it.  

I can assure you, the people making those posts, and they are from multiple companies and cities across the country, are not actually gaining business.  I would bet in many cases they are pointing to their number of posts on the site as an indication to their boss or owners of their companies that they are working and marketing and really pushing to drive business.  But BP is progressing too quickly, IMO, and the investors are getting smarter with better advice and those posts are not working to earn business for TK companies I assure you.

 I love your plan and to be direct, If I cold go back to the day I purchased my first primary home, I would  follow your same plan.  I have always lived in an area of the country where housing has been incredibly affordable and yet, I would still follow your plan.

Collecting assets and not simply keeping up with others in your life and their focus on collecting things can be a truly freeing, yet also isolating endeavor.  Some close to you are absolutely going to look at you like your crazy!  Be prepared for that.

I love that you asked this question to BP and that you are willing to listen to lots of points of view.  Please make sure you take time to connect with a CPA who is open to new ideas and experienced in preparing returns for real estate professionals.  At the same time, connect with an attorney experienced in preparing wills, trusts and other end of life plans so you can make sure that you are taking steps to truly build your plan both for now and the future.

Best of luck as you move forward!

@Steven Braun - 

I would recommend talking to JWB, Jacksonville Wealth Builders and to Apec Home Solutions.  Chanda Keuhne operates Apec and they are a very small family-owned operation down there.  The benefit would be that they can focus heavily on your needs if they are a good fit.  The benefit of JWB is longevity and experience.  Both are owned and operated by high-quality, solid people.

best to you -

 HI Devin,

A Cap Rate is traditionally used to evaluate a property when other forms of evaluation either are not present or relevant. It is primarily used to evaluate commercial buildings. A key component is a reliable NOI, which does not exist on a vast majority of single-family homes because they are entering a market to produce and NOI for the first time. So, an investor is simply guessing at an NOI input on a single-family home with no historical data.

Plus, cap rates comes in handy when evaluating two commercial properties at the same time when they are very different properties.  There are not many ways to evaluate two properties or even one property when it is difficult to find true comparisons.  Without a comparison to evaluate value per sq ft. for instance, investors need to be able to turn to another metric.  That problem does not exist with single-family homes.  

For many experienced investors, they will bristle at cap rate talk when discussing single family investments. 

A big issue that is not mentioned here yet but is very relevant is the fact that the word Turnkey has no real meaning anymore.  Most investors have an over-arching idea that Turnkey means completely renovated (and our minds say completely means a brand-new house), all permits were pulled, a super-professional team and atmosphere with a brick and mortar office, a professional property management company, etc...  We tend to build up the picture in our minds of the word Turnkey and it takes on this meaning of literally having to do nothing and suddenly only appears in our mailboxes and we call it cashflow.

I say we meaning real estate investors in general.  The problem is that Turnkey does not mean a thing.  Anyone can use the word to  market their houses or their business.  They can be individuals with no real company all the way to huge companies with dozens of team members.  

Turnkey does not mean that the property has been renovated.  There are some that market turnkey properties that have not been renovated at all.  They will handle the renovation for you and call it "Turnkey" because you do not need to interview rehab companies; they can do it for you.  There are still some that use the word as a marketing tool and have no services at all.  Forget about whether they are quality services, they simply have contacts for the buyer.  And yet, they market with the word Turnkey.

I would argue that "overpriced" has as much to do with the services and quality work offered as it does the actual price of the property.  An offer can be over-priced and have a ton of equity.  For an investor without time or knowledge, there are lots of deals offered with the word Turnkey that can be over-priced.

@Ken Vingua was spot on with his comments about cap rates and other tools that are sometimes used even by accident.  Many that use the term cap rate to discuss single-family homes have no idea that it is irrelevant.  They use it because it makes them sound and feel smarter.  Not necessarily being done on purpose, they just don't know any better.  I also agree with your post on buying turnkey and then moving into a more active role in building your portfolio.  There are a ton of investors that take this route.  They will use this as an avenue to build their portfolio when they do not have time to do it themselves or they use it to learn and then advance from there. So great comments.

As usual, @Matt R. is very knowledgable having studied and researched how to dissect properties and offerings in other cities.  I know for fact that there are companies and individuals who, whether they are being nefarious or just cheap, they are taking advantage of out of state investors.  Whether their properties are over priced from a market value standpoint or over priced due to the lack of work and services, the investor is not getting the value they expect. 

@Alan Grobmeier, you are correct that in many instances, their is great risk to buying a property marketed as turnkey.  Just because it says turnkey does not mean a thing anymore.  There is a lot of work that needs to be done by the investor before buying to make sure they are getting what they think they are getting which will be different from one buyer to the next.

 Jason,

It is not a bad thing that they have the guarantee.  It is a bad thing when the guarantee is what is advertised to get the attention of potential investors.  They are selling the guarantee.  Now I am a bit old school on this because I remember the days of being at events with several Turnkey companies and hearing them brag about selling houses with guarantees, raising the price to a point where if something happened then they were essentially giving the investor back their own money.

So they were self insuring the guarantee that the TK company was selling them in the first place.  If the guarantee never had to be exercised then the TK company pocketed the extra money.  So I am very against them today.

I advise other turnkey companies to be so good at the service you provide, that a guarantee is not needed.  Your client should know that you do the right things from the beginning and that you don't need a guarantee to treat your client the right way.

Sorry it took so long to respond...we are getting ready to host our big spring event and it is a little crazy around here! 

@Ali Boone - You and I know we have great respect for each other, but I go the exact opposite direction on this issue - especially when it comes to trust.  You may call it something differently, but the idea that you are just doing a regular real estate transaction and the only thing that matters is the house is the polar opposite of my philosophy.

To me, the ONLY thing that truly matters is the people you do business with when buying long distances from home.  The house is completely secondary in the equation.

If you cannot trust the people you are doing business with, then you will never be able to rely and enjoy the benefit of why in the heck you invest out of state anyway.  

A great property on paper can easily be ruined and often is by a poor management company, which is very often tied to the company you purchase from.  IF you cannot trust what someone tells you as to the work that was completed - and that is verified by a 3rd party inspection, then trust is lost.

If it is a simple case of what paint color was used, then sure, maybe it was a mistake.  If it is a simple case of not pulling a permit on a new deck built in a backyard and the company says they did pull one, those two things are minor.  Those may be able to be attributed to human error and miscommunication.  According to the OP, this is what happened on this property:

"Property was said to have new roof, HVAC under 5 years old, new counter tops, soffit reparied, new doors, and a few other items rehabbed on the house. I got the inspection report back stating roof was approximately 8 years old (supposed to be new), furnace approximlatey 15 years old, AC unit 10, soffits hanging down, rotted door threshold, bedroom door that doens't latch, front door that has gaps to the exterior, electrical ground cut, a/c condenser line broken, basement foundation cracked, counter tops lift off (not sealed to cabinet), toilet loose, driveway and walkway leading to front door cracked, iron sewer line leaking, bathroom sink has leak in pipe (in the line, under the sinkbowl) and a few other items."

That is deceptive at best.  Some of those things are poor craftsmanship, but if the poster is being truthful and there is not reason to think he is not, this is really, really bad.

At the same time, if anyone says it is not deceptive and if they fix everything you should be happy, how is the buyer supposed to trust that the seller has good business practices and is on top of his business?  These issues are not normal, no big-deal issues.  These are major and either show deception or poor business skills.  Again, either way, I don't know how anyone can argue that a buyer should still go forward or take a wait and see approach.

There are simply too many good companies that have their games together to put up with this type of result.  No buyer in my opinion should lower their expectations so low that they accept anything like what was listed here.

On the flip side, I still think your awesome and a fantastic resource for other investors - just had to disagree with you (shock!)!