All Forum Posts by: Petra M.

Passive losses can be applied against passive gains.  So, yes you can take your $9k loss against your $7k income.  You can't apply your $2k loss against your W2 income (active) unless your a real estate professional.

Can anyone give me some feedback on the area around S Jefferson and Lynch?  $/sq ft? Was thinking of investing in a rehab there. Thanks!

https://www.yelp.com/biz/morris-green-properties-austin

My question to TK operators: do you negotiate on price?  

I've seen some houses on a TK inventory for months on end.  I make an offer and often get told, "The price is what it is." 

Doesn't seem practical.

Agreed.  A TK provider can buy distressed properties and can rehab for cheaper.  

The TK properties I had contracts on appraised for a few thousands over asking. So, not much different than sourcing a deal off MLS. At least I know what kind of rehab I'm getting off MLS.

I know the TK provider is making $30-40k off the flip since you can easily find out what they bought the distressed property for.  They could do a better rehab job and take less off the top and I'd be a happy camper. 

I will say that I really dodged a bullet.  I looked at the PM website and saw the property I was under contract for still hasn't rented!

I'd advise the following contingencies in every contract:

- Inspection

- Finance, in case the property appraises for lower than ask.

- Tenant in place, although this doesn't guarantee you get a *good* tenant.

This is what I ended up doing in the end.  Get a realtor.  Find a near move-in home.  Get an inspection.  Find some contractors and 'rehab'.  Get a PM.  Definitely not passive, but hopefully more passive after the fact.

I sought out a few TK operators that were active here on the forums.  The pro formas gave cap rates of 12% with cash flows of $250.  Vacancies and maintenance were 5%.  Taxes and insurance were under quoted.  No cap ex.  Rents overestimated.  After running the numbers through my own criteria, which I admit are aggressive (vac 8%, maint/capex 12%, etc.), the numbers were half of what was quoted.

I did decide to go with a few properties to "test the waters".  I was assured the properties were in Class B neighborhoods and I did my best with Internet research, etc.  I did get some photos of the rehab process and things looked good.  Problems came up when my independent Home Inspector took a look and came up with a list of problems such as leaky pipes, bathrooms vented to living space, old hvac, etc.  The measure of a good TK company is how they respond to these issues.  One company was accommodating and said they fixed things, while another just canceled saying that there were too many issues to address.  Always have an inspection contingency in your contract!  

For the company that said they fixed things, I made a surprise visit with my home inspector close to closing and found things that they said they fixed, but it wasn't.  When I approached the TK operator, he got defensive and then I promptly canceled.  At the same time, I went to visit a few property management companies and found out that the properties I had contracts on were actually C class neighborhoods and they wouldn't be willing to manage them.  Always ask a couple PM firms whether they'd manage the property you're interested in and how much rent they think is realistic. 

In the end, I bought a couple properties off MLS and did some minor rehabs. They were near move-in ready. I know I didn't get the best 'deal' and am paying market, but I'd rather do a deal off MLS and do some minor rehabs myself than pay near market for a TK property with shoddy rehab.

How could TK providers improve?   I expect pro formas that are 'close' to realistic.  Be good with a rehab.  The quality of the rehab dictates the tenant.  Follow plumbing and electrical code!  But in truth, TK providers are a business and they are trying to maximize profits.  My radiologist friend is even having problems with the purported "best" TK operator in the country with a shoddy rehab.  Finally, careful with a lot of the smooth talking bird dogs on the site.  They get $4-6000 for every TK they close and may falsely represent properties as a result.

Good luck!

@Kyle Scholnick

I'm in a similar position as you -- physician with demanding hours, family, and decent income -- wanting to diversify my portfolio with real estate.

No way is turnkey passive!  I've been through several turnkey purchase with some bigger pocket members and have seen the gamut of overly optimistic pro formas, horrendous rehab jobs, etc.  Being an out-of-state investor, I felt like I was the lamb for these turnkey wolves.  I flew out to see a couple of properties that were close to closing and saw multiple code violations and the poor quality rehabs that made me pull out of a deal.  That costs time and money (flight, inspection, etc.).  

After purchasing a TK property, you're faced with managing the property managers.  Some are good and some are terrible. Right now, for my *two* properties, my PM is completely unresponsive.  Unable to get a hold of him and he doesn't return my calls.  So that's stressful.

At this point, I'm just keeping my two properties to diversify my portfolio.  They are mildly cash flow negative, but they're more for appreciation.  I personally can't imagine having a stable of dumpy midwest properties that won't appreciate and will be hard to offload.

** Now the converse is that I do have a couple of physician friends that have 5-10 TK properties and seem to be doing well.  I think they are much less OCD than I am and have more trust in the TK companies and PMs.  

I will say that as an owner, the number one thing that turns me off is the lack of responsiveness.  I have one PM in Austin who I thought was really good but has been progressively slow to respond or doesn't respond to my calls, texts, or emails.  That is unacceptable for an out-of-state owner and is an immediate deal breaker.