All Forum Posts by: Mark S.

I buy turnkey in Memphis, TN but am also looking at possibly expanding into Florida.  There are a couple of providers I’ve heard on several podcasts in FL that I may take a trip to visit at some point.  Both providers focus on new construction and generally newer properties.  The whole “build to rent” idea.  In Memphis, I use Mid South Home Buyers (MSHB).

@Jayson Greenblatt, in addition to some syndications and note funds, I only buy turnkey out of state.  I have 5 SFRs currently in Memphis, TN.  Nothing is perfect and I’m not getting rich overnight (nor did I ever expect to), but when you look at total return from these turnkeys and compare it to stock market-based investments, they’re hard to beat.  One acronym I always liked is that real estate is said to be the IDEAL investment:

Income (from cash flow)

Depreciation (tax deduction due to depreciation)

Equity growth (via principal paydown by tenant)

Appreciation (generally, over time, even though I assume 0% appreciation in my return calculations)

Leverage (and the corresponding inflation-profiting benefits through long-term fixed interest rate debt)

@Keith Weinhold of Get Rich Education does a great job of explaining the many simultaneous profit centers real estate provides.  I’m also a huge fan of his thinking on managing equity (which leads to a whole separate discussion).

I would say the biggest thing to look for and vet is the turnkey providers themselves.  It’s well worth it to take the time to meet the team and see what your guy tells you (in addition to all the other normal due diligence).  There’s some stand-up operators out there and also some chop shop garbage operators.  It’s up to us to look out for ourselves and one of the better ways to do that in my opinion is to make a trip to visit them.  There are at least two providers I’ve personally met/toured with that, although they’re really nice people, I will probably never do business with.  

@Shaun Allison

Hey, Shaun. Been vacationing at Lake Norris the past couple years. Been wondering about the rental market down here. Are you a builder, wholesaler, PM, or what? Looking to get more info on rentals in the area.

A quick search on BP would answer most of your questions before you go blasting them.  In the time it took you to create an account on BP could have yielded the answers you’re looking for.  

I'd also like to add my $0.02 here as I've invested in two syndications with Holdfolio and am considering a third.  I've had one investment with them turn out to be a dud (the investment itself) but I still got my money back, a small profit, and the majority of quarterly distributions on the way.  To be more specific, this was a 50-unit multifamily property in Indiana that I invested in in August, 2017.  The end of that year and in 2018, things got rough and a couple of distributions were not paid.  It's not because Holdfolio decided to hold the money (although they do structure their deals so they're compensated nicely - and they should for doing the hands-on work that none of us want to do), but rather because the property had higher than expected expenses/lower than expected occupancy/etc.  As frustrating as it was, I kept patient with Holdfolio and eventually they were able to sell the property at a profit and pay all the cumulative preferred dividends that were missed.  Not all their deals have preferred returns, but the ones that do (and generally I only invest in ones that do), they typically make up the payment along with way.  In other words, an occasional "missed payment" isn't necessarily gone forever.

The second deal I invested in with them was in December, 2017.  I'm still in that deal and it appears to be one of the better ones they've done.  This is an 80-unit multifamily property in Indiana.  There've only been two quarters of no distributions: one in 2018 and one during COVID in 2020 that was made up for with Q2's distribution.  I'm in another syndications as well and virtually all operators suspended investor distributions as a responsible and preventative measure.  I think we would all agree that we'd rather have a suspended distribution (that is later made up for) by being preventative than having something go awfully wrong and losing the property (and, in turn, our entire investment in the syndication).  It's called being prudent.

I'll be the first to say that I have, and will continue to, review upcoming Holdfolio deals carefully (as we all should) and I'm quick to pass on an opportunity that doesn't meet my criteria, but with that said, I think they're doing the best they can and learning from their experience.  I can honestly say I can be a PITA at times, but in all my dealings with @Jacob Blackett, he's been nothing but professional and communicative.  I think the people trolling on here that haven't invested any money with them really need to rethink the message they're putting out to the universe, especially for potential future investors who often go off of what others say.  

Good experience?  Great, please share.

Bad experience?  Also great, please share.

No experience?  Probably shouldn't be on here flaming.  Just saying.

With that said, we all should ALWAYS do our own due diligence on any investment opportunity we're considering.  I know I do.

@Patti Robertson, I just pulled up the signed lease.  Signed 4/24/2019 (about a week or so before I purchased the property - “turnkey”) for tenant to move in 5/1/2019 and ending on last day of April, 2020.  

I don’t see how the PM would have any reason to lie to me.  They’re supposedly trying to get to the bottom of it between MHA and tenant.  I don’t feel it’s appropriate to thrust myself into the mix because: 1.) that’s what I pay the PM to do, 2.) I don’f want to complicate matters further, 3.) I want to see how PM ultimately handles it if they are unsuccessful in their efforts (takes care of it themselves, offers to split it with me 50/50, says tough luck, etc.).  

It’s very frustrating on my end for sure, but I’m trying to be patient and understanding.  I do continue to follow up with PM, so they know I’m on top of it and expecting an answer.

Thanks, @Patti Robertson.  I agree they should be taking back May.  Her lease was through the end of April, so I didn't think they should be taking back April.  I've been in touch with the PM about this and they're trying to sort things out.  Apparently, Memphis Housing Authority (MHA) is saying that the tenant actually moved into another property before the end of March and that's why they took back April.  The PM is trying to get in touch with this tenant to sort through it all.  In any case, in my opinion, if the lease ran through the end of April (whether she was physically in the property or not), we're entitled to April's rent.  Are we not?  This will be an interesting learning experience no matter what happens, so I'm anxious to see how it plays out.  Worst case scenario, I'm out $900 or so.  I guess it could be a lot worse.  I still think it's B.S., though, if they don't pay April.

I just got my monthly PM statement for a turnkey SFR in Memphis, TN that previously had a Section 8 tenant in it. The tenant moved out at the end of April (new tenant moved in early July - we initially had it priced too high and had longer than normal vacancy but that's another story). There's a line item on the PM statement from Memphis Housing Authority that says Rent Abatement for 4/20 and 5/20 and the PM debited two full months of rent.

Based on my limited research of rent abatement, it appears that is when rent is withheld due to repairs not made.  I've never been informed that this is the case with this property.  Is this a COVID-related tactic?  Anyone else have this happening with their Section 8 tenants from the Housing Authority?  Completely caught me off guard.  I have an email in to the PM for clarification, but figured I would also try to get some feedback here in the meantime.

 Hey @Jimmy Lieu,

I would be taking out a larger mortgage, but at a (slightly) lower interest rate.  In my particular case, I did 5% down conventional loan when I originally bought the home, so the monthly payment was higher.  The reason why I would be able to have a similar monthly payment with the cash out option is that I'd have to leave 20% equity (of the new, higher value) in the home, I would be resetting loan at 30 years, and I would have the lower interest rate.  It just so happens that the numbers work out that way.  Original loan was $164,350 at 3.375%.  New loan (if I do cash out refinance) would likely be around $172,000 at 2.99%.  The small difference in loan amount and interest rate just happen to make those two payments about the same over 30 years.

If I did 20% down conventional initially and then did cash out refinance of a much higher (new) loan amount, then yes, the payment would be significantly higher.  Hope that helps.

I’m weighing options on whether or not I want to refinance my primary residence. I am in no rush necessarily to pay off my home, so we can leave the debt free vs not debate for another thread. I am also only interested in 30-year fixed mortgage, so the 15 vs 30 year comments can also wait for another day.

With all that said, here are the numbers and options:

CURRENT

Home Value: $215K

Outstanding 1st Mtg: $117K

Outstanding 2nd HELOC: $28K (used for rental)

Total Debt: $145K

Total Equity: $70K

Current P&I pmt: $726/mo

Current int rate: 3.375% (30-yr fixed)

Amortization: 8 years in.

OPTION 1 (Recast Primary Only)

Recast $117K over 30 years at 2.50% fixed.

New P&I pmt: $464/mo

HELOC stays subordinated at current 3.50% variable rate.

Pros: Lower monthly pmt (more flexibility), lower interest rate,

Cons: Reset amortization schedule, 8 more years of payments (but again, I’m planning to invest the difference and play the arbitrage game), no cash out option at this int rate.

OPTION 2 (Cash-Out Refi)

80% LTV Cash Out Refi at $172K loan at 2.99% fixed

New P&I pmt: about same as current

Current HELOC gets paid off/"rolled in" to new mortgage

$26,500 cash out minus fees, so probably low-to-mid $20Ks cash out

Pros: tax-free cash out for other investments, lower interest rate than current (2.99% vs 3.375%), replacing current $28K HELOC debt at 3.50% variable with 2.99% fixed

Cons: no reduction in pmt, larger loan amount than current

OPTION 3 (Steroids)

Same as Option 2 except going out and getting NEW HELOC to tap additional equity (local credit union does 90% LTV)

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Primary Goals: Flexibility & Increase monthly cash flow

Secondary Goal: Reduce interest expense

Side note that I am in great financial shape with no real “need” to reduce my monthly payment but am looking to relatively early FI. I am in growth/acquisition mode of building my rental portfolio and believe this could slightly help accelerate the process.

Interested to hear others’ thoughts and frameworks they would use to make a similar decision. Thanks in advance.