All Forum Posts by: Andrew Watson

We are dedicated long-termers.  We buy, thoughtfully renovate with resilient materials and finishes ("Bulletproof Chic") and then rent.  Our focus is on SFRs.  Recently we've been working to consolidate into tighter geographic areas.  We have in-house management so tight groupings is far more efficient for us.  To do that we are selling a few homes and then buying a few homes close to our other properties.  

On the purchase side, we have reached the point where we don't even look at "renovated" homes.  The "workmanship" that we're seeing, across the board, is nothing short of disgraceful - paint hiding rotten siding, vinyl flooring over rotten sub-floors, "new" shingle roofs over 2 old roofs where the structure can't support it, load-bearing walls removed with no structural replacement, even a swimming pool that was buried.  For those of you who invest out of state, do take extra caution and make sure your Boots-on-the-Ground team is being extremely diligent. 

We prefer to rehab our homes ourselves - keeps us from having to deal with major maintenance issues in the first few years - but the tight market has forced us to look at some rehabbed properties. Fortunately, we haven't been burned, but that's because we're seeing what we're buying.  Based on what we're seeing today, we would rather buy an uninhabitable, blight home and take the time to renovate it than buy anything already renovated.  

I'm sure you already know this, but I just wanted to make everyone is aware of the trash that is being sold as "renovated", "rent-ready" or "turn-key".  

I couldn’t agree more. I live in Atlanta but I / we are in Macon weekly when we aren’t renovating, and more often when we are. We’re selling one of our Macon homes to someone who lives out of state and plans to use a PM to manage it.  She said she can’t get the cash flow and broad pool of renters anywhere closer.  

 I don’t know Macon as a whole very well, but I know the areas we want to invest in. Unfortunately, Macon nor any of the other towns we invest in, are very consistent across an entire neighborhood. We tend to pick streets

We invest south of Atlanta, in Macon and surrounding areas. We can buy houses all day long that need work for $25-$30k, or houses in very good shape for $55-$60k, all of which will rent for $650-$950. 

I don’t know anything about the Memphis market but those numbers are pretty weak.  We would pass on that deal without a second thought. 

I love rolling the dice...on educated bets. But if you’re all in at $40K, I would take a step back. Our last two properties came with water lines leaking in the slab, mold and some rot in the structure. These were SFHs, so it was manageable, but had it been an 8-plex we’d be wishing for that $40k. 

If you’ve had thorough inspections, and you have your operating budget buttoned down to the penny, a few unexpected expenses might be manageable.  However, a new sewer line, roof, foundation issues, the hidden budget-killer called “mold”, or HVAC issues can make like unpleasant. Murphy: “what can go wrong, will go wrong”...when you are least prepared. 

@Nick Albrecht  Hey Nick, apologies for the very late response.  Somehow or another I skipped right over your message.  No helpful updates from our side.  One of our investors has a property with someone who was trying to leverage the system, but the tenant didn't fill out the CDC paperwork and provide it to the landlord, and this allowed the eviction to proceed.  However, the courts are so backed up that they have made no progress.  Same with a local investor who has tenants with expired leases, making them month-to-month and therefore evictable - but they can't get it through the courts, even though it's a legal eviction.  

I have been studying all I can find on the proposed $900B stimulus and they are consistently saying there will be protection for landlords - Unfortunately, it may be too little, too late for many.  We are about the finish rehab and rent another home, and we are being extremely cautious - going back 5-8 years, paying attention to rental history, doubling and tripling security deposits.  Out of 300-400 candidates, we've narrowed it down to 3.  And I'm still nervous!

I wish you the best - keep in touch and let me know how it goes.   

@Javier Kaufmann. I think some of the responses here are a bit too black-or-white.  Yes, your returns MAY not be as good with turn-key, but your hassle-factor and invested time are also much lower.  And keep in mind that ALL re-habs don’t go smoothly. SOME re-habs go over budget. You MIGHT even have a re-hab that becomes an all-out nightmare.  We’re re-plumbing an entire house now, unexpectedly. We planned a purely cosmetic re-hab, and whoops. Things do happen. 

We’ve bought one turn-key and it was ok - not a huge money maker, but we got a great tenant out of the deal and it will make good money long term.   We’ve also sold a turn-key (not really our business but it just made sense) that was delivering 14% cash on cash return. 

Bottom line, it really depends on the deal you find and the resources you have on the ground to manage a re-hab. Personally, I’d take less return on a turn-key over managing a re-hab remotely, but that’s just me. 

In my opinion, talking about A, B, C, or D "properties" is really focusing on the wrong thing - it's all about the tenants. For example, we have an "A" tenant - she's a multi-year tenant, was late once (by 1 day) and keeps her home clean - my one complaint: she let's her grass get too tall. She pays $550 / month and we paid $20,000 for her house. Do I care if it's a C property?  No, I have an A tenant.  

@Todd Pultz makes solid points on self-managing properties, impact of COVID and maintenance costs / hassle-factor.  And he's right, the cash-flow is not wishful fantasy - the house above flows quite nicely.

Would I do this from out-of-state?  Honestly, I don't know.  We self-manage our properties, and would do so with A properties or C properties - I don't think the PM business model can produce the kind of service most of us expect. Would I try to self-manage any of our properties from out-of-state?  Not a chance.  Would being out-of-state stop me from investing in our properties (all of which are C)?  I think it goes back to my first point - it's about the people:  in this case, the PM.  

Carefully, patiently, thoroughly select your tenants...and your property manager.   

Below are the links to the actual Agency Order and links to two very helpful sites that describe the order in layman's terms. There are important details described on the Texas websites - for instance, it clarifies the law as it relates to month-to-month, non-renewal and ending leases.  

https://www.federalregister.gov/documents/2020/09/04/2020-19654/temporary-halt-in-residential-evictions-to-prevent-the-further-spread-of-covid-19

https://www.tjctc.org/coronavirus.html

https://texaslawhelp.org/article/cdc-eviction-moratorium

Fortunately, we have had no issues so far, but we are preparing for things to get worse before they get better.  

@Andrew Hyder We are buy and hold investors in Macon and we intend to continue investing there. We focus first on cash flow and if we also get appreciation, great. The last 24 months we’ve seen ridiculous appreciation. 

I agree with @Sam T. that it’s hit or miss, but it’s even more granular than that. We have nice homes where one of the street is decent and the other end has boarded-up houses.  I took me a while to get over it and write the first check, but I’m glad I did.  


Our numbers are on target with what @Greg Johnson noted. He’s dead on when he said choose tenants wisely and be ready to walk away from 95% of them.  And when you find a good one, keep them.   There ARE good people in Macon who pay their rent early and take care of their home.

You do have to be very careful in the initial purchase.  We generally buy homes in need of rehab because some of the “turn key” investments are junk.  We’d rather rehab them ourself and know we won’t have to deal with it for 10 years.  Contractors seem to operate to different standards when it’s a turn key.  

I constantly monitor the areas within 90 miles of Atlanta and I remain very happy with Macon. It’s pretty frothy now, but even with the froth it offers great opportunity. We’ve looked at Warner Robins, but haven’t found anything that matches our numbers in Macon yet.