All Forum Posts by: Eric Prescott

The route I'm going for three houses I'm trying to scoop up all at once is too place a down payment of 40% from my solo 401(k), with 60% from a non-recourse lender.

I'm gathering private money now for a 4th property. Still figuring out how to structure it so they can use OPM entirely for a cash offer.

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Maybe check out this book:

https://www.amazon.com/Ultimat...

If you reach out to Chris Lopez/Envision Advisors there in Denver, they'll send you a copy. House hacking is one of the best ways to get started on low money down.

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Houston, Texas

Quote from @Jag C.:

Quote from @Chris Clothier:

Quote from @Jay Hinrichs:

Quote from @Drew Sygit:

@Leah VandenAkker

The biggest challenges with Turnkey providers:

1) Terrible renovation work - we've taken over many properties that investor bought turnkey and they were shocked to learn the true condition of their property from our TakeOver video.
---So, get a GREAT property inspector NOT recommended by the turnkey company to avoid bias.

2) Misrepresenting Property Class - have seen many turnkey providers in Metro Detroit area sell OOS investors Class C properties as Class B.
---So, learn the neighborhoods where you plan to invest and use Google Streetview to virtually explore them.

3) Poor Tenant Screening - they typically can't sell a property until they place a tenant. So, they have a conflict of interest in waiting for the right tenant.
---So, insist on them providing the rental application and supporting docs for your review. This means YOU need to learn how to evaluate a rental application!

4) Poor Property Management - Where do you think a turnkey provider will put their best staff, on selling properties and making $5k+/transaction or on property management and making $80/month transactions?
---So, ask about their standard operating procedures and make sure your management contract has an easy termination clause.

What are your options if you experience one of the above? Everyone thinks they can sue to solve the problem.

Do you realize how much it will cost to hire an OOS attorney to sue the turnkey company?

Unfortunately, the majority of investors that experience terrible service from turnkey companies, figure out that it's not worth spending tens of thousands of dollars suing their turnkey provider and just move on - which allows the turnkey provider to not change their ways and stay in business:(

You should also check out this BP thread about the topic:

https://www.biggerpockets.com/forums/88/topics/976647-turnkey-company-suggestion?highlight_post=5648876&page=1#p5648876

Your point 3.. this is self inflicted wounds on the part of the buyer and the keep up with the jones in the turn key space. where sellers promise cash flow day one and buyers think thats what they need other wise its not a deal. I have gotten my guys to back off of that and have the buyers close without a tenant and be involved in the tenant placement process with the PM much better all the way around. U dont have a seller burning HML rates on their houses and doing exactly what you said putting in a tenant that maybe is not best suited but they need to get the property off the books.. if the turn key guys would quit harping on cash flow day one and encourage the buyer to work with PM choosing the right tenant I think folks will have a much better long term outcome.

To your point Jay, it is only made worse when a third party property management company is used. The company selling the property is not responsible for the management decisions so they have plausible deniability in bad decisions. They can point the finger at the management company. That leaves buyers without an advocate and pissed off!

Just to give a counter view, an investor does not get a say in resident placement with us. That is a skillset that is developed through proper processes and experience. Roughly 90% of the properties we sell will have a resident with a 2-year lease in place at the time an investor closes. That is not to emphasize day one cash-flow, for us it's simply a function of being efficient and timely with how we operate. But, if an investor was insistent on being involved in a process that they are not suited for or experienced in our processes, we would guide them to look into other companies. The advice you give above would never work with us or a few of the other top companies I can think of.

Lastly, remember, this is not a trait of "turnkey" companies or deals. This is just a reality of what you face with some companies and even some individuals who use the word turnkey to promote what they do.

Spot on - I find myself in exactly this situation, ticking off all these boxes with a so called "turnkey" company that lacks any integrity and is not interested in its reputation at all. They've made quick money off me and are obviously not interested staying in business long term.

Having said that, my other turnkey experiences have been excellent - this one drew the short straw.

@Leah VandenAkker get your own property inspector referred by local investors, someone tried and true. Work with a local RE agent who can video the property with commentary so you know the cosmetic issues as well (very important). You will need to pay for this but it's money well spent. Check rentals and sale prices in the area you want to buy, at least for a few months prior to get a sense of trends/averages so you know if the deal you are presented with is acceptable to you. Network with local investors in the area you want to invest in.

So where do we all go to compare notes on TK companies, since we're all so circumspect on BP? :-)

1 Vote

Cincinnati, Ohio

Quote from @Ben Harris:

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $175,000
Cash invested: $15,000

Prior to close on the property, I was able to negotiate with the seller to install three brand new furnaces, install new vinal plank and carpet in multiple units, and pay some of closing costs because of days on the market. Allowing me to use other funds to fully renovate 2 units while the other two helped pay the mortgage.

What made you interested in investing in this type of deal?

I found problems to be solved that I believe I had the opportunity to fix

How did you find this deal and how did you negotiate it?

I found the property on the MLS

How did you finance this deal?

traditional mortgage

Congrats on the deal. In what market did you find this multi-family?

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Quote from @Jaron Walling:

Quote from @Bruce Woodruff:

Quote from @Eric Prescott:

Don't even worry about what the interest is.....just do the math and see if the numbers work. Because if they even come close to working now, and you can hold tight a couple years, then you will really be looking good when you ReFi.....

This exactly. We bought another deal following the BRRRR strategy. No point wasting time waiting for better rates... that's only one aspect of a real estate investing.

Not waiting for better rates in particular. Just waiting for the math to line up. Rates are part of the math. If we find a property somewhere (and I'm keeping our options open) that makes sense at these rates, we'll go with a conventional mortgage for sure. Meantime, there's more than one reason to improve my liquidity right now.

1 Vote

Quote from @Bruce Woodruff:

Quote from @Eric Prescott:

For our first property I'm definitely looking for something that will cash flow at least a couple grand a year, which I haven't had much luck with in the current climate, but I'm still getting started and digging deeper. When the numbers work I will buy, regardless of the interest rate, but definitely going to take advantage of what I can to get that cash flow up!

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Awesome. Thanks, Randy. I spotted some interesting properties on MLS after reading this thread and really don't know what to make of them without some local guidance. I have been looking at turnkey properties but if I can get the right team together in a market like this, it could make more sense for us to invest this way instead. Do you know Muskegon well enough to evaluate a given property on the market for its rental potential?

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All Forum Posts by: Eric Prescott

Eric Prescott has started 9 posts and replied 90 times.

Post: New, serious, self-educating & want 3-4 rentals buy end of 2023.

Post: Looking for a few new potential markets

Post: Looking for a few new potential markets

Post: QOTW: How did you / are you financing your investment properties?

Post: Looking to start. Little cash on hand.

Post: Whats your opinion on Turnkey Investment Property Companies?

Post: First Real estate Investment Deal

Post: Recession Indicator Going Off

Post: Recession Indicator Going Off

Post: Where would you move to start building your real estate empire?