All Forum Posts by: Will Spruill

As promised, here is AON's reply to Will's policy question:

"Within the 12-month policy term, the 6 months of reimbursement and $1000 in legal fees that the policy holder is eligible for is independent of the number of claims filed.

For example, if tenant 'A' defaults but didn’t meet the qualification requirements, then tenant 'B' moves in and they do meet the requirements, claims will still be honored should tenant 'B' default."

@Marco Santarelli

One thing I have yet to see, unless I missed it was what the properties rented for with the new tenants. It sounded lower than what they were first rented for.

The rents being charged are the same as when I bought. Currently I only have one new tenant from the first eviction. I'm not getting rent from both units of my second purchase and they are in the eviction process.

@John Chapman, @Sharon Tzib @Mark Ferguson @Daniel Guillermo
2. Second, Will's properties were already under management by this (new) management company. They were vetted as far as a new company could be, and Will was aware of their relationship with the property and the rehabber. As @Ali Boone correctly mentioned above it's "bad property management putting in low-quality tenants.".

There is no "new" management company, I'm still with the same company as bought with the turn key package. They did however change their name in the middle of this mess from Capstone property management to Indianapolis property management. So again, no new company.

3. Third, regarding the "not accepting any responsibility" comment, we have spent a good deal of time with Will and the property manager trying to understand the situation, answering questions, looking for solutions, and trying to help wherever possible. In fact, I wanted to avoid mentioning it, but we went as far as compensating Will for a month's rent just to help him a little.

Yes, Marco did compensate me for one months rent. This was only cause the AON rent protection policy was not setup by him by the time our first unit went into default and eviction.

I'm sorry, but I've got to say that your situation is pretty ridiculous, and I don't mean that as insult to you.

What kind of "turnkey" property is it where you have to use "rent protection" for 3/4 units in the first year? That isn't just an accidental "slip" of property screening, that is flat out abysmal and disgraceful performance. Who did the due diligence on this pm company (I presume the turnkey operator)? I certainly would not accept some ridiculous excuse that the pm let their criteria soften, and I would certainly want to hear more than that the pm is now on a "watchlist" by the turnkey provider.

This is a business (maybe Class D areas excepted) where, if you are screening tenants correctly, you should not even need rental protection.

What kind of "turnkey" property is it where you have to use "rent protection" for 3/4 units in the first year? Agreed

That isn't just an accidental "slip" of property screening, that is flat out abysmal and disgraceful performance. Agreed again

Who did the due diligence on this pm company (I presume the turnkey operator)? I hoped this was the case. I would have thought, again lesson learned.

I certainly would not accept some ridiculous excuse that the pm let their criteria soften, and I would certainly want to hear more than that the pm is now on a "watchlist" by the turnkey provider. I’m hoping to hear more as well.

As is said in the pocasts repeatedly is "what sets apart those that succeed from those that fail...persistence". Don't give up on that goal to buy 10.

Originally posted by @Will Spruill:

"The main problem, was initial screening of tenants and poor property management. I will say that the first property purchased is now producing rent, but still can’t dig me out from the no rent and unit turn that I’ll be facing with the other. The new property manager has done a much better process of screening tenants and collecting rent.

What I seen was a quick turn over of the unit and taking anyone with a pulse and down payment as a tenant."

Hi Will -- You've hit the nail on the head regarding the "initial screening and poor management". Both principals of the property management company have told me over the phone, and on separate occasions, that their tenant qualification criteria and screening process was far too "soft", and their plans going forward (2014) were to make them much more stringent.

Their other problem/challenge was they were simply over their head with work and always behind the proverbial eight-ball. That's the reason they hired a new property manager and new office lady last year.

I've had this company on my "watch list" for the last four to six months, and although they've made progress in getting themselves better organized and improving their screening process, they still need time to get fully caught up. So, I remain cautiously optimistic.

CC: @Jerry W. @Mike D'Arrigo @Brant Richardson @Michael Leffelholz

Originally posted by @Will Spruill:

"The AON policy is great, just make sure your tenants meet all of the criteria. I’m pretty sure that AON will not insure me when the policy expires."

Hi Will -- The AON policy covers the rental unit, not the policy holder. Therefore, they should cover your new tenants under your current policy, and will continue to cover you (i.e. your rental unit) with the purchase of a new policy, provided the new tenants meet their eligibility requirements. It's not like car insurance where they can choose not to cover you because of too many accidents.

I've left AON a message this weekend to verify and confirm the above, and I will post their reply here once they get back to me.

@Will Spruill I am sorry to hear about your problems. Would be interested to know what kind of due diligence you did prior to investing regarding the property manager and market? Was the management company Norada or a local company recommended by them? What kind of communication was there between you and the property manager when the problems started to arise? You indicated that these were C- and D neighborhoods. Is that what was represented by the turnkey seller. As you go "down market" in terms of neighborhood the expectation regarding the quality of the tenant would need to be adjusted. I guess the fact that you had the AON rent protection is a good thing but find it very disconcerting regarding the installation of a felon by the property manager which voided the coverage on one of the units. That would seem to be something that with minimal screening would have been learned. Any recourse to the manager for their negligence? Also not familiar with the process so I am going to ask a question (that I probably know answer to) but does the manager discuss with you potential tenant candidates prior to leasing?

In your opinion, what is the reason that the rents that you are now getting on turnover so much less than what was in place when you acquired the properties? Did you just rely on reps re rents made by turnkey seller or did you conduct your own investigation? If so, did it support the rents in place at closing.

Again, sorry for your difficulty but for anyone considering a turnkey investment we can learn from your experience.

Good luck going forward.

Michael

This is just the kind of story that has scared me away from going the Turnkey route. What do you think about the neighborhood the duplexes are in? Is it living up to what you were led to believe?