Turnkey Investor from North San Diego, invested in Memphis Area

[Edward Wills]

Hi All.  Name is Eddie and I'm from the North San Diego area, which includes Carlsbad, San Marcos, Encinitas, etc.  When I'm not at work or chasing the kids, you can find me in or on the water.

I'm a forty-something Wage Slave, and the wife and myself own multiple SFR properties out of state (Memphis TN area). I invested through a Turnkey outfit run by a former work colleague.

We have been homeowners since 2000 and purchased our first rental property in 2012.  My career is in Engineering, but I also have a Master's in Personal Finance.  My family chose to invest in Real Estate to add some diversification to our investments.  We feel that direct investment in Real Estate provides some 'buoyancy' to our portfolio.

I consider myself to be a 'Journeyman' real estate investor. I'm clued-in enough that I know how to run all the functions on an HP 12C, I can calculate an amortization (and depreciation) schedule, I can estimate before- and after-tax cash flow, and I can calculate IRR/XIRR based on assumptions about a property.

...But I'm also naive about some aspects of real estate investing. For example, one of our properties recently hit us with a 'Lease Up Fee' (which was, in fact, in the Property Management contract we signed). I just had no idea that what this really means is that when the tenant leaves, I not only miss out on rent but I also have to pay a full month's equivalent rent to acquire a new tenant- All while still making the mortgage payments. Guess I should have added this in to the 'management fees' portion of my SFR cash flow analysis spreadsheet :(

Overall, we're pretty satisfied with how things are going so far with our SFR properties. Some specific experiences:

• One particular property is a Cash Crocodile for this year.  One of the things we're struggling with is how to figure out if this cash burn is management-driven, location-driven, property-driven, or just a particular run of bad luck.
• Another property has a good tenant who has asked to sign a Lease Purchase Agreement.   On the advice of someone I trust, I am pursuing the Agreement on the belief that (1) the tenant will treat the property more like an Owner, and (2) this gives me an exit strategy with Capital Appreciation a few years down the road (note I have NOT inked the deal yet).

I'm not actively pursuing any deals right now until I determine the root cause of the Cash Crocodile listed above.  My goal is to to maintain an overall asset allocation of 20-25% towards direct RE.  At this point I do NOT have aspirations to drop everything at work and become a full-time RE investor.

I'm willing to help other current and would-be Turnkey Investors based on my experiences.  Also more than willing to listen to advice from other Turnkey Investors or Turnkey providers.  

[Jay Hinrichs]

@Edward Wills 

 says you can have a perfectly good rental in a good area then all of a sudden over the course of a year the bad element moves in and your toast. its sad but true.