I am from the UK. My parents have 3 rental properties in the UK and were looking for another one. I told them about Clayton’s properties in Indiana. We were about to go for it, but I couldn’t shake the feeling that it seemed to good to be true. I am so glad I found this thread.
There’s a lot of information in this thread. I made a summary for my own benefit and I am posting it in case it helps anyone else:
SUMMARY
PROS
There are four reviews from people who have invested with Clayton. (Jeremy Buttell, Matthew Stellas, Jack Gibson Jeremy Buttell and Alex Peralta)
Key points form reviews:
Happy with the service and property management company. Matthew notes that the property management company was quick to deal with an overgrown lawn issue. Alex notes that Clayton’s company, however, was slow to respond at times. Jemery Buttell is very positive after owning a Clayton house for 7 months.
CONS
The property management company is Ocean Pointe, which has been featured on TV news for poor service. (However the reviews posted in the Pros above suggest that Ocean Pointe are excellent)
There are two reviews from people who went to the properties in Indianapolis, but then decided not to buy. (Merritt Whitman, Shane.M)
On the podcast Clayton frequently says that as the properties are fully rehabbed, he generally has virtually no maintenance related problems for 10 years.
Both Merritt’s and Shane’s experience of viewing the properties don’t match with this. They were shown that the properties aren’t fully rehabbed, but just cosmetically improved. This means the risk of problems in the property is far higher than Clayton suggests.
There is a lot of feedback from people who have not used Clayton but have had experience in Indianapolis.
Their key points:
Most of the areas are run down, so they attract poor ‘C class’ tenants, who may cause damage, have trouble paying rent or may leave after a few months. This is contrast to Clayton’s claims that C class tenants are generally better than A class, as they give no hassle and just pay on time. Indiana is a very diverse area. Some streets can be good, but right next to them can be a run down area. Hence, it’s a bit of a lottery as to what you might get. Because the properties are in a bad area, it will be difficult for them to be used as leverage for finance (i.e. the properties have no real equity) Because the properties are in a bad area, they will be very difficult to sell at a later date.
OVERALL:
The only advantage to these properties is their cash flow (from the rent). They don’t offer the usual property benefits of increasing in value or providing leverage (but to be fair, Clayton does advertise them as “Buy and Hold for Life”).
Reviews of people who have invested suggest that the cash flow provided is as Clayton promises. However, these reviewers haven’t had the property long enough to give a long term view.
Risks of damage, breakdowns and vacancies could also eat up into the cash flow provided.
After reading this thread, I am going to think about going for it. The cash flow is still very tempting. But I don’t think Clayton’s podcast has done a good job of communicating the risks, especially if you get a bad tenant who will probably eat up all of the cash flow (Clayton’s podcast really down plays this, especially with his comments about C class tenants being relatively hassle free). I guess this risk would be high for someone like me living in the UK, because it's not really possible to see the property before buying it.
I didn’t realize there were other turn key companies, so I think I am going to look into them first.
