Doorvest experience journal

[Harris Lee]

Hello BiggerPockets, 

I'm going to start a thread that details my investment journey with Doorvest (https://doorvest.com) . Doorvest claims that they help identify, purchase, and own rental homes for a littles as 35K and help generate cash flow.

At the moment, I'm little skeptical but wanted to give it a try and write each steps here (good or bad) and help the community here. 

My very first step was signing up and Doorvest books an appointment with you. I received an email as shown below. My first appointment with them is early May, so i will updated how the meeting went and answers to questions that I have for them as well.

How it Works:

We’re a full-service real estate investing company simplifying rental property ownership.

• We work with you to spec out a home. Build your home criteria based on investment goals, risk profile, returns desired, holding timeline.
• After the framework is filled out, our acquisitions team will start curating a selection of homes specifically for you to choose from. Once you’ve chosen a home, we buy it, renovate it, place a resident, and offer it to you for purchase.
• Once you become the homeowner, we transition into a property management role and handle the day-to-day operations of the rental.

The Numbers:

We specialize in single-family rental homes in the $160-250k range, with an average price of $170k-$190k. The ideal home price for you will depend on: 1) downpayment size 2) risk appetite, 3) preference for more cash flow or appreciation.

• Given our price points, our investors need to have 35-45K to start, on average.
• The typical cash-on-cash return on our properties net of loan payments, insurance, taxes, and property management fees is 6-8%.
• Ultimately, you can obtain financing from any lender, although we have partner lenders that can provide very competitive rates.
• Our customers typically get a 30 year fixed mortgage with a 20-25% down payment. You can structure your home with an LLC, or even invest with multiple people.

Peace of Mind:

• 1-Yr Rent Guarantee: We guarantee rent for the first year, so no matter what you will receive your rental payments uninterrupted and you’ll be making money from day one.
• We only ask for a 1-yr commitment to working with us as property managers. Beyond that year, there are no commitments and no restrictions to what you do with the home. You are also not committed before you purchase the home, and can back out at any point.

[Winston Covington]

Hi Harris, thanks for posting as I’m sure that there are a lot of BP members that are interested in this service. Please keep us posted on your progress. Thanks.

[Harris Lee]

Update #2 

I had a meeting with customer success specialist at Doorvest. It was about ~15minutes going over any questions that I have + going over general future steps. It was carried out through zoom so it was very convenient

- The employee that I had a meeting with was really professional and nice. I had fear + uncertainty going into Doorvest so I asked alot of questions, but she went through all the questions in details and emphasize with my situation. 

- The appointment was generally about going over questions, but also another part of figuring out my investment appetite. They divide the investment strategies into three categories: normal, aggressive, passive.

- These categories are based on cash on cash ROI. For instance (numbers are not exact), if I put down 50K for downpayment, aggressive strategy may return $300/month (after mortgage payment, fees, etc.,) and normal strategy may return $200/month, and passive strategy may return $150/month. Again these numbers are just examples to help understand what cash on cash ROI is.

- Aggressive strategy will buy a cheaper house, which is why it results in bigger cash on cash ROI. On the other hand, passive strategy will buy more expensive house at a nicer neighborhood. So obviously, there is less risk if you go for passive strategy, but that results in less cash on cash ROI.

- I said I want to go for normal investment strategy. This usually involves putting down 20% down payment on 150K-170K houses. The exact return is yet to be known since I'm very early in the stage. It seems like it will return ~$200/month pure cash after all mortgage payments, fees to Doorvest, maintenance, vacancy fees, etc., I will update the exact number in this thread in the future. 

- Here is how Doorvest works in general: The houses are only located in Houston. Doorvest first buys the house and renovates them. The houses they buy are in non-flood zone. After they renovate, they sell it to Doorvest clients (people like me) for ~150K-170K. Doorvest connects me to their mortgage partners (you don't have to go with them) and we put down the down payment. After that, the house ownership is transferred over to me. From then on, Doorvest will be our property manager. They look for tenants, take care of the house, etc., If there are any issues with tenants or house needs maintenance, Doorvest reaches out to us by email and Doorvest also has online platform where we can keep track of all the statuses + income/expenses. Everything is done online and I don't have to do a single thing. 

- Fees are 15% of the rent. It's very expensive compared to other property manager. Doorvest will not take fees if place is vacant, so both parties have the interest to get the tenant fast. First year, rent is guaranteed even if the place is vacant. If door knob break (giving a simple example), Doorvest will charge me the price of door knob + contractor fees (Doorvest will not collect additional fees for themselves). If something like garage door broke (or something very expensive), you have an option to split the payment. No need to pay upfront for everything. 

- Doorvest is the property manager. They will not use another third party property manager, which I thought this was good. 

- If Doorvest goes bankrupt, all I need to do is find a new property manager. Hopefully, they don't go bankrupt lol 

- In order to get started with the process, I have to pay $1000 deposit. Fully refundable at any point. 

- You can choose to pay more than 20% down if you wish. Thats totally up to you and lender. Doorvest doesn't care. 

After the meeting, I said I will move forward and paid the deposit of $1000. I got an email after saying that I would have to wait about ~4weeks. After 4weeks, they will present me with houses that I can purchase. 

In general, my overall feeling was that Doorvest is good if you're super busy and don't have time to really dig into real estate. Doorvest takes care of literally everything from buying house, finding tenants, fixing houses, etc., If you're really good with real estate investment, Doorvest is not worth it. I think for people like myself who is a first timer + i have full time work and family, is a worth it.

I will continue the journey in this thread!  

[Michael P.]

Lost me at cash-on-cash is 6-8%

Lost me again at PM fee is 15%

[Eric James]

So Doorvest is getting everything that produces a high return and you get the aspects of real estate investing that have low a return. 

[Arpit Soni]

@Harris Lee Any updates on your Doorvest investment?

[Aristotle Kumpis]

I've also read about Doorvest, and they are trying to make buying a rental property similar to buying a stock with a broker. They do all the work and then they take a cut. You could easily buy a turnkey home through a company like mine, Real Wealth Network, and its the same thing minus the 15% fee. And they only offer homes in Houston, which really limits things. As an investor buying rental properties, the buyer should never have to pay a fee to purchase something. 

[Tristian Cox]

@harris lee

@Harris Lee any updates ?

[Selvin George]

I just got the feeling that Doorvest is making real-estate lenders our of real-estate investors. Some of the CoC are so low (and some of the projected appreciation is also low) that I ask myself, why wouldn't I just invest in government bonds instead.

[Carlos Ortega]

They're fine for buying a turnkey, older home that gets "spruced up" and comes with a 1-year warranty on their repairs. Especially if you don't have the time or know-how to do it yourself. It's the one-year required management agreement at 10% that can get you (although you can re-up the following year at a discount if you pay the entire year at once).

What you definitely need to avoid is leasing through them, should your property become vacant. See, it's a snazzy start-up where everything is remote (besides their main office in SF) and they got da fancy "algorithms" & da nifty "machine learning" with a coefficient quadratic equation here and a pythagorean theorem there that tells them what rent should be and tenant profiles you should look for. Say you got a neighborhood in suburban Georgia with a certain type of industry in the area, well, okay, cool, but you're gonna have a 24-year old recent Berkley graduate still living with their parents to manage the property! Because see, they've got a script & the software to tell them how to respond to tenants & owners, what the cost of a repair or appropriate vacancy rate should be, etc... see where this is going?

Without proper boots on the ground, your property will never get the proper love & respect it truly deserves (I get it. It's an investment. It's a dollar figure on a spreadsheet. But it's also A HOME). If it sits vacant for months at a time, the data model gets recalibrated and they'll tell you to lower your rent calibrations, but maybe what it needs is someone to tell you "you know what? yellow walls don't really work in this city" or "actually, there's a bottomless pit in the front lawn that is putting people off". But because Doorvest relies on a Zillow feed to feed their data monster, they may not know you have a portal to the 7th layer of Hell located on your property. "It looked fine on Google Maps!" 

So... if I were to advise a friend, I'd tell them, sure, if you really wanna buy, this platform is fine, just like Roofstock is fine, if you really don't have a team built out and trust built in to find better deals & opportunities. But please for the love of all that is good, plan your exit strategy with their property management, because that has been a giant dud for me and do not see it getting any better should they continue the hands-off, digital approach to placing & managing tenants.

[Michael Smythe]

So true

[Kang-Li Cheng]

Avoid them. Or don't and suffer huge losses due to subpar leasing and property management operations. I have one property with them and I regret it almost every day.