Planning to buy property from MARQUIS PROPERTIES

Plano, TX · Member since 2014 · 4 posts · 0 votes

I am new to Real Estate Investment and planning to buy it from Marquis Properties in Utah. Appreciate any feedback on good or bad about doing business with the company.

Thanks,

Ram Tummala

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Will BarnardPro Member

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Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes

12y

Originally posted by @Rick Clatfelter:

Yes the cash flow and the estimated Gross ROR is estimated on Rent currently being collected on the property times 12 full months occupancy, divided by the purchase price. I agree with Will. There is an expectation that people will have a little common sense or at least a little investment or business sense and realize that there is a huge difference between Gross and Net. Marquis prides itself on education clients in this regard. I try to make sure that people understand that occupancy should be figured at 11 months at the most, and that there should be escrows for at least 10% for repairs and maintenance and another 10% for good property management. Figure in Taxes and Insurance and you have a bona fide investment decision made. :) I would estimate the true honest to gosh cash flow on that property to average $5500 - $6000 a year. Still a net 11% - 12%. Not too shabby if you ask me. We are seeing these returns for our investors consistently.

I fully appreciate your desire to defend your position as you are a principle in the company who sells these units to prospective investor buyers. The issue I take is that you are only back peddling from the truth. Your company used "cash flow" in the marketing of these units and then used the word "gross" in front of it. To explain this, you state it was done under the assumption of everyone having common sense when in reality, it was done to make it "look good". If you truly want to "educate people" then use the proper terms. Had it been "gross income" and you left out everything else, I would personally take no issue with that. Clearly you would have only put out the gross potential income. While I think that lacks enough info for many, it would be enough for me or even a novice investor to work with.

Secondly, using the $6000 a year cash flow number you feel this unit actually makes also goes against the norm and even against what you typed above. You said yourself that vacancy was 10%, management 10%, and repairs 10% which add to 30% on my calculator. Then you said to add in taxes and insurance. That would be over 35% just for those listed expenses and yet, $6000 claimed cash flow on $8400 in gross potential rents would only be 28.6% expense ratio! well under the actual "best case scenario". Then I would state that you left out other expenses like cap ex, legal, eviction costs, advertising, accounting, utilities, and the list goes on. When you add up All the expenses associated with any buy and hold investment, you will find that the expense ratio is not only well above 35%, but at or around. 50%, with some being less (by 5-8%) and others being more, thus the average.

There is no way possible that the numbers of that posted investment could come anywhere close to an 11% return. Anybody in this business would now that for a fact.

Almost every single turnkey company markets with gross income less PITI with some adding in the majors like PM and a vacancy factor. So I get that from a marketing standpoint, including every single expense item in your advertising would make your investments look terrible in comparison to the others. But please don't insult our intelligence and state it was done with the assumption that others would use common sense. Many turnkey buyers are buying their first and have no clue about the business or operating costs, therefore, they are easily fooled.

BP exists for many reasons and one of those is to help spread the truth about RE investments and help keep as many people as possible from falling prey to gurus and grossly inaccurate information. I think BP Nation does one hell of a job dong that and it is in large part due to the large, intelligent, and experienced investors who make up part of the membership here.

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Brian H.
Rental Property Investor · Huntsville, UT · Member since 2012 · 127 posts · 35 votes
12y
I'm an investor in the Utah market and I've never heard of Marquis. I see though, that they are marketing turnkey investments in other markets like Indiana and Missouri. For me, this would be a red flag. If I was interested in purchasing a property in the Kansas City area, I'd want to work with someone who was based in Kansas City and knew the market and submarkets intimatily.
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Engelo RumoraBusiness Member
Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
12y
@Rambabu Tummala @Brian H.

Our group is based in Kansas City and have been buying quite a few properties over the years.

Does Marquis have a website?

Happy to look at the numbers and areas in the deal. If your buying turn key you will always be paying a margin which is fine as long as the group has your interest at heart and they have great property management to take over and hit the promised "paper numbers" in real life.

Thanks and have a great day.
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Rambabu Tummala
OP
Plano, TX · Member since 2014 · 4 posts · 0 votes
12y
Thanks for the responses guys. Here is their website:

http://marquisinvestmentproperties.com

This is one of the properties they have offered to sell, the numbers as below:

4911 Eucilid rd

Price: $50000.00

Expected Cashflow: $8,400

Rate of Return: 16%

Look forward to your thoughts
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Engelo RumoraBusiness Member
Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
12y
@Rambabu Tummala

I know the area very well an we have bought 30+ properties within close proximity.

Have a great day
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Jeremiah B.
Investor · Portland, OR · Member since 2012 · 266 posts · 128 votes
12y
Welcome to BP!

I couldn't find the property you referenced, but I will say that I've (almost) never found an "expected cash" value, presented by a turnkey company that I would trust.

Can you share their pro forma? What is the rent? insurance? age of the house? taxes? etc. What are you setting aside for vacancy and rehab?
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Rambabu Tummala
OP
Plano, TX · Member since 2014 · 4 posts · 0 votes
12y
Thanks Jeremiah and Engelo

Correct address: 4911 Euclid Kansas City MO

Built: 1911, Sq#1857

Price: 50000

Monthly Rent: 700

Insurance: $450

Est. Taxes: $377

Property Mgmt Fee: $840

Market VAlue they are expecting: $75,000

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J ScottPro Member
Moderator
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
12y
If monthly rent is $700, the only way cash flow would be $8400/year would be if there were absolutely no expenses associated with the property. That would mean no taxes, no insurance, no vacancy, no maintenance, no property management costs, no utility costs, no capex, etc. That's not just unlikely -- it's absolutely 100% impossible.

I would make two suggestions:

1. Do some research and learn how to analyze deals yourself. Had you bought this property, you likely would have had to divide all your return numbers in half to get anywhere close to real life numbers...and potentially much worse.

2. Don't trust a company that posts information that is verifiably incorrect just based on a 2-second glance at the info (like this company did).

In other words, I would never, ever do business with this company and you should do some research to learn why...
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Eric M.
Flipper/Rehabber · Louisville, KY · Member since 2008 · 1k+ posts · 1k+ votes
12y
I agree with Jeremiah, turn key companies are getting a real reputation in general for not being able to deliver the numbers they promise.

Did you google them? One quick search and on the first page I found

4 BBB complaints

1 Ripoff Report Filed and Resolved

At least one fraud lawsuit filed in Western Missouri, Truckenbrod v. Marquis Properties, LLC et al

Worth looking at further in my opinion.
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John Moore
House Flipper · East Stroudsburg, PA · Member since 2013 · 1k+ posts · 205 votes
12y
Welcome to the BP family. You can certainly see the value of participation. As several have mentioned if your going turnkey, buy local. Attend some real estate groups in your area and learn what is real and what is a pipe dream. Go into the podcast and the learn section and learn how to crunch the numbers and you will avoid a lot of pitfalls. Again welcome aboard.
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Rambabu Tummala
OP
Plano, TX · Member since 2014 · 4 posts · 0 votes
12y
Absolutely. Thanks for all the great advise. I see great value in this forum.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
12y
It always amazes me that you hear stories of investors buying these turnkey properties all the time and the horror stories that follow.

I do not focus on residential but the three BIGGEST things I see with turn key providers that they falsely promise on a consistent basis are these.

1. Minimize expenses or do not include them at all and show dream like returns that will never happen.

2. Say " Newly Renovated" and sell it like you will have to do nothing forever with the property when in reality they replaced nothing important ( carpet, paint, a few light fixtures, etc.) the expensive stuff is old as a dinosaur and will drain all those returns they are selling to almost nothing in the coming years.

3. They oversell the quality of a location and an area by misguiding investors. Puffing is a term used to present an area in a light that is better than actual reality.

If you use these 3 metrics against turn key companies you will automatically eliminate about 90% of them without getting into other metrics to analyze.

DO NOT get sucked in with amazing returns that are stated. Those numbers rarely ever happen.
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Daniel Brueske
Kansas City, MO · Member since 2014 · 8 posts · 5 votes
12y
@Rambabu Tummala

I actually drove by here a few weeks ago looking at a duplex in the neighborhood. I judging by the area, I would be shocked if you could get a tenant to consistently pay $700/mo here.

Maybe that's because of it's relative proximity to the Plaza and the Nelson-Atkins Museum (about 2 miles away), but the neighborhood really starts going down hill around Troost.

For the record, I do not have any experience in real estate investing. I am just trying to learn as much as I can right now. But $700/mo in rent is just one more aspect of the deal that seems unrealistic to me.

You might be able to get UMKC students, but they're probably going to stay west of Paseo, and I would think that you're likely to have more vacancies with them.

Just a local perspective. Hope it's somewhat helpful.
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Shawn Holsapple
Residential Real Estate Broker · Indianapolis, IN · Member since 2010 · 1k+ posts · 557 votes
12y
@Rambabu Tummala , I'd agree with all the comments above. I see out of State buyers on a regular basis after they bought from someone that claimed to offer great deals or returns only to find out that they didn't get what they expected. In addition to what's been mentioned above, once you've narrowed down your investing city - I would suggest you interview a few local property managers and investors to get a feel of what is available. I'm sure they can also provide, or point you in the direction of, real "turn key" properties as well.

Good luck!
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
12y
Also when a turnkey states rent pay close attention to how well they screened that tenant and how they qualified them.

Also actual rents versus state gross rents.

For example they said they are getting 700 a month. Your research shows that is high for the area. You find out they actually have waived security deposit and given half months first rent off or no rent first month. The tenants agreed to 700 because they didn't have to meet other requirements OR landlord is including paying some utilities in rent to make it seem higher gross income.

I really do not like saying this but there are a lot of companies who would throw you off a cliff for a quick buck and care nothing about you or your life. I know nothing of this particular company but I rarely see many long term turn keys stay in the business.
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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
12y
Originally posted by @Joel Owens:
It always amazes me that you hear stories of investors buying these turnkey properties all the time and the horror stories that follow.
I do not focus on residential but the three BIGGEST things I see with turn key providers that they falsely promise on a consistent basis are these.

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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
12y
My guess is that turn key properties that are true deals and the expensive items are rehabbed and the numbers still work is very hard to come by.

Also the time versus value of money today. Turn keys want to offload risk onto the buyer.

In many ways syndicated used to front load fees and ongoing charges so if the property went belly up later on they would have made a decent return.

Now the buzzwords are "aligned interests". Contributing investors gets made whole first and the syndicator makes some fees but makes the most if they keep the asset performing and deliver on what was expected but not guaranteed.

A syndication takes up a lot of time if managing cash flowing assets.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
I know the marketing director of this company,

this is a typical turn key operator with all the same marketing information.

Under state Operational costs

Over state rental income

and sell for top dollar.

AS one will learn over time. low end cash flow is in certain big cities in the US... to be successful in turn key you need access to lots of low end distressed Real Estate ( constant deal flow) and a city with very high % of rental vs a vi homeowners.
The reality is that most of the subprime and homeowners that were going to lose their homes have done so.. This inventory coming up in most markets are landlords that could not make it and walked.
What makes the newbie investor think they are going to do better in these C markets really befuddles me... I guess they just don't know what they don't know.. and that is C class is not passive investing its anything but.. Just look at those that post about their 30k and under homes.. there you see pride of ownership and almost all of them live near to their investments and are very much hands on...

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Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
12y
Originally posted by @Jay Hinrichs:
C class is not passive investing its anything but.. Just look at those that post about their 30k and under homes.. there you see pride of ownership and almost all of them live near to their investments and are very much hands on...

I guess you have never heard of having a property manager to be more passive. I have both a $120,000 property and the "30k" properties. Both take about the same time each month to manage. However if I had $120k I'd rather buy 4 of the 30k properties and get $800 per month each out of them than one $120k property at $1600 per month.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
Dawn,,, Not to disagree with you but I have owned 350 plus of these at one time.. So I have some knowledge about this and have financed well over 2,000 fix and flips for most of the top turn key guys since 2002. And your obviously one of the hands on folks that gets it.. You probably know more than most and you can effectively manage the manager.. I stand by my statements C class for the average busy professional that thinks they are buying something akin to a mutual fund is anything but passive.

At least 50% of all foreclosures of these same C class houses that continue to go through the buy rehab foreclosure loop are coming from Investors that were sold on passive and turn key and they failed and walked away and that is just a fact.. Of course some people do succeed but many don't...
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Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
12y
Originally posted by @Jay Hinrichs:
Dawn,,, Not to disagree with you but I have owned 350 plus of these at one time.. So I have some knowledge about this and have financed well over 2,000 fix and flips for most of the top turn key guys since 2002. And your obviously one of the hands on folks that gets it.. You probably know more than most and you can effectively manage the manager.. I stand by my statements C class for the average busy professional that thinks they are buying something akin to a mutual fund is anything but passive.

True, I don't know the Oregon market; I know my own market so I can't speak firsthand on other parts of the country.
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Engelo RumoraBusiness Member
Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
12y
Hey guys,

Our group has been working that market since September 2012. Until 6 months ago I was driving through Euclid Ave and all the other streets numerous times per day.

The experience that I have had with properties in these C class areas is that 2 bed 1 bath homes should be rented between $500 - $550pm and 3 bed, 1 bath homes $600 - $650pm.

The tenants in these areas live month to month. If any property rents for more that above quote numbers the odds are as soon as it gets colder and they have to pay the $200 heating bill on another cousin dies (which happens every month) you will not get the full rent amount or any rent at all.

The numbers can still work well if you don't ask for top dollar rent and it will be more sustainable as the tenants will likely stay longer and you wont have risk of break in while the property is vacant.

Thanks for reading.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Engelo Rumora

this winter has been killer for low earning US citizens in the cold parts of the country.. I took a duplex in trade in Indy.. and based on this winter. I just told my manager lower the rent by 200 a month for 3 months.. and that worked they stayed were very happy and I kept the unit rented.. Will sell them this spring as things thaw out.. sometimes if you work with these folks instead of making demands things can work out as some rent is better than a vacancy in low end areas.. a vacant home can get trashed in a heartbeat.

I am sure we have all seen the Electric ranged turned to high with the door open and a 30 inch fan in front of it trying to heat the house..
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Engelo RumoraBusiness Member
Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
12y
@Jay Hinrichs

Thanks Jay.

Most investors buying these properties from our of state or nation do not know the expert tips from people that have had a foot on the ground for many years.

I am fortunate to have learnt from some area experts here on the ground that still look after these things for us and make the numbers work.

I sure have seen the oven method many times.

I have also been collecting rents from great people/tenants that sometimes have to be short $50 for that month due to buying food or other bills.

The rents must be kept affordable otherwise the tenants will not stay long.

Thanks.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Engelo Rumora

Your fellow country men are lucky to have someone watch after them. If they were just trying to manage property mangers from AU.. in those price points it would be frustrating for them no doubt.. Especially as the average AU investor has no clue as to what the tenant base is in the US.. The fact that so many US citizens do not have checking accounts just blows them away.. Banking is all automated in AU.. In our low end areas of the US there is no banking its all cash, money orders, pay day loans,, Car title loans, cashier checks etc. ITs a death spiral most of these folks get into then it becomes the habit and culture as well.
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Engelo RumoraBusiness Member
Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
12y
@Jay Hinrichs

Its a different world Jay.

For some investors its hard to swallow so I encourage that it might not be the right investment for them.

It sure is. I remember when I first heard about US property and the fact that in some areas the rent is collected by knocking on the door haha.

Funny stuff.

These days I am using more of the American lingo when talking about real estate like "net cap" instead of "net yield" and "rehab" instead or "renovation"

haha
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