In March 2015, we worked through Maverick Investor Group to purchase a property in Birmingham, Alabama. The Seller was Birmingham Income Properties - owned by Brad Lewis and Bryan Conwill. Property Management would be done by their other company, Arbor Trace Real Estate.
There were many difficulties during the rehab and purchase process. Most importantly, about two months after closing on the purchase, we discovered there was not a tenant in the property.
According to our contract, the house would be fully rehabbed with new plumbing, electrical and appliances and have a tenant in place before closing. We were also promised a paying tenant in the house at closing; a specific rental amount; a specific cap rate; and told that if the rental rate was not met, the sales price for the house would be lowered to maintain the cap rate. All of these stipulations were promised jointly by Mr. Lewis and Maverick during a webinar in March.
Problems started during the rehab process. Timelines kept getting missed. The Seller claimed work was done that wasn’t and frequently lied about issues. Fortunately we hired an independent inspector who helped us hold them accountable for doing the promised work. The inspector pointed out an old water heater that the Seller claimed was new, among many other issues. We often discussed these issues with Maverick; their response was to praise our due diligence and repeat the promises we had been given.
The Seller told us a tenant was lined up, but at a lower rental rate than promised. We mentioned up the rent guarantee. The Seller refused to lower the sales price, and eventually told us the tenant had agreed to the original rent amount. Shortly before closing the Seller sent us a copy of a signed lease. We closed on the purchase in July, and hired Arbor Trace for property management.
Almost two months passed and we did not receive any rent or owner’s statements. We contacted Arbor Trace to ask about the situation; we discovered the companies were collapsing in dramatic fashion. One staff member told us the house we had bought was not occupied. We called the electric company and verified that there was no power at the house. The lease we had been shown in order to get us to close at the agreed price was a fraudulent lease!
At that point, we reached out to another PM group in Birmingham. They helped us secure the house (which was empty) and get the lawn cut (there was a city citation on the door about the overgrown lawn).
We are not convinced that this drama is over yet. But so far, we have:
- Bought a house that will cash flow for $200 less a month than promised
- Dealt with a fraudulent lease
- Had to find a new PM company
- Had to spend at least $1000 to get the house rent ready
- Paid a $500 bill to the electrical company to cover an unpaid bill
- Been sent one check by the Seller to cover some costs – the check bounced (twice)
- Received no substantive support from Maverick – they completely failed on their due diligence
Knowing how BP folks feel about turnkey properties in general, I want to say that we are not against the approach – we are in the process of closing two other turnkey properties with two different companies.
Our warning – stay away from the groups and people mentioned here and always do your due diligence!
