All Forum Posts by: Jeremy Lewis

, Unsure if this was in our market(Indy) or someplace else... I have a bit of a different perspective. I own a property management company here in Indianapolis, and last year we worked with a turnkey guy pretty heavily. I really got a front row seat view of what to do and what not to do. 

Let me preface that the below is what I have seen, and my thoughts. I do NOT know what kind of buyer you are, and I am making no assumptions. Well, maybe a little bit.. hehe

1. You probably did get a front office person answering your questions. Heck, you may have even gotten a VA from the Philippines. They are probably making minimum wage or just above. They have been trained what to answer, and you probably got someone who is doing the bare minimum or felt like your question was something you should be getting an answer to yourself(You should btw).
   1. They are also probably busy answering a lot of other peoples questions, and in the end, it's just a job for them. They aren't hungry like a owner/partner would be. Sucks, but it's true.
2. If you are looking for lower income houses, those are usually not affected by appreciation or depreciation. In Indy we see a 3% appreciation or depreciation rate, but that mainly only works on homes 100k+.. Anything below 100k they remain the same for decades... Example: I looked at houses around 38th and Post back in the early 90's.. Still worth the same today. 
   
   1. IMHO: Lower income stuff is not really affected by foreclosures because there is more investors in those markets than home owners. 
   2. You will probably sell a low income rental for the same amount you paid for it. The money will come from the cashflow.
3. As others have said do the macro investigations on your own.. You DEFINITELY do NOT want to count on a turnkey/wholesaler guy/gal to tell the numbers for an area, because you will be sorely disappointed. 
   1. This is the biggest thing I see with ALL wholesalers and turnkey guys.. They over inflate the numbers. You should NOT be trusting these folks for numbers. 
4. Here's the problem, as I see it, with turn key people.. Their whole business model is buying, rehabbing, and selling houses SUPER quick... 
   1. Sometimes they throw tenants into rentals just to get the numbers to show it's producing. I have seen some pretty shady practices where the PM side or the PM they used(not us) would just throw a body in and that could go horribly wrong, horribly quick.  If a prospective tenant is desperate enough they will agree to any price for a rental.
   2. Turnkey guys go through contractors like you can't believe. It's very hard to find good contractors that will work for the numbers turnkey guys need to make better profits, which equates to the end buyer investor sometimes getting very shoddy work. It is a special type of person who will work in these homes. Not always good.
   3. More often than you can imagine, investors show up and don't want 1 or 2 properties they want 10-20 properties from a turn key company. Complicate that by the fact that those investors will pay in advance for a promise 3-6 months down the line for delivery and you may not be the turn key guys favorite customer.
5. They want easy sales!!!  Turnkey guys, and PM's like me, get hit up by a lot of micro manager investors. People who watch too much HGTV, and become book smart but common sense dumb. They read somewhere that your property manager should be doing XXX, and so they demand it. Even though it may not work in the market they are investing in. So a lot of times if you start asking tougher questions you start to look like someone they don't want to do business with. We don't need squeaky wheels looking to get greased.
   1. If they sense you are a squeaky wheel, they will probably go with a perceived lower maintenance investor. 

Hopefully the above gives you another perspective. I am sure I missed quite a few things. Me personally, I buy houses for myself. Rehab them and put tenants in them, for myself.. I get investors who ask me all the time what I have and what I want to sell.. I offer up my own inventory. I know we rehabbed them right, and I usually have a track record on the house, so I feel confident. I am by NO MEANS, a turn key guy though.. I do deals when I find them, so I am slow, and I don't care if I sell them or not.

 I thought about paying cash for this property, and I may do that at some point.  But I was trying to do this deal with zero dollars of my own money being used..  Its not working out that way, so i'll have to game it to see where I would have come out better off, paying cash, paying SOME cash, etc

I'm in talks now with a private lender who intendes on using a sdira, so I may get far better terms going forward.

Yea that is a good point. The market will change eventually.  Its been a sellers market here for a while. I dont know anyone who is buying all in (purchase, rehab, refi) for 75pct of arv without direct mail marketing

Ive thought of that but it seems its costly and you need time to answer those calls. I work fulltime.  Ive thought of marketing only to the neighborhood where i bought my rental property as thwre are numerous homes in there that need rehab and the rents are relatively high

I think i could have got another 100/mo given the response i had. I could be selective on the tenant.  

looking back, If i target houses with more value, I think i may come out better.  The cost of financing a 120k deal isn't much more than a 100k deal.  In terms of taxes, insurance, prepaids, origination etc.  

I honestly don't know how anyone makes money doing this in the 60-80k range.  Financing costs eat up a ton of a percentage