All Forum Posts by: Spencer Sutton

@Trevor Ewen that's a good thought. We've actually put together an ebook that goes into details and shows real life examples of this happening in our market. I think it would make an excellent blog post but not sure how to make that happen with BP!

*BP deleted my post earlier today b/c they felt I was promoting something...so I removed all references to our company just to be safe.  Here's the edited post.

Let me start off by saying that I know there are some really great and reputable turnkey companies out there. We know there are those who provide a valuable service to their clients around the country.

This post is not about them.

As a matter of fact, this post isn’t about anyone.

It’s about protecting real estate investors from making some big mistakes in the turnkey market.

And the only reason for the post is because we continue to see people lose their shirts on manipulative turnkey deals.

I’ve got a friend who buys/sells wholesale here in Birmingham and he just told me about an out of state investor who bought a turnkey house for $45,000. A couple of years pass and ‘yada, yada, yada’, she just sold it for $2,000.

You don’t want to be that woman.

Here are the five most common manipulations we see from ‘less than reputable’ turnkey companies.

1. 1. They rent the house for more than market rate - the problem is twofold:
   • When the good tenant realizes they can get a better house for the same $$, they leave after one year and your chance of getting that rental rate again is slim
• The tenant is willing to pay more b/c they have less than stellar credit - you end up paying for this mistake in slow pay to no pay and possible eviction...then you have to turn the property
2. 2. They underestimate repairs and maintenance - There are a lot of factors that go into a reasonable repair and maintenance estimate...things like:
   • Age of the home
   • Quality of tenant
   • Geographic location of the house
   • Quality of rehab
3. 3. They fail to estimate non homestead taxes - we see this a lot
4. 4. They fail to account for the fact that tenants will be moving out of the house at some point
   • No allowance...just repairs and maintenance
• A silly 5% vacancy...it's more like 2-3 months or 6-9% annualized
5. 5. The rehab of the house is shoddy
6. This is one we come across a lot when investors come to us with their turnkey properties. There is a big difference between solid a solid rehab and putting lipstick on a pig! 

The point is to be careful when buying turnkey properties. Do your homework, use a professional and seek objective 3rd party advice.

Hope that helps!

Here's the ebook 

https://gkhouses.clickfunnels.com/5-turnkey-manipu...

@James B.

Hey @Payal Z.

You described A/B neighborhoods as the following: "...places where professionals would feel comfortable living with good school districts or close to vibrant parts of the town".  

In Birmingham you will find those in Mtn. Brook, Vestavia, Homewood, Hoover, and varying parts of Shelby County. 

While Centerpoint has some great rental areas and rental houses, it is not a place where young professionals live and the school districts are really bad.  The areas I listed above have some of the nations best schools and young professionals can be found everywhere.

Hope that helps!

There's usually two primary aspects of effective marketing....driving traffic and conversion of that traffic. I'm not sure what your CTA (call to action) is on your postcard or mailer but I'm guessing that you're asking them to call you as opposed to send them to a website you've built.  I could be wrong.

Either way, I believe you should be most concerned with what the copy says on the mail piece you're sending out. If your copy is not good it will look like all the others and be thrown in the trash. If your copy is compelling and has a strong CTA, you're going to stand out above 98% of your competitors.

And if you're trying to get people to a website...make sure the copy on that site is top notch. 

There's a reason why great copywriters make a lot of money...they get noticed and drive people to action.

You could also stand out from your competition with different packaging. I've used what I call 'lumpy mail' to get an envelop opened and then compelling copy to get someone to respond. 

I was selling consulting services a while back and sent a lumpy mail to a large privately owned business up north. I received a terse email from the owner telling me I should dial it back a bit and to take him off my mailing list.

I responded politely and then he shot me back this email: 

Didn't mean to sound so rude; 

I'm not that kind of guy. We all got a good chuckle out of your presentation. Have to admire anyone who thinks out of the box! It's hellfire hard to get heard these days.

We're spending about $100k overhauling the website over the next year, so we're all set for consulting, thanks.

I didn't land them as a client but I got noticed...and sometimes that's the hardest part!

Stay disciplined and use a good CRM to schedule follow up and keep notes. When it comes to sales, only 2% of sales actually occur on the first contact. Eighty percent occur after the fifth contact.

Hey @James B.

The book is coming along and is out at the designer now making it look great (I hope!).  It should be ready to share by late next week.

@Linval T. - Great points!  I think it comes down to treating tenants the way we would want to be treated in the same situation...respect and appreciation are important.

@James DeRoest

We actually have an extremely disciplined underwriting process...but I appreciate the suggestion.

It's also important to note that in some cases we take over management from another property manager or a house that's been owner managed...so we inherit the tenant.

@James DeRoest

Good points...I believe in certain circumstances the house will not need much work...but in other cases, it could need things like:

• Paint
• Carpet
• Kitchen/bathroom flooring

Some tenants are harder on houses than other...normal wear and tear without trashing the property. 

We deal with a lot of B/C/D property here in Birmingham and so it's rare that a house turns and there's not at least $1,000 worth of work...most of the time it's more.

For those of us involved in rental real estate investment it’s common that we focus on the house as our asset. I mean, why wouldn’t we? We spend a considerable amount of time sourcing a house, buying it, fixing it up and marketing it for rent.

A different perspective was presented to me the other day when I sat down with 35 year Atlanta property management veteran Robert Locke. Like most of us in the Property Management world, he got his start buying and holding rentals.

Now he manages over 1,000 rentals for owners throughout the city.

Not long ago one of his property managers came to him and told him a long-term tenant was moving out of a house they’d lived in a long time. When Robert asked “How long?” the PM told him 20 years!

Incredible.

Robert told me that got him thinking that the tenant is the real asset to the investor...not the house. His point was that when a tenant moves out, the cost to the owner to put that house back on the market (turn) is not money that he/she can recoup from another tenant. It’s sunk cost.

What’s the industry average for a turn? Is it $3,500? If the house is older and the tenant rougher, $5,000?

Imagine doing that every year or year and a half....begins to turn your great investment into Tom Hank’s The Money Pit.

So what was his point? It was more like an epiphany than a point. He came to the conclusion that the tenant is the real asset and that investors and property managers alike need to focus on what he calls ‘celebrating the tenant’.

That simply means making them feel like they’re important and appreciating them in ways that they wouldn’t want to risk having a different landlord.

I’d love to know if you’ve done this with your tenants? If so, what were some of the things you did to make them feel appreciated??