Rent to Retirement...Proceed with Caution

[Katie Roche]

This is an ongoing situation and I’m hopeful that with RTR’s help, this story has a positive ending.

TLDR:

• Property not performing as advertised. Negative cash flow and extended vacancy.
• RTR’s property management recommendations have been disappointing
• RTR team has been supportive and informative over the last 7 months

As a first time investor, I was thrilled to learn about RTR. I did excessive due diligence on the company (combing through hours of BP reviews, BP forums, RTR webinars, reddit, podcasts, social media posts, connecting with other investors, etc). I was particularly impressed with the founder Zach. His client-focused approach and his commitment to building long-term relationships with investors growing a portfolio piqued my interest and made me really excited about the business.

I was matched with one of their investment strategists in May. I found them extremely knowledgeable, informative, and responsive. They were adamant about understanding my goals and situation to ensure I was matched with a property that made sense for me personally. I have a separate positive review of this individual on BP.

We spent a great deal of time formulating a strategy. As a first time and out of state investor, my top priorities for this first investment were (1) a property that would be quick to rent (as I didn’t have other properties to offset extended vacancy rates), and (2) a very strong local PM team that RTR had extensive success with. I was willing to pay a higher upfront cost and sacrifice a greater monthly cash flow to achieve these top two priorities.

We landed on a SFR in Harvest, AL. Shortly after, my strategist flagged that RTR was severing its ties with their PM partners in Harvest and would be seeking a new go-to team. My strategist explained possible implications could be (1) longer initial vacancy (~60 days), and (2) potential for PM team to not perform well (as there was not yet a proven track record of their work with RTR).

After much discussion, we pivoted to a townhouse in Dundee, FL. The big selling points here were (1) RTR properties in this market were being rented extremely quickly (well under 30 days), and (2) the PM team here was very strong. My RTR strategist confirmed multiple times their very high degree of confidence in the RTR monthly rent projection, sub 30-day vacancy rate, and PM team performance. This property offered less cash flow and a higher cost to entry than Harvest. I chose to move forward as it aligned best with my initial top two priorities (quick to rent, strong local PM team). We closed and the Dundee property was listed for rent late August.

105 days of vacancy, three rent reductions, and two PM teams later, I’m stuck with an unrented property that, once rented, will cash flow negative each month (and that’s excluding the cost of the 100+ days of vacancy).

I later learned that the initial PM team I was paired with actually did not have any experience with RTR. In hindsight, this made sense as their responsiveness, listing quality (photos, description), and understanding of market rates were subpar. RTR was helpful and supportive in switching me to a new PM team. While I am still having significant responsiveness issues, the quality of the listing and this new PM’s understanding of market rates is significantly better than my previous PM.

I’ll note that during this time, there had been 2 hurricanes in surrounding markets (fortunately no damage to my property from either) that likely contributed to some of this vacancy. By late October, after 60 days of vacancy and two rent reductions), the same Dundee RTR listing remained advertised on RTR’s inventory site at their initial rent projection.

I have been working with RTR’s client success manager through these issues, and I am cautiously optimistic RTR will act in good faith to help offset the losses here once it’s finally rented. Until then, the question remains: how does RTR respond when their properties perform drastically below the projections they market to investors?

I chose to invest with RTR with the intention of building a long term partnership, and wanted to grow my portfolio exclusively through them. While this has been an unfortunate start to my investing journey, I still believe in RTR’s future as I see great opportunity here for investors when it’s done right.  Lots of lessons learned here that will only make me a better investor in the future!

[Aristotle Kumpis]

Hi Katie. Thanks for the information. And sorry that you are dealing with a vacant property for such a long time. It doesn't sound like you visited the market, the PM, or the seller in these markets. If not, it's highly recommended that you do. At least do this for your first few properties. I find that a lot of people don't recommend you go out there first. But it really makes a difference. Another you could have done was to call a few other PM's in the area and get their take on the rent range. I always say trust but verify. Trust that RTR is referring you to good companies, but just verify. Was the home in a build to rent community, meaning it was all investor owned houses?

[Katie Roche]

Hi Aristotle, thanks so much for your reply and insight. While I did look into the PM, local market, and was able to visit the property after closing, it was not to the degree of how closely I looked into RTR. I made the mistake of consolidating nearly all of my due diligence specifically to RTR, and was less diligent when it came to evaluating their partners.  The property is a new construction in a build to rent community.  I appreciate your very valuable advice I will be sure to take it moving forward as I continue on this journey.

[V.G Jason]

Honestly, @Katie Roche, this is all your fault. RTR's advertisements are just that-- ads. There's always buyer beware.

You took a company selling something at face value, you didn't do your diligence. You just trusted, but didn't verify.

This is an excellent thread to remind folks to do your own damn diligence. Just one small glance at the properties, their pro-formas, etc., and any semi-experienced investor could tell you oh hell no. The entire site is listed with a bunch of hell-nos. 

And knowing you don't do your diligence, you probably signed something in the agreement with them to not talk **** about them in the open. So you're probably violating that, too.