All Forum Posts by: Quentin Mitchell

If you need anything to just push you out of analysis paralysis then go with turnkey to get started. Light cosmetic rehab once you have a little bit experience with home ownership. Go with value add once you know the area and are confident with your assessment of property value and costs. Of course you need to consider the amount of time needed to accomplish different methods.

@Quentin Mitchell I agree with your points but a major consideration with value add is that there is no guarantee of creating equity. There's an assumption that a turn key will cost more than a value add but the realty is that turn key companies have several cost advantages that the individual investor does not. Turn key companies generally buy further upstream at better prices. They get substantial discounts on materials and have better control over their labor costs. As long as a turn key company isn't selling above market value, it's not uncommon for and investor, especially with little experience, to pay as much for a value add deal as they would for a turn key while taking on a lot more risk.

Agreed Mark I stated that in my positives, maybe I didn't word it right but yes it defintely is easier entry for the novoice investor and minimizes risk if bought from a reputable company.

@Quentin Mitchell, There are always pros and cons :)

Yes there is and that is what I would people to expand on, possible can learn something.

I think that it ultimately depends on your preferred lifestyle.

If you have extra time and can do a lot of the renovation work yourself then I would recommend house hacking or the brrrr method. (depending on your market) However, if you work a lot and don't have the extra time to be a project manager I would recommend turnkey. Basically... TIME = MONEY! I would always recommend someone to choose the option that will add value to their personal situation.

 Either way, you are getting starting investing in real estate!

Can't argue with that I am not saying defintely one is better than another, just in my market in my opinion value add is better. 

Hmmm, I don't see any numbers. The only way I make an informed decision is to know the numbers, something like this:

I agree I was speaking in general every vaule add isn't always better than a turn key and vice versa just giving my opinon on the advantages and disadvantages of both. I would love to hear your take on both.

Average Turnkey Cash Flow Per Door In Phoenix Metro Area No Bank Financing Needed

https://www.biggerpockets.com/forums/600/topics/584916-average-cash-flow-per-door-in-phoenix-metro-area

@Quentin Mitchell this is always a challenge for people who invest at these price points.  These property types do cash flow better (although the maintenance % is higher) but always the challenge is the lender aspect since so many lenders will have "loan minimums".  As if you notice above, most lenders will comment "you can't borrow less than X"....but what they really mean is "you can't borrow less than X....FROM US".  It sounds suprising but Fannie Mae and Freddie Mac don't have loan minimums.  But most lenders will place a minimum.  Likewise with other rules too.  In the lending industry we call these "overlays".  Rules that are put OVER the Fannie/Freddie rules to help a company be more conservative with certain areas.  Now, do not take this personally....investment properties foreclose at a higher rate than primary homes.  Likewise, lenders don't make as much money on lower loan amounts....and sometimes will even lose money at lower loan amounts.  So these "overlays" are business decisions.  Kind of like how we won't invest in "this" or "that" or "that area" or "above this price point because they don't cash flow as well".  Those are all of OUR business decisions too.  So what we need to do is get you in front of lenders that have NO OVERLAYS.  So here's my suggestions:

1. if you know the product you need but just need it in a specific state try posting in that state forum. Bigger Pockets has some great state forums and usually there are good locals that monitor those. Also, try some local real estate meetup groups. Meetup.com is a good resource for those but some post here on Bigger Pockets too.
2. Calling all the smaller lenders in your area.  If they have one location, and you've never heard of them.  That's a great start!  But be prepared to call a lot. Now, most of these smaller banks may only have 12 employees or so. So don't get frustrated if they don't return your call or aren't in the office. Just call back and be friendly. Maybe play dumb a little "I don't know if I'm in the right place..." "I'm sorry to disturb you, you may not be the right person for this....", etc. Maybe someone can get you to the right person.  Keep a spreadsheet of lenders who you've called and who you spoke with.  Dial for Dollars!

Then when you do have a lender that seems like they will lend, ask these questions to make sure they are friendly in the OTHER areas that some places put overlays on:

Questions for Lenders

1. When do you start using rental income to help me qualify? (the answer needs to be immediately)
2. When do you start using “After Repair Value” on my property?
3. How long do you need me to be on title to refinance? (this is important if you do need a short term loan to purchase then refinance out - and the answer should be 1 day...very important that it is 1 day on title is all that is needed to refinance)
4. What is my minimum down payment required? (if they only require 15% down on a single family home that is usually a good sign that you are working with a flexible lender)
5. How many loans can I have with you?
6. Can I change title to my LLC?
7. Do you sell your mortgages?
8. What is your loan minimum?
9. Can you explain to me what your reserve requirements are?

*WHEW*  I know that's a lot of information so feel free to ask anything additional if you need to.  Thanks!