Turn Key Rental Investment Company

[Mindi B.]

Anybody invest with Triple Net Houses? Pay upfront and get a monthly check even if the property is vacant. They also take care of all repairs and maintenance. Seems like a good deal but wondering if there is a catch. 

Anybody recommend any other turnkey investment companies they have worked with? 

[Andrew Johnson]

@Mindi B. Maybe a few things to consider:

1.) SFRs are valued against comps not by cap-rate. If you use a cap-rate to justify a purchase price you might find yourself overpaying. Just looking at the addresses and zooming out on Zillow I see that where they list properties for $65K-$100K the "sold" properties are $15K-$50K. Even if these (and I'm guessing they are) pre-renovation properties it's hard for me the imagine that they will appraise. Odds are there's a ceiling on that market. And if the properties are trading a low prices it's likely investors that are buying them. If that's the case, when you go to sell your buyer will be an investor and (therefore) not pay what an SFR homeowner would.

2.) Having a 5-year NNN lease is an interesting concept but it also means that the PM knows just how long the repairs have to last. That makes me a little nervous as it *can* lead to sub-optimal decisions for the property. Not in year one, but rather in year 4 when they know they have 12 months left.

3.) What's most odd is that the company seems to have been around for 10 years but there isn't really much in the way of reviews.  If they're active they should have more than one person singing their praises and the occasional hateful post because, well, things don't always work out 100% of the time.  So that just doesn't make a lot of sense to me intuitively.  

But just for fun, let me put my *pessimist* hat on for a moment...

Cap Rate = NOI / Market Value

Let's say sales price is $75,000 so with an 8% cap rate they are paying you $6,000 per year. If actual fair-market value for the property is $60,000. And let's say that it doesn't rent out as well as I'd like, maintenance is higher than projected, I can easily afford to lose (as the NNN PM) $1,000 per year for 5 years just to "juice" the cap rate. I'm literally paying you (the buyer) back with your own money because you overpaid to start with.