All Forum Posts by: Steven Gesis

 Alex, you are correct, they are not notable at this time, hey, we cannot have it all, however we do have (3) major sports teams. As you did notice I am certain I did mention the Cavs. 

I am true Clevelander and it has been absolutely amazing to be a part of this Renaissance, I can take a few on the chin when it pertains to our sports teams. We have them and we are proud of what we have :)

If you happened to watch the Monday night Football game you would have seen something, I think no one has ever see before, is watching the Cleveland Browns have a blocked field goal, with a return to the house by Baltimore (the former Cleveland Browns) for a loss with 0.00 seconds to play, this was not notable in-fact embracing. 

Come tour us and come check out our awesome spaces, I think even though the some of our teams were not notable still a great time at any one of those stadiums.

#TeamTurnkey

 David good point, its not about price, its about the actual value and the operator you define. You want to have an understanding what the sweet spots are and what the sweets are for renters. Most importability again ask your operator for actual scientific data for the immediate area, if they are masters of their hyper local areas, they will be able to flood you with knowledge. Good advice, I think it applies ot all markets, however not all areas, if that makes sense :) 

#TeamTurnkey

 Peter, when considering Multi VS Single - consider the additional owner burden responsibility and the communal area you would be responsible for serving, yard, snow - then you need to define if the utilities are separately metered or not etc. Just a little item to consider when looking at the ramifications of Multi vs Single

Single Family  tenant is responsible for all services, at least this has been my experience. 

 Peter, you are definitely int he right forum for advice on this subject. I will begin by cycling I am a little biased towards Cleveland, Ohio - if you have not seen this market, I recommend looking into it, $50K down payment can go a long way in good well established suburban neighborhoods. You can expect to see hi yield rent ratios. Its a good space that is booming a little bit about Cleveland:

Did you know:

CLE - home to the 2016 Republican National Convention

CLE - Superman was created here

CLE - Cleveland Clinic #1 Heart Surgery Center in the World

CLE - Over a dizen Fortune 500 Companies

CLE - Second largest theatre district in the Country

CLE - Epicenter for BioMed Research & Development

CLE - A great place for the WHOLE family/

CLE - A great place for investing come check out the beautiful things CLE has.

Anyhow, I think we need to get back to the core of the question: As a new investor looking / considering investing outside of your local hyper area you will want to define someone who is not just going to help you buy, renovate and then you will figure out how to manage, you want someone who can allow you to have passive income without giving up your full time occupation. Who is this person and how do we define this individual? You will notice if you dig around BP a lot of discussion about TurnKey - this is your number one solution! However, I think it is important to standardize the definition of Turnkey:

*Turnkey = A cash flowing asset, that has been acquired, renovated, tenant placed and vetted and all managed by (1) operator - all service are in house.

You do not want to work with a piecemeal operator, they have no skin in the game, the loyalty is very short lived, plus you cannot place actual value on a property that has not been renovated yet, difficult and complex to finance. What I mean by this, if the "partner" you define in any marketplace can take you through acquisition and construction and have to pass you along to some tertiary management team, I will suggest avoiding this situation, no one has any accountably for anything. 

I am assuming you are not going to be looking to try to have a long distance rental and doing it on your own. I think a big fail here is that you do not get the value of the team, the economies of scale, the immediate hyper local knowledge to make your rentals a success in long term play, for cash flow with an eventual exit or reposition.

Next, moving on! 

Now, we have defined our perfect operator: someone who offers a completed renovated, cash flowing asset with in-house management services. You get the global experience, you get the economies of scale. Best practices to consider when working with a turnkey operator is to discuss the construction method and methodologies, tenant screening policies, view copies of the rental agreements and management agreements. You want full disclosure, complete transparency and operator who has the sophistication to accommodate and communicate with far reaching clients. The management is the secret sauce behind every asset, a good and happy tenant is a good and long term tenant. Visit the teams you expect to work with, see what they do and how they do it, Meet the people see the communities.

Do your homework, be invasive, ask tough and hard questions, scrutinize and understand the pro-forma and what the pro-forma is saying, just because it says one thing in Kansas and another in Cleveland, does not mean they have the same definition, I know our core logic tells us they should all be the same, but, believe em I have seen some crazy stuff over time. Be diligent! You will want to ask blunt questions about resilient product implementation during construction so you can better understand the ramifications of multiple tenant turns. Ask why they use specific products and how they serve you. A sophisticated well established turnkey operator with the proper systems, should be any more expensive not he contrary you should be able to take advantage of the efficiency and uniform systems designed to service investors exclusively. It's not just any amazement and any construction materials and any support staff, you want the A team, no matter what area. Whatever you do in any market you need to make sure you get a home inspection. You want to get as much repaired and cleared up during the purchase process. The more risk you mitigate = MORE ROI ! You want to define an operator that can provide you with scientific data to your questions, I am saying yes, precision data, a good sophisticate deported will always be measuring themselves with a series of widely accepted metrics to enhance the performance and opportunity to the investor.

Finally, some people will post about the premium placed on these Turnkey assets, NO a good sophisticated operator, with good systems in place, with a positive track record will be able to extend their economies of scale to the investor, you should be able to acquire at or below market, obviously below market if possible. If you plan on financing, this condition will be regulated by the lender regardless, the appraiser will determine f the home is or is not worth the money. Obviously if you do not appraise, you will need to bring money to the table to cover the gap, this places you in an underwater situation, I would avoid this type of transaction. I know it sounds perhaps silly, you would be shocked to learn how much of this goes on.

Happy investing!

GO CLE!

#TeamTurnkey

 Great resource, great point, thanks for sharing that Brian, I think its always good to know the rules for yourself, yes, be aware some lenders do have additional layering to their loan requirements. 

 Nicholas, you will need the following (4) elements in place to make this work effectively:

(1) Contractor

• Competent
  
  • Financial Capacity to carry your project
  • Creative solutions
  • Administrative capacity
  • Vetted and Trusted Subs can GC your entire project 
  • Well Defined Scope of Work
  • Extensive field knowledge both application and product
  • Presentation
• Experienced / Track Record - How many completed in past 12 Months?
  • You will want to be fairly reasonable about the capacity and track record - from experience you will want to work with someone that at-least does 10+ projects / yr. - these are complex and have a large administrative demand, so you can be reasonable about the capacity and track record. Granted if they complete more than 10 /yr. - I can assure you, you have found someone you want to build a great relationship with and get them voting for you and working with you the entire way. Trust me after completing and being apart of 100's of these projects, I can safely tell you, it's not easy, its draining and takes a-lot of moving parts to complete. 
• Capacity
  • These are high paced projects and they have time restrictions, you want to know you are working with a skilled well oiled logistics team, you want to have a dedicated project manager not just an estimator running your job. Set a hierarchy, be proficient and diligent in communicating to be able to deliver a mutually accepted product and insure you meet the lenders requirements.

**Handy tip to find a reputable and well vetted contractor for 203k

~A simple google search and page 1 results should spit out some sophisticated results for 203k contracts, do not use any of the websites they couple you with handy men etc. You want something reputable. Based on my experience the contractors that show up on page 1 results typically have a sophisticated enough operation that they can take you from A-Z and hit all the aforementioned checkboxes fairly easily.  (i.e. google search : CITY X 203k contractor) 

~You can also try a good reputable resource www.203kcontractors.com - they vet and verify financials, references etc. (You still want to do all your due diligence as stated above. Do your own homework, if you engage with someone and you establish a good mutual understanding stick with them)

(2) Banker / LO / Mortgage Broker

• Experienced
  • Knows all he loan products, understands the paperwork, has a proven track record of completed loans. You can PM me and I can send you some more information about an awesome reference, I want to share publicly, but I will reserve it for private PM only. You can verify how much volume each lender is doing in your area. If they have a large volume you can be certain it is for the right reasons. 
  • (3) Immediate Products
  • FHA 203k Limited/Streamline
  • No Structural Work Permitted
  • Max $35K - Fee's -  Contingency 10-20% = Max Budget $29,500ish
  • No Min.
  • No HUD Consultant Required
  • Must complete all health & safety and mandatory FHA repairs
  • Any electives are acceptable 
  • 3.5% Down Payment Gov't Backed - PMI - Lowest Interest
  • FHA 203k Standard / Full
    • Structural Permitted (Addition, Load Bearing Walls)
    • No Max - $5K Min
    • HUD Consultant Required
    • Must complete all health & safety and mandatory FHA repairs
    • Any electives are acceptable 
    • No Upfront Payment to GC
    • 3.5% Down Payment Gov't Backed - PMI - Lowest Interest
  • Conventional Renovation
    • No Limit
    • No HUD Consultant Required
    • Not as extensive for mandatory repair items
    • 20% down - NO PMI
    • Any electives are acceptable 
    • Can do structural and additions

~Again, you should just do a simple google search first for a 203k lender in your area, and you should be able to populate and define someone from page 1 results. Once you got someone with good rates, lock it down, at the end of the day, as long as they are experienced with this loan product and 100% understand the product its all about the deal you get on your rate at that point.

(3) Home Inspector / HUD Consultant

• Experienced & Multi-Faceted
  • If you can lock down a home inspector who can also act as your HUD consultant this is a big win.
  • This gives you ultimate flexibility, a dual licensing like this allows you the opportunity to get the hard bones information about the home and if you decide you want to pursue, you  can turn on or turn off the feasibility report requirement and or scope of work / work write up.
  • Reputable - ask for a sample of a Work Write Up and a Sample of the Feasibility Report, you want a tangible product so you have a tangible contract, you want someone who is within the bounds of market rate on their feasibility report, you want someone who is detail oriented. 

~You should ask your lender for a reputable inspector or HUD Consultant - even better ask your contractor, either one of them sold be able to reduce a reference of 1-3 solid HUD Consultants do nt go wandering around or shopping around for this if you need it. You want someone who understands the paperwork and is well established, this can make or break your deal. This is also a good time to test the experience level of your contractor and/or banker. Am established contractor or loan officer will be able to spit out an immediate answer.

(4) Realtor

• Experienced - you want some with a good eye for opportunity, that has worked with clients on this type of product / acquisition.  They can make or break your deal, its simple if they understand the function of this product they understand the inventory they are looking to present to you and the value after improvement. Its not a perfect science but it makes it a whole lot easier and will save you a lot of time, grief, and heart ache. Set realistic expectations with your realtor. FEAR NO Renovation! Lastly you want to make sure they do not break your deal due to a lack of experience.
  • Just ask the relator questions, as them to give you examples of deal and clients they worked with, the sizer and scope. Do not whatever you do allow your realtor to become your contractor. Keep all these worlds separate everyone on your team has a specialty designation, allow them to be masters int heir craft, do not cross pollinate them. I am not saying do not share information, I am saying let the realtor do the realtor thing, let contractor do the contractor thing etc.

If you have not noticed, the common theme is experience, we are hunting for experience, we want to utilize the knowledge these professionals in their respected field have established through making mistakes and overcoming challenges. Help yourself by simply screening and doing an awesome job on vetting your partners. Consider this a business venture, however, in this business venture at the end of your transaction the banker and realtor collect their commission and they are gone, it is just you and the contractor + (HUD Consultant sometimes). Build excellent relationships with your broker and relator, establish extraordinary relationship with your contractor and HUDn consultant life will be much easier once the keys are yours.

Hope this helps, if you have any questions just PM me, Im happy to help.

 Jay & Mark, I thought you guys would like this read Downtown Cleveland Apartment Boom this aligns perfectly with the conversation we were having. I think you will find us to be in the middle of the boom time right now, with development at every corner of the city.

Happy Reading Gents!

 Cleveland is very competitive offers a lot of bang for your buck, you can get into a building for about 250 - 1.5 - fairly large spectrum, we have something for everyone. Most of our buildings downtown are rentals not condos at this time. I do think we will be seeing a lot of conversions to condos in the near future. 

 Precious, I see this is a year old, I was wondering if you made any investments in this time? I think the #1 mistake investors make is simply not completing enough due diligence not he asset, operator and or partners you define to help you with your initial investment. If this is not all in order, the remaining pieces will also fail and then it will be one mistake after another.

 Mark, yes, we have (2) still existing, one owned by Case Western Reserve University and the other by Cleveland State University (recently modernized mechanicals and restored much of the original carpentry). Very interesting stuff!