All Forum Posts by: Abdul Azeez

Hello Folks - I am being offered a turnkey property in the following neighborhood on Scottsdale Ave zip 38115 for $120,000. It is classified as a B+ neighborhood. The house in question is a 4/2 with projected rental income of $1295. I have run the calculations using the following forecasts - 10% management fee, 4.5% 30 year fixed with 25% down and vacancy allowance of 12.5% (assuming an average tenant would stay 2 years with 2 months to acquire the tenant and 1 month of rent as commission. So close to 1.5 months on an average in a 12 month period leading to 12.5%). I have also used 10% as a maintenance and CAPEX reserve. Using all this, it comes to $227 per month on a free cash flow basis. Is this a good deal? Do my numbers above look good including the confidence factor on rental estimate? Also, is this truly a B+ neighborhood or are there other factors to look at?

Hello -Folks - I am a retail investor wanting to expand my personal portfolio into real estate and looking to buy and hold in Memphis, TN or pockets of Texas and am looking for reliable boots on the ground to help me. To summarize this is how I believe it will work. First and foremost I need a good real estate agent who can help me find good deals in good neighborhood. Once available, I would need reliable contractors (preferably associated with the prop management company of the agent if possible) to be able to get the property into a rent ready condition and turn it over to the prop management company for renting it out. Kindly PM me if you know of any such reliable professionals I could work with. I am looking to buy one house at a time using this strategy.

@Jay Hinrichs I think you are being presumptuous when you say "as a broker myself I would not spend the time on someone like you frankly.. too much work too little reward.." (or) "if your 100 questions for a seller or turnkey they simply don't have the time to manage all your expectations". You are making assumptions. All that I said was I want to buy at a fair market value. The deals I am seeing are around a 50 - 60% markup and I am just trying to understand if that is the right way to go when you go TK. Or are you recommending that that is how it is in TK land and I just need to suck it up?

@Chris Clothier I think I may have given a mistaken perspective that I am looking to do all myself. As I stated above, the deals I am seeing have a fairly large markup in TKs and I am just trying to understand if that is the way it is. I am certainly not looking to be completely Active investor especially in an out of state market. 

@Derrick Craig I understand what you are saying about multi year rentals but it just gives a bit of comfort seeing a longer term on a lease, that's all.

@Jay Hinrichs Thanks for your note. What you are referring to are advanced strategies. It would be extremely presumptuous of me to make any claims about hitting double digit home acquisitions in a defined time period. To put it simply, I aspire to build wealth one house at a time so that after the next 10 years, I have more financial flexibility and freedom. I don't know what that magic number is i.e. 10 houses or 20 houses or 30 houses or maybe 0 if the first experience is a lemon. However, to get to that I need to go 1 house at a time. And for this, I am interested in understanding if in addition to TK providers that I am already working with, can folks on this forum recommend a few realtors who have a good relationship with property management to enable me to look at a few deals. The only reason I am even considering this second option is because I am all in for purchasing from TK provider if the property is offered at a Fair price but of late finding the prices to be hiked up too much and I am wondering if I could have a few options to make the best purchase decision.

Coming back to my main question, can folks send me a PM of good realtors in the area who have a good relationship with reputed property management companies?

@Pati Tanielu You are trying to do too many things. Hone in on one strategy and try implementing. You could start fairly small by getting a RE license and working out a deal with a brokerage where they don't hold you to sales targets and start putting low offers out there to see which ones come back. Realtors I have worked with are not helpful to investors when putting in a low offer. So, it makes sense if you could take control of that. Once you get enough experience there and get a few deals under your belt you can branch out.

Folks - To clarify my original ask, I am a serious out of state investor interested in building wealth one house at a time. I am talking to a few TK providers in the Memphis area right now but the market is tight for inventory. So, there are not lot of options available. I don't want to limit my deal pipeline. Another investor in the forums PMed me about him working with a realtor who has helped him. I am not looking at realtor vs. turnkey as either / or scenarios but just multiple avenues to source deals. Eventually the realtor that my BP Colleague referred me to did not work out because he wanted an exclusive agreement which I was not comfortable starting out with but that's a different story and I digress. So, at this time I am looking for both avenues - turnkey and realtor driven to help build my deal pipeline so that I can buy the right properties. Please let me know if you have any good contacts you can refer.

@Curt Davis Absolutely agree. If I buy turnkey it makes sense using their management company and I do prefer 2 year leases.

To add some perspective on why I am searching for two different avenues is this. I am talking to three TK providers right now and I don't seem to fit the "ideal" client definition. This is because I am probably a little bit more active than a fully passive armchair investor. As an example, whenever I get a deal, I personally run through my own APOD that I constructed based on Frank Gallinelli's book under different stress scenarios i.e. lowest rent to highest rent. I use a 12.5% vacancy as opposed to the TK provider's 4% vacancy because the way I look at it is on a 2 year lease, if you assume 2 months to source a tenant and 1 month of rental commission, it works out to 1.5 months per 12 year period or 12.5%. I am also uncomfortable buying at lesser than appraisal and one of the TK providers has been upfront about the fact that Appraisal could come 20% lower. When I factor in all of the above and under different stress scenarios and a 10 year APOD with an IRR view for holding period, I have got to turn around and ask what if I sold the property at the end of the holding period, can I walk away without bringing additional money to the table? It doesn't seem to work out that way for the pricing on the several turnkey deals I have seen out there. I am perfectly fine with a TK provider buying a property, putting work into it and selling to me at Market value because this is their business model and is their bread and butter. Everybody needs to make money. But, I am finding that the price offered is much much higher than Market value which a less educated buyer would readily pay but which I am finding a bit difficult to swallow even though I can afford it. This is where my formula above breaks down when I factor in holding period, low vs. high rent, vacancy and a 10 year APOD. This is the reason I want to source deals through multiple channels and see what works best.

I do wish I would get some good deals on TK and there are some very good ones out there. I sincerely wish we could come to a good agreement on pricing.

I should have clarified that the realtor works in a brokerage that offers good property management service.

Any recommendations on good Memphis Realtors working in a brokerage that does very good property management?

folks - I appreciate all the valuable input. I will take this into advisement.

@Alexander Price Thanks for your response. Given that the sale is from a TK provider, the pricing will be near retail price.