Turnkey fees

[Alex Yaro]

Hi, I am looking at properties in  Memphis, TN and/or Middletown OH (based on recommendations of reputable Turnkey operators: MidSouthHomeBuyers and Missy McCall.

My first question: are both operators as reputable as I have heard?

My second question relates to fees:  I calculated the annual equivalent of 

- move-in fee (1/2 of rent)

- annual maintenance of A/C & furnace: $85

- management fee 10%

- lease renewal fee $200 (every year)

- rehab fee (when tenant leaves) $600

- vacancy (1 month / every 1.5 yrs)

- 10% repair accrual

After all these fees, my Cash-on-Cash return seems to be 5%, not the 15% top line that just looks at the monthly rent and mortgage payment.  Am I being too conservative?  Are the fees too high?  One point the MidSouth person told me is they don't mark up materials like other operators.  This may be an important point - I could really get hammered if I don't know the cost of hammers in TN.

I welcome all thoughts/suggestions/advice.

Thank you.

-Alex

[Curt Davis]

Alex,

Mid South Home Buyers is a legit and reputable company.  I am not a fan of selling homes that are under $60k which they do sell a lot of.  You will tend to have higher vacancy, repairs, low income tenants, etc....

Regarding the fees you mentioned,  they all seem in line except if you buy a home under $60k, heck any home in general your make ready cost  between tenants will be more then $600 in most cases.  Most companies dont mark up materials, they just do a standard 15% mark up total for any repairs in general. I dont believe anyone who says they dont.

My last bit of advice, if you buy in Memphis do not buy anything in the zip code of 38127 no matter who is selling it ( unless your local here ).