Turnkey Tour - Due Diligence and Questions

[Jay Bhatt]

Hi BP community,

I am in Chicago to take a tour of a turnkey rental operations. Although it is kind of last minute, I thought I would run by BP community list of questions I am going to ask or notes I am going to make. Please provide your review and add anything to the list of questions. We have asked them more than 30 questions about their operations and  property  management.  I will summarize that details here for everyone.

Neighborhood class :B

Property Type: SFR

Property Management Fee: $95 per month regardless the price of the property

Property Management: In House

Market: Suburb Chicago

Average occupancy: 3 to 4 year

Tenant Type: Blue Collar workers with families

Renovations: All the big ticketed items + cosmetics

Cash on Cash Return: Using BP calculator with very conservative number - 8% Vacancy, 10% Cap EX and 10% Maintenance, we know we can get a property from their portfolio which will generate double digit returns.

Finance: leverage with 20% down

Properties to property manager ratio is also impressive.

They do have eviction experience. They also have online portal for owners and renters.

Now, they offer properties in various suburbs of Chicago and if anyone can chime in with recommendations of suburb that is upcoming market, it will be a great help. Some of the areas I am listing below might be B+ or A class neighborhood since they offer properties in those areas as well but our focus is B class.

South Holland, Matteson, Blue Island, Bellwood, Richton Park, Lansing, Bollingbrook, Lock Port, Homer Glen, Crestwood, Alsip, Oak Lawn, Evergreen Park are to name a few where they invest.

1. How do you select the property?
2. What is the exit strategy? ( if there is any)
3. Where do you see expanding in upcoming years?
4. How do you see rental markets in your area for five years?
5. Who are the biggest employers in this area?
6. Do you offer any special programs for loyal investors?
7. How many properties are own by an average investor?
8. When do you see this market entering saturation? or What will you consider as a sign for saturation?

Thank you in advance for your help. I understand it is kind of last minute since I will be on tour for next 3 or 4 hours. I should have thought about this before but better late than never. I will keep checking the replies on the post.