My Experience with Strategy Properties - Detroit MI

[Will Zena]

I found Real Wealth Network back in 2018 and became a member. Then went to an event of theirs in Orlando FL and was introduced to Strategy Properties. The high ROI is very attractive and with them advertising these properties as turn key homes I assumed no major mechanicals would need to be changed for at least 3 years because I was told everything in the homes I was purchasing would be brand new. Brand new roofs, brand new hvac, flooring, hot water heater etc. BUT I WAS IN FOR A RUDE AWAKENING.

Long story short we purchased 3 properties in a 2 year period and all have been nothing but trouble due to poor renovations.  The trouble was extended with very poor property management as well.

1 - First of all they each had lead base paint issues ranging from $250 to $5,000 in remediation needed per home.  As a result these properties were never certified for occupancy - not turn key right there.  Which resulted in fines of close to $1k per property.

2 - Then due to poor rehabs we needed to replace a "brand new roof" and parts of "brand new flooring"

3 - When we purchased house #2 there was a small leak from the ceiling in a closet which I brought up at least 10 times that I wanted proof it was taken care of.  Never received the proof and was just told it was handled.  Then I needed to spend thousands later finding out half the ceiling in that room was covered in mold.  This was due to a terrible job of installing a "brand new roof".

4 - Also house #3 took 6 months to add a tenant because the property management team at Pro Way
(Strategy Property affiliate at the time - now closed) had no record or lost the records that I purchased the home.  I emailed many times and was either ignored, emailing an employee that no longer worked there, or was just told they will look into it.  I got RWN involved and they got Proway to get me a tenant who unfortunately was/is a bad one.  Section 8 tenant who never paid their portion of the rent.  It is a nightmare to get tenants out at this time.

There are other issues that escape my mind at this time since I have been so busy with my business I didn't research the rest.  I keep every email with all my property managers for future reference.

**RWN set up an email conversation with Strategy and after 2-3 months of discussions they offered me $4,000 to keep my mouth shut and not write this post.  It was a no brainer to decline and share my story with everyone here.  After spending $25k+ and still spending I would rather help someone else not make the mistakes I made of working with this company.

[Jay Hinrichs]

Quote from @David Garner:

Quote from @Will Zena:

Thanks for sharing.  I do have a turn key property in Columbus OH that was well done.  A great performing property with minimal issues.  Just things you would expect.  I also want to scale up but shelling out all the money to fix the issues of these 3 have slowed it down a bit.  However I do have some reserve funds set aside if an opportunity presents itself.

The power of bigger pockets.  We try to help others by sharing so they dont learn the hard way like we did. 

Thanks for sharing your experience David. 

Quote from @David Garner:

Wow, Will. Sorry to hear you had that experience, but thank you for sharing.

Sadly, I've experienced the same kind of thing whenever I've purchased supposed turnkey or 'managed rehab' properties. I learned that ultimately, i was the exit strategy for the seller, and they have a clear financial incentive to spend as little as possible on the rehab while charging as much as possible to the buyer.

I own over 100 of these types of houses, but I brought everything in-house in the end. Acquisitions, contracting, property management... all in-house. I just couldn't find reliable providers, and being out of state made it worse I think, because I wasn't there to pull people up on things so there were plenty of little things that initially escaped my notice, which eventually became much bigger problems.

I had to make the decision to either sell everything, or buy as much as possible to create the scale that was needed to pay for everything in house.

Again, thanks for sharing your experience!

 Absolutely... sharing is caring! I'm glad your OH unit is working out!

From my point of view, I ended up spending time in the markets I buy in and building my own team, but I know that's not entirely practical for most people. Even then there are always issues to contend with. Again, scale has been the key for me.

Happy investing!

 Scale is important for these types of properties for sure.  I have been to Strategies offices and they have/had a robust team there and the owner certainly is high energy guy.. Like most TK brokers (RWN) there is only so much they can do when they are putting two parties together for compensation its how the TK industry works generally speaking you have 10 or so of these TK Brokers and about 50 to 60 providers around the country.  At the end of the day up front inspections is important and of course your only as good as your tenant.  Its not uncommon for Section 8 tenants to not pay their co pay.. frustrating I know but what are you going to do evict them over 50 bucks ?? 

I started my HML ing out of state Career in Detroit and had a great run from 2002 to 2005 when values started to crater even before the crash of 08. But I did end up with 2 homes that I owned and well it was not good rehab them get destroyed by tenant rehab again same thing I finally let them go to tax sale.

But when I went to see Strategy a few years ago I was pleasantly surprised at how nice many of the areas of Detroit Metro were / are  and especially the new construction..  So like all these markets  LOCATION is paramount you simply cant buy based on return numbers or price points..

the take away here is buy the best you can not the houses that look best on paper.. a 5 or 6% return that you actually get on these rentals over time without major issues with tenants needs to be weighted with the " My Criteria says I need to make 9 to 12% return) which turns out many times like what your describing above basically no return or negative returns with little hope to right the ship for many years to come.