Difficulty selling rental properties at loan amount

[Sabrina Brown]

I own 3 rental properties in Memphis and have been renting them out since I got them.  However, last year I tried to sell them at 25% below market value and still only got offers for less than the loan amount.  I ended up having to put tenants in it again after not receiving any income for a year in addition to putting in another 20K to fix these properties up to make them turn key.  I can't refi because I am self employed and I can't do a short sale or approach the banks as to not to jeopardize my excellent credit rating.  

I would like to sell these properties as a package. They generate at least 1K/month in net profits (after PITI and management fees) and don't need any repairs.

Is there any other strategy I could use to offload these properties at a minimum of breaking even or just a tiny bit of a profit?  

I am currently looking for MFH's in CA and would also consider an exchange or other unique options.  Please advise!

[Ben Leybovich]

That's exactly it - @Alex Craig. TK providers are no different from money managers. The reason we have proverbial disdain for money managers is because they get paid whether the investor wins or looses - the same is true in TK. Think on it:

1. You take a huge chunk of equity off the table for the investor

2. And, you institutionalize management fees as part of the formula. 

You win both on equity and CF side. In essence, your upside is guaranteed contractually, but not the investor's. And, unlike the syndication model, for instance, where we are only paid out of equity or cash flow if we are able to reach hurdles, your pay is not tied to performance.

Considering that the very reason we are in RE is to attain control over our investments that we cannot get elsewhere, TK does not work. And thus, you attract CA money that wouldn't know a good RE investment if it hit 'em in the head... Do you take advantage of them? No - I wouldn't say that. People are free to educate themselves, or not. People are free to make decisions, good or bad. You are running a model that is tailored for you - good for you. However...

Now -talking to me about A Class is just silly. What's A Class today, will be B Class 7 years from now. It will need CapEx. It will need flooring, appliances, water heater, and potentially furnace. And if you include those future capital expenditures into you static proforma, then the real cash flow will not look as it currently does.

Now - if you would underwrite to IRR, which requires you to commit to an exit time-frame and price, include all of the economic losses which are sure to happen down the road, and structure your pay relative to achieving those hurdles, then I would change my mind instantly. I'd still say TK is not the best way to invest for the most sophisticated investors, but I'd gladly tell people that investing with you is as equitable as it can be within that framework...

[Alex Craig]

@Richard Dunlop  Teaming up with local people is certainly a good idea.  Probably very hard to do that b/c that means finding someone.  I have one that I would certainly like to partner up.  I have put all the down payment money that I am able to this year and have an "A" class deal (if you are at @Ben Leybovich, then we will disagree on "A" class houses, so for him, I will say "A" class area). Really want to keep this one.

[Derek B.]

Originally posted by @Ben Leybovich:

That's exactly it - @Alex Craig. TK providers are no different from money managers. The reason we have proverbial disdain for money managers is because they get paid whether the investor wins or looses - the same is true in TK. Think on it:

1. You take a huge chunk of equity off the table for the investor

2. And, you institutionalize management fees as part of the formula. 

You win both on equity and CF side. In essence, your upside is guaranteed contractually, but not the investor's. And, unlike the syndication model, for instance, where we are only paid out of equity or cash flow if we are able to reach hurdles, your pay is not tied to performance.

Considering that the very reason we are in RE is to attain control over our investments that we cannot get elsewhere, TK does not work. And thus, you attract CA money that wouldn't know a good RE investment if it hit 'em in the head... Do you take advantage of them? No - I wouldn't say that. People are free to educate themselves, or not. People are free to make decisions, good or bad. You are running a model that is tailored for you - good for you. However...

Now -talking to me about A Class is just silly. What's A Class today, will be B Class 7 years from now. It will need CapEx. It will need flooring, appliances, water heater, and potentially furnace. And if you include those future capital expenditures into you static proforma, then the real cash flow will not look as it currently does.

Now - if you would underwrite to IRR, which requires you to commit to an exit time-frame and price, include all of the economic losses which are sure to happen down the road, and structure your pay relative to achieving those hurdles, then I would change my mind instantly. I'd still say TK is not the best way to invest for the most sophisticated investors, but I'd gladly tell people that investing with you is as equitable as it can be within that framework...

But why would I care about IRR? I am buying it for "cash flow". :-)

[Ben Leybovich]

Originally posted by @Derek B.:

Originally posted by @Ben Leybovich:

That's exactly it - @Alex Craig. TK providers are no different from money managers. The reason we have proverbial disdain for money managers is because they get paid whether the investor wins or looses - the same is true in TK. Think on it:

1. You take a huge chunk of equity off the table for the investor

2. And, you institutionalize management fees as part of the formula. 

You win both on equity and CF side. In essence, your upside is guaranteed contractually, but not the investor's. And, unlike the syndication model, for instance, where we are only paid out of equity or cash flow if we are able to reach hurdles, your pay is not tied to performance.

Considering that the very reason we are in RE is to attain control over our investments that we cannot get elsewhere, TK does not work. And thus, you attract CA money that wouldn't know a good RE investment if it hit 'em in the head... Do you take advantage of them? No - I wouldn't say that. People are free to educate themselves, or not. People are free to make decisions, good or bad. You are running a model that is tailored for you - good for you. However...

Now -talking to me about A Class is just silly. What's A Class today, will be B Class 7 years from now. It will need CapEx. It will need flooring, appliances, water heater, and potentially furnace. And if you include those future capital expenditures into you static proforma, then the real cash flow will not look as it currently does.

Now - if you would underwrite to IRR, which requires you to commit to an exit time-frame and price, include all of the economic losses which are sure to happen down the road, and structure your pay relative to achieving those hurdles, then I would change my mind instantly. I'd still say TK is not the best way to invest for the most sophisticated investors, but I'd gladly tell people that investing with you is as equitable as it can be within that framework...

But why would I care about IRR? I am buying it for "cash flow". :-)

 Because - this CF is phantom in most cases:

1. 12% CCR discounted 20% for economic losses + CapEx (likely higher actually), becomes 8% CCR at best.

2. Further, NPV discount of that 8% real return over 7-10 year hold period will have you realize that you are better off tracking S&P with much fewer head-aches.

The only saving grace is the back-end appreciation, and you are giving that away at the time of purchase to the TK guy :)

[Richard Dunlop]

Originally posted by @Derek B.:

Originally posted by @Ben Leybovich:

That's exactly it - @Alex Craig. TK providers are no different from money managers. The reason we have proverbial disdain for money managers is because they get paid whether the investor wins or looses - the same is true in TK. Think on it:

1. You take a huge chunk of equity off the table for the investor...

But why would I care about IRR? I am buying it for "cash flow". :-)

Probably help the cash flow to not have the $15,000 minimum TK markup included in the mix.

[Derek B.]

Originally posted by @Ben Leybovich:

Originally posted by @Derek B.:

Originally posted by @Ben Leybovich:

That's exactly it - @Alex Craig. TK providers are no different from money managers. The reason we have proverbial disdain for money managers is because they get paid whether the investor wins or looses - the same is true in TK. Think on it:

1. You take a huge chunk of equity off the table for the investor

2. And, you institutionalize management fees as part of the formula. 

You win both on equity and CF side. In essence, your upside is guaranteed contractually, but not the investor's. And, unlike the syndication model, for instance, where we are only paid out of equity or cash flow if we are able to reach hurdles, your pay is not tied to performance.

Considering that the very reason we are in RE is to attain control over our investments that we cannot get elsewhere, TK does not work. And thus, you attract CA money that wouldn't know a good RE investment if it hit 'em in the head... Do you take advantage of them? No - I wouldn't say that. People are free to educate themselves, or not. People are free to make decisions, good or bad. You are running a model that is tailored for you - good for you. However...

Now -talking to me about A Class is just silly. What's A Class today, will be B Class 7 years from now. It will need CapEx. It will need flooring, appliances, water heater, and potentially furnace. And if you include those future capital expenditures into you static proforma, then the real cash flow will not look as it currently does.

Now - if you would underwrite to IRR, which requires you to commit to an exit time-frame and price, include all of the economic losses which are sure to happen down the road, and structure your pay relative to achieving those hurdles, then I would change my mind instantly. I'd still say TK is not the best way to invest for the most sophisticated investors, but I'd gladly tell people that investing with you is as equitable as it can be within that framework...

But why would I care about IRR? I am buying it for "cash flow". :-)

 Because - this CF is phantom in most cases:

1. 12% CCR discounted 20% for economic losses + CapEx (likely higher actually), becomes 8% CCR at best.

2. Further, NPV discount of that 8% real return over 7-10 year hold period will have you realize that you are better off tracking S&P with much fewer head-aches.

The only saving grace is the back-end appreciation, and you are giving that away at the time of purchase to the TK guy :)

I'm with you. I guess my sarcasm didn't come through. I actually posted several pages ago on this topic that this is precisely why many TK operators advertise cash flow and CoC, rather than IRR. IRR is low or negative and no one would buy if they knew the true irr. The west coast $$ is trying to get in the game and they aren't stopping to think about how they will get out of the game.

And I agree with you. CF only looks good on paper. 

[Ben Leybovich]

Originally posted by @Derek B.:

Originally posted by @Ben Leybovich:

Originally posted by @Derek B.:

Originally posted by @Ben Leybovich:

That's exactly it - @Alex Craig. TK providers are no different from money managers. The reason we have proverbial disdain for money managers is because they get paid whether the investor wins or looses - the same is true in TK. Think on it:

1. You take a huge chunk of equity off the table for the investor

2. And, you institutionalize management fees as part of the formula. 

You win both on equity and CF side. In essence, your upside is guaranteed contractually, but not the investor's. And, unlike the syndication model, for instance, where we are only paid out of equity or cash flow if we are able to reach hurdles, your pay is not tied to performance.

Considering that the very reason we are in RE is to attain control over our investments that we cannot get elsewhere, TK does not work. And thus, you attract CA money that wouldn't know a good RE investment if it hit 'em in the head... Do you take advantage of them? No - I wouldn't say that. People are free to educate themselves, or not. People are free to make decisions, good or bad. You are running a model that is tailored for you - good for you. However...

Now -talking to me about A Class is just silly. What's A Class today, will be B Class 7 years from now. It will need CapEx. It will need flooring, appliances, water heater, and potentially furnace. And if you include those future capital expenditures into you static proforma, then the real cash flow will not look as it currently does.

Now - if you would underwrite to IRR, which requires you to commit to an exit time-frame and price, include all of the economic losses which are sure to happen down the road, and structure your pay relative to achieving those hurdles, then I would change my mind instantly. I'd still say TK is not the best way to invest for the most sophisticated investors, but I'd gladly tell people that investing with you is as equitable as it can be within that framework...

But why would I care about IRR? I am buying it for "cash flow". :-)

 Because - this CF is phantom in most cases:

1. 12% CCR discounted 20% for economic losses + CapEx (likely higher actually), becomes 8% CCR at best.

2. Further, NPV discount of that 8% real return over 7-10 year hold period will have you realize that you are better off tracking S&P with much fewer head-aches.

The only saving grace is the back-end appreciation, and you are giving that away at the time of purchase to the TK guy :)

I'm with you. I guess my sarcasm didn't come through. I actually posted several pages ago on this topic that this is precisely why many TK operators advertise cash flow and CoC, rather than IRR. IRR is low or negative and no one would buy if they knew the true irr. The west coast $$ is trying to get in the game and they aren't stopping to think about how they will get out of the game.

And I agree with you. CF only looks good on paper. 

 Haha - so sorry. I guess it's kinda too late to admit I didn't read most of what came earlier...busted :( I hope Josh doesn't ban me over this...

[Alex Craig]

@Richard Dunlop  I can walk through the Math of how 15k profit is not realistic for most turnkey providers running a legit biz.

[Chris Clothier]

I was not involved in the sale of these properties, but have sat back and watched this thread for the better part of a day and what fascinates me is how easy it is to get the result you want from other people.  The thing that makes BP so great is that you can get unfiltered advice and usually from people that, besides a picture, are anonymous strangers.   That is also the bad part.  Due to no filter and anonymity, sometimes the comments are just thrown out there without any real thought about facts and details. It is unfortunate, that after @K. Marie  Poe stopped asking questions, no one really picked up where she left off.  It was obvious that things did not add up from the original post to where the thread took off.  

This is not about should you buy Turnkey or not.  This is about the basics.  This is about buying smart and being honest here on BP with all of the details and sharing ALL of the pertinent data if you truly want the users to help you.  @Jay Hinrichs, you're getting a couple of votes or that last post, but as much as I like you, I'm not one of them.  You make a lot of assumptions in your response and you castigate @Curt Davis when he is the only poster on here actually trying to help Sabrina achieve her original question.  He is the only one being honest about her options and solutions and the realities of her situation.  Yet, you knock him for his honesty about what it would take to sell to a turnkey company and then you knock him for his honesty about the value of her properties and the fact that blaming will not get her closer to her goal.

I would think that many of the smart investors and commentators on here would really want all of the data and details before really coming to a conclusion.  Big props to @Michael Lauther for his straight forward and pragmatic comments about buying midwest turnkey properties and the way you have to be brutally honest with yourself if you are going to be successful.

As for Turnkey, who cares about that debate?  No one is going to change their minds on this and that is ok.  As for your comment @Cal C., I own a turnkey company and I will gladly share this thread.  For most of us running reputable companies, we love having these types of threads shared because they really help to define the good and the bad in both turnkey companies and investors.    

Here are a few facts that were left out that are easy to know if you are familiar with Memphis.  Why they were left out of the original post, I have no idea, but when put into context, a lot of commentators may feel differently.

1.  There was an AFFILIATE company out of Los Angeles who worked very hard to get Memphis companies to sell properties to their clients.  First red flag - They charged people money to be a part of their group and then those people would get access to their turnkey properties.  Second red flag - They pushed the no-money out of pocket investing, positive cash flow, sit on the couch and collect mentality so any investor coming through them was set up for failure from the beginning.  Jay, you have harped on this topic and here is a real life example of a buyer who bought through them and how their expectation was not met - but does that mean someone got screwed?  

2.  The company selling these properties is not a big company and they do virtually zero marketing.  They rely solely on affiliate relationships for sales.  The owner is a very good real estate investor and a fantastic business man with a great reputation.  He does not sell on customer service, he does not sell on great management - hell, he doesn't even sell on doing extensive rehabs.  He sells based on being a small company with low overhead a small management company and they do low-end rehabs to sell properties below market pricing to investors.

3.  @Alex Craig is spot on with his analysis of the renovations done to these properties.  They are not extensively renovated and still have deferred maintenance to this day.  I am quite sure the same holds true with Lazini and the poster already said that the Chelsea Hill property had to be boarded up because it was being vandalized.  

I was not there when these properties were sold.  But, I am familiar with what was going on at the time and how companies were selling including the Affiliate company in LA.  I am very confident that none of these were sold as short term investments.  I am quite sure they were absolutely sold as long-term buy and holds beyond a 10-year hold.  

Now lets look just real quickly at the houses themselves and the posters original post.

The outrage from BP posters came from this investor being taken advantage of by a Turnkey company who overpriced the properties, lied about value and did shoddy work.  This company does not have a reputation for those things...  

All three properties were purchased in early 2010 (this data comes from the assessors website so if it is wrong or Sabrina says she paid more....I'm just listing what is on the gov. site):

3381 Kings Arms purchased for $76k 

3958 Chelsea Hill purchased for $35k. 

9265 Lazzini Cv purchased for $70k. 

Again, that is from the property assessors website so perhaps they are wrong, but this is exactly the way the sales were recorded.  Perhaps the affiliate company and the turnkey company both mislead the buyer about the amount of work that was done or the amount of deferred maintenance needed, but I highly doubt these properties were sold at or above retail value.  Maybe Chelsea Hill was sold as a great area of town, which again, would be wrong, but like I said, they don't look overpriced to me based on what I know about Memphis.  And at $35,000 I have no idea how a buyer can think they are being over priced.  @Ben Leybovich, there is your under $50,000 pig property that is almost impossible to have success with as an out of state investor.

Are the properties any good?  Chelsea Hill is an area of town that we do not want to buy or manage.  Kings Arms is a nice area and a good property.  Lazzini is in a nice area and also a good property, but is an abnormal property at 2 bedrooms in a 3 bedroom area.

So I don't think any of these properties are sold too high.  Not for the area of town and not for the work or lack thereof that was done.  Only the OP knows what her expectations were for renovation.

What about the claim that they were listed at 25% below market value with no bites? I know other posters thought that was a little odd. Well, here is what the MLS shows:

3381 Kings Arms was listed at $109,900 that is 44% increase in 5 years!!!  No way that property is listed at 25% below market value.  IN fact, it was overpriced.  It has been dropped to $99,900 and as was pointed out by Alex, it may still be slightly over-priced considering the lack of retail updates.  But if it is sold at $89,000 based on lack of upgrades, that is still a capture of equity or appreciation, whatever you want to call it and would probably be slightly below retail value based on the lack of updates.

9265 Lazzini Cv. was listed on the MLS at $95,000. It is no longer listed, but again, at 95,000 that is not 25% below market value. That is at a whopping 34.7% mark-up and priced right at max value for that property in that area. It may be priced perfect or may need a little less to move to a retail buyer.

3958 Chelsea Hill does not show to have been listed on the MLS.

So were they ever listed at 25% below market value? Doesn't look like it, but that is the claim that sent BP into a frenzy. How can these properties not sell at 25% below retail value and not get a bite unless this buyer was screwed by a company? Or, they are not listed on the MLS.

OP claimed that selling all three as a package was preferable and that she just wanted to get out of them at break even or possibly a little profit.  It sounds like Chelsea Hill will be the challenge for a package.  Curt Davis has offered to help with that multiple times here on the thread and was even asked by Linda Pliagas to reach out and try to help you.  He has done that.  He has stated that he thinks he can help you break even at worst.  At least give him some props for trying to help and offering to help if he can based on the original post.

I get how BP works.  I have been posting and writing articles here for almost 6 years now and understand which comments to laugh at and which to really dig into.  The best way to make BP work is to be willing to be honest and ask for analysis and advice based on all the facts.  These properties were bought with no money down from an affiliate and from a  vendor who is usually pretty up front that he does not believe in over renovating and likes to keep prices low.

To me, it sounds like a bad deal all the way around, but not the way the OP has described and certainly not the way the thread took off.  It sounds like she wants to move on to other investments, but her long-term properties in Memphis are not going to let her realize a big profit. If she truly wants to sell, then with all the details on the table, there is bound to be a buyer on here and a solution that can help her get out of the properties at a break even if not a little profit.

[Gautam Venkatesan]

This thread reaffirms the fact that, if you are considering purchasing out-of-state turnkey properties, you really need to go physically visit with the team on the ground (the turnkey operator, the PM companies, realtors), tour different neighborhoods during the day and night, visit the properties or comparable properties before/after rehab to get an idea of the quality of work done, etc. before you pull the trigger.

[Michael Lauther]

@Chris Clothier thanks for the good mention but more importantly thanks for the details provided. The investment described here highlights the importance of having a clear objective and strategy for getting there. Investing in low price real-estate in poor areas does not lend itself for an easy exit. If your need is short term gain or hands off investing, don't do it. I really believe that this turn key investment is doing just what it is designed to do.

[Michael Mcghee]

@Chris Clothier thanks for being thorough in regards to this post. Also the resale price was not exorbitantly higher when the tk company resold to buyer. My previous posts clearly states that this has turned into a finger pointing fiasco instead of giving advice. 

[Mike H.]

I still don't see why another TK buyer type wouldn't want to buy these houses at 75%. That would be a huge discount off what the TK sellers are selling them at.  And basically, the houses are better than turnkey. Just go out and hire the same TK provider to be the PM and everybody wins.

I, for one, don't think I'd touch anything in the low end of price range in any area where there is little to no exit strategy at selling retail. And ultimately, that may very well be the lesson here - beyond the TK issues.

Then again, if these are 30k to 60k houses, maybe its just best to drop the sales price down to 65% LTV and pay the 10% (3k to 6k) to get out of that area completely and never look back......

Call it a lesson learned. If they're as bad as it sounds, I don't think you'll see any appreciation on them any time soon anyway. 

[Matt R.]

@Chris Clothier Right on Chris, it was sounding like the wheels have fallen off in Memphis. We can always count on the king of Memphis to help clarify. You always point out the realities short, mid and long term up front. Thanks again!

[Sabrina Brown]

@Curt Davis Yes, I purchased these properties through an affiliate marketer and one of the TK providers you mentioned earlier you say you find them to be a reputable company.  They were supposed to rehab the property and bring it up to par for what is adequate for the area, which now I know they didn't.  They did the bare minimum. I paid for it via refi through conventional loan at which time it had 25% equity.  The assessor's site does not include the amount of rehab I paid in addition to the original purchase price for the distressed property.  Your recommended TK provider then managed all properties. 

Chelsea Hill used to be in Section8 but this TK provider allowed the tenant to stay 3 months longer without me getting paid or getting the extended voucher approved by Section8.  I then hired your company as management company.  Your company helped me collect the Section8 but strongly advised me to take it out of Section8 in order to get higher rent (so at that time you must have thought the property was in great shape, etc. in order to collect higher rent).  Several months later, the property was still not rented out by your company.  You referred me to one of your agents to sell this property.  9 months went by and your agent did nothing and later admitting to me that he is a buyer's agent, not selling agent.  During this time, the property got vandalized and I had to have it fixed up for another 13K.  A few months later I had it boarded up again with another smaller vandalism.  I was then approached by another management company who found a tenant who would later be interested in a lease purchase option and fixing up the property for 2 months free rent (that is all that was needed and his brother is a licensed contractor).  The lease started in June 2015 and the inspection by city and county were completed.  I now had to fire this management company as they have not remitted the August and September rents to me (I am in contact with an attorney to recover damages).  This property may be able to be sold to the new tenant at loan amount or more.

Most of these issues for this property alone (and I can go on and on about the other properties, too) were caused by your recommended TK provider, your management company, and your agent.  What is it that you can truly do for me?  

At this point, I can't really trust anybody in Memphis anymore.  No matter who was referred to me or what I tried to do to rectify the situations, I got screwed over yet again.  I have heard from a couple of attorneys that it is common knowledge that out of state investors are getting the short end of the stick and they know how to take advantage.  I know that my biggest mistake was to ever trust anybody from CA promoting these properties at that time, including those TK providers and attorneys that also promoted in CA at various real estate events and still do.  Somehow they still promote their business in CA and of course, they are eager to get beginners investors into the game because it is easy to mislead them and take their hard earned investment money.  Yes, I also told the realtors to take better pictures, etc., but almost every single time I was told that it was okay ("I shouldn't over rehab or "I have another showing so let's not spend more money right now").  There are just too many factors that are out of my control, hence I "hired a professional team that will take care of everything for me".  

I do have another property out of state with a reliable and reasonable management company and long term tenant.  Never once did I have an issue.  They are not in the business of ripping me off.  This property was purchased through a CA investor company that is more on the conservative side and looks out for its investors.

[Derrick Craig]

@Chris Clothier

Thanks for clearing the air!! I too was under the assumption that the homes were actually marketed and placed on the MLS for 25% below market value??? If this never happened then I don't think we would have gotten such a big response of the back and forth gibberish!! @Curt Davis I must commend you as well after reading the posts again all you have done was tried to help KUDOS to you!!!  I am soo glad we now know the facts!!

Disclaimer: I was not involved in these transactions, I know the TK provider as well he is a very good Real Estate Investor and has a solid turnkey company here in Memphis. He is a very good guy super knowledgeable business man I actually just met with him Friday.

I am going to leave you with this..

Here is what Wikipedia said about Real Estate Investing is good stuff:

Real estate investing involves the purchase, ownership, management, rental and/or sale of real estate for profit.

Real estate is an asset form with limited liquidity relative to other investments, it is also capital intensive (although capital may be gained through mortgage leverage) and is highly dependent. If these factors are not well understood and managed by the investor, real estate becomes a risky investment. The primary cause of investment failure for real estate is that the investor goes into negative for a period of time that is not sustainable, often forcing them to resell the property at a loss or go into insolvency.

[Sabrina Brown]

For the other property, Kings Arms, there was a similar size home (over 2,400 sqft like mine) sold at 133K on the same street in November 2014.  I had listed my home at 115K at that time and it appeared that the other property also needed various upgrades.  The comps in that area are for houses with about 1,400 sqft at around 80K.  This home is for a larger size family.  Again, this property was supposed to be brought up to par when I purchased and rehabbed and it was fine for the first few tenant families that lived in it.  I put in another 11K+ just recently, which is AFTER the online pictures were taken.  I was told by realtor that it was a long rainy season and there was not much activity during that time (probably till around May). This property is off the market now since a tenant moved in just last month.  With rents being $1,000-$1,250/month, what would be a reasonable sales price taking everything under consideration?

[Curt Davis]

@Sabrina Brown

You and I have never done business nor have I ever spoken with you over the phone so lets be very clear here.  Our management company that we do business with is out-sourced so I dont know who or what company you are referring to.  You have never done business with Buy Memphis Now so unless you state the company, I dont have a clue who your talking about.  To suggest that I or Buy Memphis Now is in anyway connected with your issues are false statements.  I have tried to offer suggestions, even Linda P asked me to try and help you but you dont actually seem to want any help.  

[Chris Clothier]

Originally posted by @Sabrina Brown:

For the other property, Kings Arms, there was a similar size home (over 2,400 sqft like mine) sold at 133K on the same street in November 2014.  I had listed my home at 115K at that time and it appeared that the other property also needed various upgrades.  The comps in that area are for houses with about 1,400 sqft at around 80K.  This home is for a larger size family.  Again, this property was supposed to be brought up to par when I purchased and rehabbed and it was fine for the first few tenant families that lived in it.  I put in another 11K+ just recently, which is AFTER the online pictures were taken.  I was told by realtor that it was a long rainy season and there was not much activity during that time (probably till around May). This property is off the market now since a tenant moved in just last month.  With rents being $1,000-$1,250/month, what would be a reasonable sales price taking everything under consideration?

 There are currently a few properties listed near you.  I am not a Realtor, but would suggest you maybe contact the realtor who sold the property you referenced.  They would be familiar with the property that sold and the buyer and tell you the difference, if any, between your property and that one.  I just looked up on Redfin real quickly and you have a 3/2 listed at $99,900.  There is a 4/2 listed at $110,000, a 4/2.5 listed at $110,000 and a 3/2 listed at $111,000 all within 1 mile.  However, just from pictures alone, they look a little nicer with what look like more upgrades.  If the property looks better then may be it will have some success now.  Also, it shows that it has been listed for over 150 days which is probably hurting the activity on it as well and leading to some of the low offers because investors see that number as a possible desperate buyer that would want to dump and run.

Maybe check in with the other realtor and get their view on listing your property.

[Sabrina Brown]

In an earlier post I read something about a "street to street" issue where one street would be monopolized (my words but this is how I interpreted it) by a TK provider whereas an adjacent street would just be a "regular sales" street.  Is this true?  If so, it makes complete sense why this "game" has been played with 3 different values as correctly pointed out before: wholesale, retail, and TK.

Based on prior posts, my asking price is not too far off from what I should be able to reasonably get the properties for.  I believe that I should still be able to get the loan amount, plus closing fees, plus a little "cushion", while the properties still generate more than enough cash flow for someone else to be able to make a profit on it.  Or am I missing something here?

[Sabrina Brown]

@Curt Davis  I DEEPLY APOLOGIZE for mixing you up with another person!!!  There are so many companies that even sound alike, I mixed yours up with one!  I also apologize to the other investors and want to CLEAR CURT's name with this post!  

The companies and individuals I mentioned earlier are related/affiliated with:  MemphisInvest, Premier Management, Premier Realty Group, Marathon Management, MemphisCashFlow.  There were many others I have done (costly) business with that consider themselves professionals but there are just too many to list.  I am not in the "bashing business" but since it came up, I had to clarify but don't want to cover up the experiences and truth either!  I am representing some of the other investors here that had, and still have, similar experiences and would like to get out of this game as well.

[Cal C.]

Sometimes the irony of the posting sequence on here is hilarious.  

For instance:  "Chelsea Hill used to be in Section8 but this TK provider allowed the tenant to stay 3 months longer without me getting paid or getting the extended voucher approved by Section8."  Quickly followed by "I know the TK provider as well he is a very good Real Estate Investor and has a solid turnkey company here in Memphis. He is a very good guy super knowledgeable business man"

Or even better: "I then hired your company as management company. Your company helped me collect the Section8 but strongly advised me to take it out of Section8 in order to get higher rent (so at that time you must have thought the property was in great shape, etc. in order to collect higher rent). Several months later, the property was still not rented out by your company. You referred me to one of your agents to sell this property. 9 months went by and your agent did nothing and later admitting to me that he is a buyer's agent, not selling agent. During this time, the property got vandalized and I had to have it fixed up for another 13K. A few months later I had it boarded up again with another smaller vandalism."  Followed by "I must commend you as well after reading the posts again all you have done was tried to help KUDOS to you!!! I am soo glad we now know the facts!!"

[Chris Clothier]

Originally posted by @Sabrina Brown:

@Curt Davis  I DEEPLY APOLOGIZE for mixing you up with another person!!!  There are so many companies that even sound alike, I mixed yours up with one!  I also apologize to the other investors and want to CLEAR CURT's name with this post!  

The companies and individuals I mentioned earlier are related/affiliated with:  MemphisInvest, Premier Management, Premier Realty Group, Marathon Management, MemphisCashFlow.  There were many others I have done (costly) business with that consider themselves professionals but there are just too many to list.  I am not in the "bashing business" but since it came up, I had to clarify but don't want to cover up the experiences and truth either!  I am representing some of the other investors here that had, and still have, similar experiences and would like to get out of this game as well.

Sabrina,

You need to re-read your last two posts very carefully.  You make a lot of claims and once again lay a lot of blame falsely onto other people.   

Just to be clear, You have NEVER done business with Memphis Invest.  

You purchased your properties from Memphis Cash Flow and I have no idea what makes you think it was on my recommendation.  Again, we have no relationship with this company and ZERO affiliation with the Los Angeles based affiliate company you joined and bought from.  That was entirely your decision making and long before you reached out to our property management company.

Your property management was with Marathon Management.  Again, we have no affiliation with them at all.  But I think I described them pretty damn accurately earlier about how they do business.

The second you mentioned our name on here I was alerted and immediately asked Nate Gray who you were and if you ever did business with Premier Property Management.  He just sent me the details including all the emails from you, the amount of work his team put in to helping you and reminded me that this is the reason we DO NOT manage for outside investors.  He laid out the details for me including your income/expense on your properties.

In 2012 you reached out to our management company and asked us to take over management of your properties. You were experiencing vacancies and rising maintenance costs.  We broke our rule of not managing homes that we did not renovate and agreed to take on the last three properties you had in Memphis even though you were told at the time that we did not want to manage the Chelsea Hill property.  We do not have a Section 8 account and do not actively advertise for section 8 tenants because we do not manage in traditionally Section 8 areas of town. Nate advised us not to manage the properties at all, but the Clothiers over ruled him and decided to bring them in knowing the poor experience you had already had with the properties buying from Marathon through the affiliate company.  We had been getting a lot of calls from people asking for help and took some on.  You left your properties with our management company for a little over 2 years and removed them in November of 2014 which is approximately when you put them up for sale. You collected a little over $62,000 in gross rents on your two good properties during that time!  I will be happy to forward this to you so you understand that I know EXACTLY what I am talking about. 

On the two properties you collected $62,000 in rents, you also had just over $10,000 in expenses including management fee, lease up fees and maintenance. That is 17% over a two year period.  Doing the math, with 9% management fee (I believe one reason you decided to leave our management and sell was we raised our fee to 10%), that leaves approximately 8% of collected rents over a two year period went to any lease up fees or maintenance. That is 4% a year. On crappy renovated properties, but in good areas. I think those numbers are pretty damn good, but you may have expected something better.  We didn't set your expectations, we simply tried to help an investor and I think Premier did a pretty damn good job.

Your Chelsea Hill was a complete disaster from the beginning, a magnet for vandalism and we wanted nothing to do with it since we do not manage homes in this area, but we took it on to try and help you. You chose to list the property for sale after a couple of months and later sought out another management company. Mark Saller, who is the listing agent for Premier Realty listed it for you at the price you wanted. It was a crap property then, it is a crap property now and you are going to have to sell it to an investor and at the price you own it for at best and it does not matter who lists it.  You can be mad at Premier Realty for not selling that one property for you, which is the only one you asked him to list, but if you are being honest, that is a property that has nothing to do with listing agent and everything to do with being a bad property.  This is not an owner occupied area.  It is a rental area, hard to get to , hard to find and in general not an area that we invest and as your case illustrates, not an area we want to manage.

So let's be real clear here. My company never promoted any turnkey company to you. We never sold you property. We gave you real advice on a very poor property on Chelsea Hill and stabilized your other two properties getting you a consistent and reliable income. You removed those properties because you did not want to pay 10% management fee and wanted to sell.  That ended your relationship with Premier Property Management and your last response to us was that you appreciated our help and our offer to assist you in the future should you need it.  That was November 2014. 

When I started responding on here, I wanted to help you, be clear with you and give the full details for all the readers who were taking this thread off the rails (in my opinion).

  My fault for not checking to see if we had ever done business earlier because I would have liked to disclose we had managed your properties in the past.  That makes me look poorly that I was not aware of that fact.  I would have liked to tell the real story before you placed your false comments.  

But now you have made false mention of my families' companies and tried to tie us to your problem when it appears to me, we did nothing but help you form 2012 to 2014 with a poor investment decision.  

Again, to be VERY CLEAR - YOU NEVER DID BUSINESS WITH MEMPHIS INVEST.  YOU ASKED OUR MANAGEMENT COMPANY FOR HELP - WE RESPONDED YES EVEN THOUGH IT WAS THE EXACT SCENARIO WE TRIED TO AVOID BECAUSE WE HAD NO IDEA HOW BAD THE SITUATION COUlD BE - AND THAT TEAM PERFORMED EXCEPTIONALLY WELL UNDER THOSE CIRCUMSTANCES AND HAD NOTHING TO DO WITH SETTING YOUR ORIGINAL EXPECTATIONS.  

Best of luck to you with your issues, but from this point on I'm out - you are quickly burning bridges with people who probably could have helped you and would have helped you again.  

[Dean Letfus]

Clearly the original poster has some issues, however if all she wants is to exit these homes a lease purchase would be a simple solution assuming her current finance rates are reasonable. i could find a home for them for you @Sabrina Brown easy enough.  PM me.

[Account Closed]

While the details of this whole mess is not clear to me it seems there are several overlapping issues. One set deals with the management of the properties. PM is THE most critical part of out of state investing, even more than purchase price. And from all I hear, getting good PM is not easy. You should not buy a single property unless you are confident in the PM. No matter how good the deal. 

The second is the exit plan. I think buying TK and selling retail to OO is highly unlikely in these markets and you should not go in with that expectation. Best you can expect is level price AFTER the costs you incur to bring the property back to "rehabbed" state. If you do get some appreciation, call it gravy and be happy.

Third, there is a lot of angst about buying price and TK margins. To me really, on a $50K house the absolute numbers are small. When I bought turnkey I looked up MLS sales of similar properties and found that on average I was going to pay maybe 5K (or 10%) higher for the turnkey product. But if you consider that I would have put in at least $2K simply painting and carpeting plus an extra month or two of vacancy before I could get a tenant in, the extra $5K seemed worth it, not even counting the time I would save. Now if a TK provider is really marking up a $50K house by $15K, thats a whole another thing.

I haven't yet completed the cycle and exited my investment so can't speak to IRR. But I am generating enough cash flow to pay off the 75% mortgage in under 10 years on all my properties so within 5 years I have nearly doubled my equity. Now even if I have to pay back another 10% getting it ready for sale, I still come out with a decent return in my estimation.

Admittedly this part is still theoretical  and will have to be seen in the future but at least the model makes sense to me.