Originally posted by @Chris Clothier:
Originally posted by @Ashish Yadav:
Does anyone here have any experience with REI Nation (formerly Memphis Invest)? We have been interacting with them for the past two months and have had the following issues :-
1. Cash flow negative - On all the properties sent over to us, with the amounts they charge and the cost of the house, the properties are cash flow negative (around $2K loss per year). I realize that some of the markets are crazy but their price seems too high.
2. Renovations cost - We were quoted around $50K each on renovations for multiple homes but when we asked for a breakdown, the numbers didn't match up. They also claim to provide a higher quality of finishes but do not provide any appliances - fridge, stove, microwave, washer, dryer, dishwasher etc. or maintenance on them.
3. Taken up within a few minutes - There is a known sales tactic to create FOMO but I find it surprising that most of their properties get scooped up in a matter of few minutes or so they claim.
4. Fees charged - They charge a 10% property management fees and 1 months rent (8.33%) for every new tenant. We have also heard that they charge a 15% fees on top of repairs and fixes. Is this standard?
Curious to see what other people think and if anyone is familiar with similar companies with more favorable numbers for investors.
Good morning Ashish,
There are numerous posts on BP about Memphis Invest where many investors comment on my families' company. Some go back over a decade so you can certainly find feedback on our company. Many of those investors are also happy to talk privately in the messages as the mere mention of buying Turnkey can sometimes bring out negative comments from investors who simply don't like the niche. Again, if you search you can find many threads about our company including experiences from like-minded investors. Here is a recent one for reference:
https://www.biggerpockets.com/...
I would start with a search of those threads to gain some perspective on your questions. I want to make sure I address a couple of your concerns because I know you have spent a considerable amount of time with Blake and Ashley up to this point. It would appear that you may have put something under contract without really being ready and I know that is not a comfortable feeling. I would recommend that you take some time before going under contract again. We are certainly not the right fit for every investor and actually say no to more investors than we say yes to. Again, the service we provide has to fit the needs of the investor so reading your questions on here and knowing how much time our team spent with you, I think reading the threads and connecting with other investors will be really good in helping you decide if we are the right company to meet your expectations.
As for your questions, none of our properties will produce a negative cash flow if we have done our jobs and continue to operate the same way going forward. As for what you can show on paper, all of our data on a performance evaluation comes from our portfolio and historical performance of our company. If an investor wants to include higher expense or make other assumptions that may negatively impact the return they see on paper, then they should absolutely run their numbers that way. When that is done, a property may not look so good to that investor. There is nothing wrong with that. Every investor has to be comfortable with their expectations, but remember that paper calculations and real world returns do not always line up. Again, we have two decades of performance data to back up how and why we run a performance evaluation. If that was not clear to you on the front end, I'd be happy to explain that data.
As for renovation costs, I am not sure what would not be clear in our scope of work provided at the sale of every property. Perhaps you had not seen one yet, but our average renovation cost per property is going to run near $45,000. We pull all permits on every job, use licensed contractor work only and seek to limit or eliminate all deferred maintenance. Our annual renovation budget including maintaining our clients portfolios is near $50 million. I can understand that sometimes it is hard to fathom how work is done and how renovations are performed at that level in 9 different cities, but speaking with other investors who have been with our company and experienced our renovation and management processes will help. As for appliances, these are provided by the residents themselves. Our average length of stay is approaching 5 1/2 years so residents are happy to bring their own appliances just as if they would upon buying a property. The biggest impact this has is reducing the number of low dollar maintenance calls for an owner. Through data we identified that just over 50% of all maintenance costs were appliance related and this was a major factor in lowering investors returns. We provide value in other ways to our residents as evidenced by the average length of occupancy. Now, this is not the case with every property in every city, but it is the case with a majority of our properties.
As to the comments on creating urgency, that is not a tactic we use. We do our best to avoid it with our clients. I even went so far as to advise you earlier to slow down a bit. If we are the right fit for an investor, then we will locate and make available to you a property that fits your needs. Sometimes, there are other investors whose portfolio that property also fits and sometimes we are unable to hold a property for any length of time. There is simply too much demand. But, we also go out of our way to help first time investors with our company reach a level of comfort with that first purchase. The reality is that we have no waiting queue. We do not require any deposits to get in queue. We don't publish a list of available properties. Everything is very one-on-one. Now, we do have more qualified investors wanting to purchase a property than we physically renovate and release in a month. And, roughly 65% of our sales each month go to an existing client continuing to build their portfolio, so it require patience. But you should never have a feeling of FOMO. If we are right fit, it will work.
Lastly, traditional property management is usually filled with a buffet of charges. We have reached a scale where we have a handful of charges for different services. We have also reached a point where our reputation and performance speak for themselves and we are not willing to discount our work. That devalues our team and the services we provide. However, so far in 2020, our maintenance costs including Capex and our 15% mark-up on services performed will equal 5.1% of collected rents. That 15% charge is a revenue source that ties directly to the service the resident receives from the maintenance team. Calls are answered live, dispatched and the resident is communicated with. Once the service is completed, the same team contacts the resident to make sure they were satisfied with the service they received and to confirm that there are no other issues we need to address. This personal connection is a major factor in keeping a property occupied nearly 5.5 years on average.
There are a lot of companies here on BP that offer passive investment opportunities and many that market with the word Turnkey. Reach out to me and I'd be happy to make some recommendations. Some may show better paper returns and some may show the same. Either way, few are able to provide the level of customer service to both clients and residents that we are able to provide. That has real value for some investors and absolutely none for others. We completely understand that view point and are happy to recommend other companies who we know personally and know they do a great job.
@Chris:
Happy New Year, I hope you had wonderful holidays. I would like to start off by saying that I understand REI Nation is a big name among Turnkey investment companies and I am aware that you provide a good service as well. The only question that I am trying to figure out as an investor is whether the service being provided is worth the cost or not, for me at least.
Now, I would like to address some of the points that you mentioned and some that I may have left earlier.
Contract:
I had talked with Blake and Ashley, but I never went under any kind of contract. I decided not to go with the property without signing any contract papers.
Negative Cashflow:
I am not making any unnecessary negative assumptions. I am simply adding up the numbers provided by REI Nation. I am even taking the average of the rent range provided. For e.g., if the rent range provided is 1450-1550, I am taking 1500 as the monthly rent. Numbers on paper vs real-world numbers might differ but my opinion as an investor is that one cannot be overly positive with the numbers while buying a property.
Renovation costs:
Answer to “As for renovation costs, I am not sure what would not be clear in our scope of work provided at the sale of every property…”:
The scope of work document that REI Nation provides is a pdf that gives an overview of the kinds of renovations done on the property. This is NOT an estimation but the actual renovations that have been done already. Now, the property in question had the renovation cost amount of $50,000. What I simply asked as a buyer is the renovation cost breakdown. What I received were a few snapshots of some numbers which totaled around ~$52,768. Please mind that these were not official receipts or anything, just a bunch of numbers cobbled together and taken a snapshot of. Now, what I don't understand is why the cost of the renovation differ AFTER the renovations were completed. Once the renovations have been completed, you should have the exact numbers to quote. Where did the difference of $~2768 go?
Your annual renovation budget might be $50 million and you might not think of $2768 as something tangible enough to give any explanation for, but I am a small-time investor trying to break into real estate investing with my hard-earned money and these costs matter to me. I am not at all asking you to give me the details of your renovations or how you do renovations in 9 different cities. I was simply asking for the exact renovation cost for the property that I am interested in, that’s all.
In the humblest way possible, I would like to mention that I am ok paying more for better service, but I am not ok with a lack of transparency.
Concern about the floor plan:
This is something I did not mention in my original question. The property in question had the size listed as 1192 sq ft. After looking at the floor plan, it seemed that the 1192 sq ft of the house includes the garage space of 398 sq ft. In my understanding, garage space is not usually added into the livable space. If I remove the garage space from the layout plan, the total sum of the livable space comes out to be around ~884 sq ft. On the other hand, if I include the garage space, the total livable space comes out to be (398+884 = 1282 sq ft). These numbers don’t make much sense. In both the scenarios, the total space does NOT come out to be 1192 sq ft. I do understand that the floor plan is not always available and most of the time may not be accurate but being this much off was a bit surprising.
Note: I was only able to see these numbers after I asked for the floor plan. Had I not asked about the floor plan, I would not have even known about it because I was not provided any such document beforehand.
To end this note, I would like to say that I had done my due diligence on REI Nation even before my first call with Blake. I had gathered trust in your services even before going in and I am still open-minded to continue the discussion. But I would not want to just "blindly" go with any property that REI Nation provides. For me (and I am sure many other first-time investors like me), buying their first property is a big step and I just want to make sure that I am making the right decision.
