First Turnkey has Early Significant Repairs - Do I have options?

Question

Hi BP folks,

I could use some more experienced eyes on this.

I bought a fully rehabbed "turnkey" property from a turnkey provider in a Midwest city 7 months ago. A tenant moved in 5 months ago. I just got a notification from the property manager (different company than the turnkey provider) that they received service calls from the tenant, so they went to see. The manager said that the sliding glass door was improperly installed and is now broken and inoperable. The handle is broken and the screws are stripped. They say that a whole new door needs to be installed and the framing redone. Estimate: $1,700.

Secondly, the porch was apparently painted in the wrong kind of paint and is now peeling. They suggest we strip it, sand it, paint and seal it. Estimate: $1,300.

The property manager also said that they sent the claims/requests to the turnkey provider, which were denied.

That's the situation.

So, my question is whether I'm solely on the hook for the repairs. I don't think the repairs are frivolous, but I definitely wasn't expecting such things quite so soon after buying a "fully rehabbed" property (so I'm disappointed in the turnkey provider). And I suspect that the sliding door wasn't in such rough shape when the tenant moved in (so I'm a bit upset that the tenant didn't call right away, if the door was indeed not working correctly right away, rather than totally breaking it and THEN calling). I don't want to burn bridges or nickel and dime tenants or business partners, but I feel a bit taken advantage of.

What do you think? Do I just need to get over my newbie gut-check, or would I be foolish to simply sign a check for the full repair amount. And if so, any suggestions for a course of action?

Thanks for reading,

Jonathan

Jonathan Allen · Answer

Thanks, @Chris Clothier. That makes sense (and thanks for the reassurance). Looks like I have some calls to make, and if they don't change the situation much, that's why we set aside for cap ex, right? (the property would be in the B range)

Jonathan Allen · Answer

Updating. It's been a few weeks, now, but I followed up with my turnkey provider and simply asked to help me understand the situation. They were happy to walk me through the repair requests, and they confirmed that they had actually taken care of one of them (the paint on the porch). The sliding door issue had been attributed to tenant damage. So, there seemed to have been some miscommunication between the provider and the property manager. Now I'm working with the property manager to get the sliding door fixed, and it makes a lot more sense that the door problem happened after the tenant moved in. I'll be asking the property manager for a copy of the move-in condition checklist to confirm that, too.Good lesson that calling for clarification is never a bad idea.

Andrew Hogan · Answer

I hope that more TK folks would read your post before diving in. Looking forward to seeing where you go with this

Lane Kawaoka · Answer

This is why it is critical to have a mentor or someone who has owned this stuff before you help with inspection report and negotiation.

Chris Clothier · Answer

To be fair, I would not categorize these as cap ex although I don't want to take the conversation down that rabbit hole. These are maintenance costs and cap ex is usually bigger item that you expect to repair, replace on a more routine basis. Have you seen the property in person? Have you met the company that you purchased these form in person or the management company? My advice would be to see how the company you purchased form responds and how the management company responds. From their responses, depending on if you've met in person or seen the house yourself, you may want to make a quick trip to lay eyes on the property. From what you've shared, there may be no issue at all with the house or the companies. It could just be honest mistakes and they may take care of it with no argument. On the other hand, you want to make sure that everything is buttoned-up on all of your properties so you know this is just a one off and not going to a continuing issue with the other properties.Shoot me questions if you run into any questions. The bottom line is that you should bot expect 3000 of maintenance every year per property. At this point, so early in your investment, you just want to make sure you've got good partners who are going to communicate and have your best interest as well as theirs. We'll take the word turnkey out for now because these don't meet my definition of turnkey, but as a passive investor, you have to be really good at managing your management company. A good one will meet you half way and make that relationship feel very much both ways. So, until you get to that point, you're going to need to be extra diligent. We call it inspecting what you expect. You are the customer so keep that in mind keep your expectations high. Reach out as you start making your calls and let me know if you need any advice on the answers you get. Best to you -

Chris Clothier · Answer

@Jonathan Allen,Have you spoken with the company you purchased the property from? I think your approach should be from the standpoint that this is not the experience you expected to have in your first year. Having a bad resident that doesn't treat the property right is always a risk, but you should have some confidence that the house is renovated correctly, the right paint has been used and if the resident is a little rough on it, it won't fall apart.I would ask from some relief from the company you purchased from (at a minimum pay for the deck repair). I would also ask the management company for a second quote on the sliding door. That is a steep price and may be perfectly inline, but without a picture of the door, it is hard to know if that is a good price or not.As for going forward, these types of things happen. Sometimes they are not the fault of anyone. It is imply the nature of some properties. I don't know what price you paid or what the condition and rents of the properties are, but some price points can tend to present these types of problems more often.