All Forum Posts by: Greg Powers

I'm a new investor in Manchester, NH. I've been doing quick analyses of properties that come up on the MLS here and have to echo what everyone else has said--using the 50% rule, I've had a hard time finding anything that reliably cash flows more than $100/door. Of course, I'm just doing a very basic kind of first-pass analysis, but I think it would take some creativity to find a deal that really works in Manchester, rather than relying on the MLS, especially if you're going to put a dent in your cash flow by paying for management. I haven't contacted any Realtors in town yet, but Elm Grove Realty will be one of my stops. If you visit www.nhreia.com and view the profiles of board members, Mark Roy, the principal, has a nice write-up there.

Seems to me this would be a no-brainer to investors, but it's nice to hear it broken down in such terms. When you're buying turnkey properties, you're buying the intrinsic values. I could buy a cheap property down the street, but it would be much harder for me to find reliable property management.

Obviously the practical value has to come in at a number that would allow me to pay for the intrinsic value and still have a cash flow that's equal or better than all the other ways I could spend my money and time, but it's my job to understand that practical value (via due diligence) and your job to find, fix, sell, and manage it for me. And if you're good at what you do, and can find investors who understand the trade off (the money value of time, as opposed to the time value of money), then you'll stay in business, as you and Marco have done.

The investors who don't understand this will probably get burned and drop out. The ones that do will be your repeat customers and keep you in business for the long haul.

Just out of curiosity, what are the advantages and disadvantages of taking the 15 year loan and owning free and clear in retirement, versus taking the 30 year loan and still paying debt service when you're retired?

Obviously if you own free and clear your cash flow on this one property would be higher when you need it most (retired, theoretically no other income). But with a 30 year loan you'd have higher current cash flow that could be reinvested over the next 15 years.

Seems like you could invest that in another couple of properties in the mean time, which would provide even greater cash flow in retirement. Obviously you know that already, so as a newbie I'm curious about your thinking behind the 15 year term.

Marco, I should have finished your article before replying--I see you have a great list of questions there, too!

Thank you, @Marco Santarelli, for the comprehensive reply, and for the link to your article on finding a PM. I was listening to the BP podcast this mornning and @Mehran Kamari mentioned a checklist of questions to ask a potential PM, so I've contacted him about that, as well.

I also like your unequivocal answer to being touch with tenants--"No." That's what my gut was telling me, but I thought I'd ask.

I'm going to piggy-back on this discussion with my own questions. This is my first post on BiggerPockets--I'm fairly new to real estate investing, looking for an entry point based on my financial and personal circumstances, and the turnkey model looks fairly appealing. I've been reading all the posts so far, but I'm not sure these questions have been addressed yet:

If house prices go up in a specific market and current turnkey owners sell their SF rentals, and the in-place property management has fewer and fewer properties to manage, at what point does it stop being cost effective for them to manage these properties?

The discussion originally focused on a scenario in which the investor is not happy with the property manager and wants to change. What if the property manager is no longer happy with the business model and bugs out? If I only own two or three SFs in a market miles away from each other, how easy is it going to be to find a replacement PM?

(And incidentally, how likely is it that the investor/owners would sell to cash in the equity in a rising market versus holding for the continued cash flow?)

Also, how does one manage the property manager from a distance? How do you check up on how they’re doing? Do you plan a trip once a year to check on the property; get in touch with the neighbors and ask how things look; send the tenant a brief survey every six months…?

And as a corollary to that last question, is it ever a good idea to open a channel of communication directly with your tenant, or should you stay anonymous and let the PM be a buffer between you and them?

And lastly, addressing this to the turnkey operators who are active here on BP, and without naming names, how long have you been in business? Of your colleagues/competitors, how long has the oldest been in business? Just trying to get some historical perspective. If turnkey investment companies weren't around twenty years ago (like interest rates below 4%), what suggests they will be around twenty years from now? I mean no disrespect--I just like to have the long view whenever possible.

Thanks to everyone who is participating in this discussion. In fact, thanks to everyone who participates in BP in any capacity--I've learned an unbelievable amount from you all so far!