Pre rehab, turnkey property company in Memphis BRRRR

Pre rehab, turnkey property company in Memphis BRRRR

Investor · Torrance, CA · Member since 2017 · 124 posts · 70 votes

Okay, I had to use some key words in the subject like to trigger some keyword alerts. Lol...okay, here is my question. Has anyone here purchased a pre rehab home from a turnkey company and used their 'rehab crew', for a lack of better words, to get it rent ready (BRRRR)? If so, what has been your experience? I am in the middle of a buy and hold deal from a Memphis turnkey provider (rehab being worked on as we speak). I am excited about my first deal and hope it goes well. In addition to that, they supposedly also have an inventory of PRE rehab homes they sell that 'don't meet their numbers'. These are homes they purchased and own in their inventory. As the investor, I can but the home from them for, say $60K...use their rehab crew (maybe from their PM company?) and spend $20K (for example). In this example, I am $80K into the deal. The ARV is worth $95K or $100K. I would rent it out after rehabbing it but wonder if there is a genuine benefit by doing it this way versus finding my own deal. Make sense? Oh....and I live out of state!

Thanks for your help everyone!

Eric

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Temecula, CA · Member since 2016 · 75 posts · 38 votes
9y
Eric - Memphis has a ton of opportunity, but also a ton of risk, especially for the out of state investor. BE CAREFUL! Dont commit to a 2nd deal until you see some success from the first. Trust but verify, especialy any ARVs and rents that are promised pre-rehab. Dont rely on any turnkey to do your due diligence.
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  • Rental Property Investor · Rockwall, TX · Member since 2017 · 87 posts · 49 votes
    9y
    I would be careful and find out what they mean buy "don't meet their numbers". But this makes sense to me. I think I would like to try it later on. We want our first property to be post-rehab fully turn key though. Morris Invest in Indianapolis will do either option. Also, Good Success in northern Indiana, mostly the Chicago suburbs, promotes something they call "active turn key" who ch is basically the plan you describe. They also like lease options, but you don't HAVE to do that. They were originally a construction company so they have the rehab and maintenance covered for sure. But they provide everything now. I'll be following this thread to see what others think and how this works out.
  • Temecula, CA · Member since 2016 · 75 posts · 38 votes
    9y
    Eric - Memphis has a ton of opportunity, but also a ton of risk, especially for the out of state investor. BE CAREFUL! Dont commit to a 2nd deal until you see some success from the first. Trust but verify, especialy any ARVs and rents that are promised pre-rehab. Dont rely on any turnkey to do your due diligence.
  • Chicago, IL · Member since 2017 · 46 posts · 20 votes
    9y

    @Patrick Anibaldi

    Thanks for your reply.

    As a novice looking for his first turnkey deal out of state (living in CA bay area so impossible to do things locally) I'm reading a lot of material and would like to pull the trigger in a few months and Memphis is one of the most stable rent-to-value markets from what I'm reading. What would be a few examples of the "ton of risk" you're talking about? Also, don't want to hijack this thread, but I am not talking about pre-rehab, I would be buying a turnkey property rehabbed, after inspection, at appraisal value (since I don't know the market) in a B neighborhood.

    Thanks!

  • Kuba F.Pro Member
    Real Estate Investor · Los Angeles, CA · Member since 2013 · 2k+ posts · 694 votes
    9y
    Eric Hyde the benefit is that you don't have to find your own deal...which is the hardest part, especially remotely. What part of their numbers doesn't it meet? That would be the biggest concern.
  • Kuba F.Pro Member
    Real Estate Investor · Los Angeles, CA · Member since 2013 · 2k+ posts · 694 votes
    9y
    Paul B. One of the biggest risks there is that the neighborhoods are street by street so it helps to really know that market at that level.
  • Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes
    9y

    @Eric Hyde What you are doing with this 2nd deal you are considering is assuming a lot more risk.  You buy it prehab, pay them for the rehab work (either up front or in two or more escrow releases, and then continue to carry it until you have a tenant placed.  So, what you are doing is taking on a lot more risk and are a lot more dependent on getting the work done in a timely manner, within budget, and done well, as well as getting it rented in a timely manner.  The provider has unloaded all that risk to you as oppossed to a turnkey purchase, where you don't own it until the work is done, the inspections are complete, there is an appraisal confirming the actual value, and likely there is a tenant in place.

    What could go wrong with the BRRR - a whole lot more. You need to be a whole lot more involved, and have contractual protections in place, and those will not be any guarantee of success. Is it going to be worth the added risk and time on your money for the $10k or so you MIGHT save? Only you can decide, but I would be extremely cautious until you have a good and long track record working with this provider.

  • Rental Property Investor · Rockwall, TX · Member since 2017 · 87 posts · 49 votes
    9y
    I think I need to make it clear that I am not endorsing or recommending Good Success. I have not dealt with them at all. I attended a seminar where they spoke artless a TEI expo in Dallas. I have listened to several of their podcasts. I would expect anyone who decides to do business with them to do their own research and due diligence. I think that their "active turn key" concept makes some sense. It absolutely would me more risk for the investor. It would probably be foolish to go that route (out of state anyway) for your first several deals. As I said in my first reply, you certainly need to look VERY closely at why these deals "did not meet their numbers" and why then they would possibly meet YOUR numbers. Be careful and good luck.
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