Planning to buy property from MARQUIS PROPERTIES

[Rambabu Tummala]

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

[Will Barnard]

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.