Turnkey Properties In Review | REIal Talk | Turnkey | EP. 50

Foreign. Welcome back for another episode of Real Talk. That's Real Talk for real estate investors. I'm Chris Sonino, joined today by Mark Woodring, podcast number 50 Century. That's an age almost there. Almost. Today we're going to be talking about past property overviews. So as we said in our vlog, it's kind of just what are some real data of how properties are performing after we're like the to be continued and the movie credits, like, what, what happened? So like we said our vlog, we picked a couple properties that are varying, different situations. Some are slam dunks that were super easy to rent, are, well, performing above what we expected. Some were a bit of a struggle bus to get to where we needed to go and it took a year, but. And some of them were kind of in the middle. They did kind of what we expected them to do, maybe a little bit better.

Right.

So we're gonna be reviewing four properties, a total of five units because one is a multi family. And then kind of get into some of the owner experience, tenant experience, all that good stuff. Stuff.

Yeah, absolutely. You know, so just starting with, with the duplex that we were going to talk about.

Yeah.

You know, I remember when we acquired that property, you know, it was a, it was a lengthy move out process. So our numbers were months forecasted down the road. And so, you know, for us to do the ARV and the rents.

Right.

You know, I know that you'll be able to talk to the rents a little bit better, but we had only forecasted around 1100 per side.

Per side. Yeah.

And then the ARV of the property as well. And then so by the time this went under contract, I mean, this one was a big win, right?

Yeah, actually. So to give a little bit more clarity as perspective, so this is a duplex located in Monroe for our clients. An enemy's sake. We're like, we're not going to provide like property addresses or anything, but yeah, it's located in Monroe, which was kind of a emerging submarket for us. I mean it's the, at the time was the only property we managed in Monroe. It was a lengthy move out process. It was also kind of like a tail end of COVID So there were still some like restrictions on how we were moving properties. Actually, all of these properties we're going to talk about today were all kind of in that process during the tail end of COVID Early to mid to 2020. Well, no, early 2021. Kind of the tail end of 2020. So a lot of these are in that kind of category. But this duplex, it's One side is a 2:1, approximately 675 square foot. The other side's a 3:2 with 300 more square foot. So I wasn't involved in the rent comp process for freedom at that time. Not, I mean I was the hey Chris, can we fudge the number a little bit to get it here conversation. I wasn't actively involved in that. I am a little bit more now for sure. But yeah, so we did, we just did projections based on probably rentometer and a few other variables. 1100 is the number that was came up with several months later when we got through the rehab. We're starting to put a contract together. I think the contract went out. You got under contract quick. Because even with the projection of 1100.

Per side, numbers were cash on cash.

Yeah, numbers were great. Actually. You have the pro forma in front of you. Numbers are great.

Yeah, absolutely. I mean, so this was a cap rate of 11.

Right.

And cash on cash of 23%.

It was, I think the owner that bought the property, he's still ecstatic about having this property.

Yeah.

However, the day that it went to listing, so the day that we built the leasing profile for that, an ipm Independence Property Management, we built that and we always send like an email to the owner saying, hey, your property's going live. Congratulations. Here's the links. And I immediately got a phone call within like 15 minutes. Actually I don't have anybody knows this. Within 15 minutes this guy calls me and goes, are those, are those rent numbers correct?

Right.

And that's because when I did our analysis right before we moved it, I think I told you about the rent comp. I mean probably within days of it closing. Right. Hey, I looked at the rents. This is where we're at. The 32 listed for 14.99. So $399 over our performance number. The duplex or the, the other side, the two unit or the two bedroom. Excuse me, it rented for 12.99.

Yeah.

And when I say these properties rented in days, I think the 1499 one, like we had showings in a couple hours and one of those showings rented it. So performer said, you know, 20 $200 out the door per month. Rented within a few weeks tops. We're talking about like $2700, $2800 a month.

Wow.

So and, and the tenants are still there? Actually there is one. One of the units that the tenant did just recently moved, but like they left it in back in condition. All we had to do is clean it. It's already going back on the market and it's going to rent for probably a little bit north of what we already had rented it for. So owners ecstatic. That's a slam dunk.

Yeah, that's a, that's a win. And yeah, we're hoping obviously to find more of those.

Of course.

I mean, would you say in general that like, you know, now that we're kind of turning the corner of COVID and, you know, you have tenants that aren't going to be able to maybe use as an excuse or something like that, maybe raise rents? You mean, do you see, do you see that continuing to follow the market that rents are going to start ticking up?

Yeah, yeah. So I think that's definitely something that's coming in. It's growing. There's still other variables and inflation's a real thing. And are the people's salaries aren't raising the same rate as the cost of, I mean, gas Is what, 410 right now? That's insane. But I mean, the rate, the market, rent market is doing the same thing. It's increasing on a pretty steady rate. It's kind of leveling out a little bit. But yeah, I mean, we, we build rent increases into our renewal process and that does change. I mean, not every. I mean, some properties will increase on a bucks, some will increase more. Realistically, 15. Right. Dollars. So it kind of depends. It depends on the sub area and property performance and lots of other factors. But yeah, absolutely. Rent creases are in the cards.

Well, because I know, you know, transitioning into a different property now is that, you know, so we had one that was down, you know, near a hot flipping spot, you know, in, in Dayton. This particular one was, was, you know, had some issues, you know, getting going. I know that the property itself appraised for more than what we had sold it for. So I mean, there was some equity in there for the owner. And you know, maybe I, if, if you'll, you'll remember this better than me that there was maybe some initial rent issues going on with that one. But now this investor has like, approached us that, you know, they seem to be doing better. The lease got renewed and all of a sudden they're like, I want to sell it. And it's like, why you're finally doing great.

So this particular. So you mentioned actually. So the owner had a kind of a bad experience and then he falls in the category of another property we're going to discuss today. He had Kind of a bad experience because. Well, first off, the property's on Wayne Avenue. We're talking about the same one, properties on Wayne Avenue, which if you're familiar with Dayton, you're familiar with our market. It's a great flipping spot. Like, a lot of people are buying properties, they're getting good right there in Belmont, good returns on their investments. But when it comes to renting, it is a main strip. I mean, it's like a busy, busy road. It's not always the easiest thing to rent. Like, we've had trouble renting it. We've had a couple properties on Wayne that are like, okay, it takes me a little bit. I think we went a back and forth competition of who could sell, who could rent it faster.

Right.

On a different property on Wayne. So a little fun in August competition. But yeah, so for this one, like, it was a bit of a. He had a bit of experience. The resident wasn't the best in the first few months and she was affected by Covid. She had had some employment repositioning and nothing evictions or anything like that. She was good on paper. But yeah, the owner had some pain in that and it was. It was difficult to keep him just engaged and on board. So honestly, I wasn't overly surprised that he was reaching out to us about selling the property. You know, we encouraged him, like, hey, let's kind of just see how this tenant performs. I think when he first approaches, like, we were like six months in the lease and I was like, the tenants paying their rent, it's just late. And it was just. It was a bit of a conversation. Sure. But like, as today, this three one and a half is 1300 square foot and it's rented for 1123.

Yeah.

Which our Performa we projected. I mean, I don't actually. I don't want to perform a set. I think 1050. We rented it for 10.99, so a little bit above.

Yep.

Not a whole lot, just a little extra gravy.

Right, right.

But that's actually just renewed and they renewed for 20. Almost $25 more.

Yep.

And they're been. They've been on time consistently for the last six months, which is why we even offer the renewal in the first place. Tenant, the owners and it should be in a better position now recouping any losses. And honestly, this property is projected to perform even better the rest of 22 and into 23 with another rent increase coming. Yeah, I mean, we're actually probably going to be having conversation with that client tonight and saying hey look, this is what's going on and it's actually a good property. Like I would be excited to have a property like this that's actually cash flowing. The numbers still look great.

Yeah, the numbers are still great. It had great cap rate from the very get go and like you said, with those just little marginal increases, those cap rates get better over time. Again to me, you know, when I have this conversation with the investor, you know, of course we're going to do whatever it is that they want. But at the end of the day, you know, my position would be you're, you're in a great spot, things have turned around, let it ride, let it ride for a year. I mean, unless you're in a financial position where you need to liquid, you.

Know, which it does happen.

It does happen. But you know, if it's, you know, something like that. So yeah, again, another big win. But again you have to ride some of the storms and I think that we're all starting to see coming out of COVID that things are returning to normal.

Right.

And so you had a couple other properties.

Yeah, yeah. So this one is actually, it's not too far from Wayne Avenue. It's a property on nil.

Oh yeah, that was a beautiful house.

Yeah. Well the problem with that house again, tenant issue, when we first acquired it, we kind of tenant wasn't taking care of the property. It might have something to do with the seller too. They probably just didn't take care of it either. But when I talk about intentional vandalism, like they removed windows, doors and I'm pretty sure they like they poured like tar. If I remember correctly, they poured like tar or something on the floor just to make sure that that's the rehab was going to be a little bit more.

Cuz those were beautifully redone wood floors. I mean so the restoration of that home was just amazing.

Yeah. So originally we were going to keep the hardwood floors and then it turned out, I mean they still turned out great. But I mean when we talk about those floors shined at the end of the rehab, I mean you could see your reflection of the floor.

Awesome.

Rehab took a little bit longer. Obviously we weren't budgeting in vandalism. I think we do now. But that one was. Another one's a little bit slow to rent. Like it took us, I think it took us about a month.

Wow.

Maybe a little bit more. And the issue was never the rent price, it was always the location.

Right.

The location was an issue. And again it's right off of a main Strip, I think it's on a one way street with that turns into another one way street. So there's a little bit of logistical movement there that I can understand would be a deterrent. But it's a 1200 square foot place. Like it was a pretty decent sized rental.

And that's out near Patterson Park.

Yeah, Patterson Park.

Great, great. You know, buy and flip, buy and hold area. So again, as. As time has, has gone on, we've seen we've acquired more properties there.

Right?

It's.

Yeah, and I think that's. You bring up a good point there. You're alluding to a good point there is that sometimes when we acquire properties, like for example, our first property on Wayne was, I mean, I think it's sold two times since I've managed it. Two different clients have owned it. In part that's because like we, we are entry into that area and then all of a sudden we buy more and other investors buy in that area and slowly we're revitalizing the whole neighborhood. And Nil is a perfect example of that. We bought a property that was in a kind of a distressed neighborhood. Not, I mean not, not terrible location, but not ideal. I mean we're not talking about Belmont, we call Bel Money. But it was an area that definitely needed some love. And over the course of the last year it's done exactly that. Like that property is still rented today for just north of $1,200. Resident pays on time every month. Owners having a great experience. Like I said, she had a little bit of a feeling at the beginning when we first getting it rented because it was slow leads, slow interest. It was one of those things people turn in the block and they're like, oh, I don't know if you actually get to the house, the household itself.

Yeah, absolutely beautiful house. To show. I remember I had an out of out of state investor from California. That's one of the homes that I shown them because I really enjoyed the way that, that rehab. And you know, again like we, we've talked about this in different podcasts that we know the neighborhoods and we can see kind of the future of where it's going and where we're buying. And this particular California investor, he was just amazed with this neighborhood. He was like, wow, you would call this a C neighborhood where I'm from. This is, you know, this is a class brother. And so yeah, I'm happy for her. You know, this investor that owns this property, she's actually engaged into buying another property from us. So again, I think that we were able to kind of turn those pain points into, you know, we're going to make it right.

Yeah.

We know the neighborhoods, we know what we're doing. And now that, like you said, we're coming out of that tough time that everybody was in and is business as usual.

Yeah, yeah, absolutely. So, I mean, there are wins, there's fails, and there's properties that we haven't been able to bounce back from fully.

Oh, man.

Yeah. But for the wins, for the. For this particular client in particular, like, she. She did have a bit of a pain point there. And the fact she's buying more, I think she owns like three or four now. Well, she's in contract for the fourth, I think.

Yep.

The other property that I have, my list, like we talked about it before we came in here, like the pro forma happened forever ago. I mean, that was probably when you first started. And it's in an area. Dayton. That's not. It's not a bad area. We don't own very many properties in that direct vicinity, but it's another. It's actually a little bit of a smaller place. It's only a thousand square foot when it comes to single family homes. It's a three. Three one and a half size. One half bath was pretty decent sized space. Smaller for a three bedroom, but it's running for thirteen hundred dollars.

Yeah.

Which given this house and location, the fact that the same tenant's been in there for the last thing, I think they're going on their second lease now. That one, I don't remember what the pro forma was, but I remember that it rented for more than what we'd expected. It may have only been like $50 more, but that one was. This one was like one of those ones where like the tech, like I had to look for it when Caitlin was setting up everything for this podcast, I was like, oh, I haven't talked to that tenant in a while. Which is a good thing or a very, very bad thing.

Just send me the chat.

So, yeah, so when I look at that, I'm like, I look back at the client and experience and it's like I haven't had hardly any maintenance. They haven't had any. Hardly any issues with the tenant at all.

Right.

It's on Gideon.

Yep, absolutely.

It's a nice little area. I mean, it's not. Sure. Yeah, it's not Belmont, but, you know, it's definitely a good area. That one is. We don't have anything big to talk about that one. It's just Kind of straightforward.

Yeah.

Numbers looked okay on the sale.

There's a new cap rate.

But it was, it was.

I would say for IPM that that's probably one of your favorite things.

It's one of my favorite things.

When we place a tenant, sell the property, tenant in it, send you your check, I'll talk to you later. You know what I mean? Like, yeah, that's got to be a good feeling. And so, you know, although that one may not have been like some of the big wins that we were talking about on the other ones, but if you could do that, you know, tick tock like a clock. Every property that we have, it's, that's a good, that's a good feeling.

I think we, we put it on the list because it wasn't a problem. It wasn't one where like we undershot the projection or it wasn't one that we had a pain point that we recovered. It was just a easy rent, easy to rent, easy to maintain client. I think they have more, actually they do have more properties. It's just nice to have those types of assets. So we have things all over the spectrum. Yeah, I think to bring it full circle, the whole purpose of this was I think we talk about, we're very open about our failures in this company because we use that as a tool to get better, which is what you should in the business. We're open to the Better Business Bureau and Google reviews and all that. So people, when they tend to have bad things, that's where they go. They go to the public places and they put those things. But we want to talk about the wins. We want to talk about the fact that hey, there are people that have good experiences. But to bring 100% around forecasting, yeah, like it's, it's a science, it's an art and it's not always perfect. And sometimes most of the time, it should play into the owner's favor. I know on your side, the sales side, the forecasting, sometimes we have to look at the rent comp or not the rent comp of the sales comps and adjust the sales price.

Yeah, absolutely. I mean sometimes when we buy these properties, you know, if they're tenanted, you know, it may take a little time to have them out. So it takes a little longer on the rehab. The ARV that I had for that property could be six months old, you know, and it needs revisited and same thing with those rental projections or something like that could be a few months old. And so, you know, we definitely want to dial Those in as we get closer to that. And so with that forecasting, one of the things that we had talked about earlier is taking a look at those neighborhoods that we're shaping and trying to buy ourselves in that like, you know, how about that one street we have in Cincinnati? We literally bought five or six houses in a row.

Yeah.

We are changing the price point of that single handedly.

And I'm sure where there's gonna be a podcast just for that.

Yeah, absolutely, I'm sure there is. Stay tuned. But yeah, we bought an entire street in Cincinnati and we're changing that. And so Dayton is definitely a market that we feel 100% with and Cincinnati we feel very comfortable with. You and I have been doing real estate in Cincinnati for a while now, but there are neighborhoods that are still there that aren't untouched. But you know, I mean, we may be first to market on that. As an investor, I would hope that that's one of the things that you want to do is be the first kid on the block. I mean, getting the lower price point, which would eventually give you the better cap rate. Because as your property values go up and as your rents increase versus being the last kid on the block to buy, you're gonna get, you know, the street completely changed.

Right.

You know, you may get the higher rent, but you're also gonna be paying the higher price. And so.

Right.

Just things to consider again, you know, I know that we drill in. This is, this is a buy and hold strategy. And you know, trust us that you know that we, we know what we're doing.

Yeah.

You know, again, we do make mistakes. We definitely do. But we try to make it right. Yeah, we definitely try to make it right.

Yeah. So when you were talking about that, it made me think of like I do some day trading crypto and the stock market and stuff. And you know, there's this, you know, sell high, buy low strategy type thing. So you talk about that. I'm like thinking, okay, yeah, like you get in Bitcoin 2008, that's different than getting in Bitcoin in 22. Right, right. I mean you're dealing with. It's the same exact asset, but different price point, right? Different. You're going to get different returns. Real estate's the same way. You're talking about buying a specific neighborhoods that are performing. Actually when we do bird dogs now, we do company bird dog days. For those of you who don't know what bird dog is, there's a whole podcast on that. But essentially we call it driving for dollars is what some investors call it.

Yep.

We canvas the neighborhoods that we buy in, we determine if we want to buy certain properties, and we try to try to locate the owner and then try to make offers. It's a whole premise of what C4WAH does.

Yep.

But when we do that, like, we do take things into account like this, like Packer, the director over there, he'll. He'll reach out to me and say, hey, Chris, where are your. Where are your. Where are your win. Properties?

Right.

So these properties are on that list. Right. And these are the ones that our owners have the best experience, that our residents are the happiest, that the rent's paid on time. Because it's not about us buying a property and selling it. Right. It's about an owner having experience that's worth the purchase.

Right, right.

And so we can this specifically based on our wins. Like where. Where are their clients having the best experiences?

Absolutely. Like past performance. You know, it can definitely, you know, help with the forecasting. I mean, I know in particular that I think just recently we sold a property that may have had some negative comments online about. And it's like, you know, for those people who are casting those negative comments, what's their profession, what do they do? How are they able to make those particular accusations or have you. Versus when we are forecasting that property, we may have multiple rentals in that area.

Right.

We may have others that are being purchased, so we can kind of see a little bit into the future on those particular properties. And so. Yeah, I mean, you know what I'm talking about.

Yeah, actually, I was, I was avoiding that. That message thread when it was going on, but. Yeah, yeah, yeah, no, I completely. I know what you're talking about. And you know, it's actually kudos to that investor too, because as, as realtors, we always tell people, do your due diligence.

Yeah.

So that's exactly what he's doing, is trying to do his homework. And we appreciate that.

Yeah.

But we also need to be real that, hey, these are projections and they may be right, they may be wrong. We're giving information best we can. And that's part of what my job is. Yeah, yeah, I'm a property manager and yeah, I run the property management company. But honestly, my job is to set expectations, be very, very clear about what is going to happen and what the potential blowback is or, yeah, negative, anything positives, all that, and then try to deliver on those. So if we set a projection, like I see performance, I mean, they hit my Desk. And you know, I, most of the time they're like, oh, yeah, they're fine ones that I'm concerned about. The rent prices, like, we bring those up because we're thinking about what is the client going to experience when they buy this property. Is the resident going to, is it going to rent?

Right.

And then beyond that, we're past Covid. I'd like to say I'm going to turn the corner. I'm going to knock on wood and say we're past Covid, guys, but there's a whole new economy and what we're dealing with. So next year, what am I going to be able to rent this property for? Sure, because I might set it at $1,000 because that's what the market's saying today. But is there going to, am I projecting, forecasting that it's going to be able to perform that way or better next year? Because what I hate doing is dropping rents on properties when we renew.

Yeah.

So it's more about, it's, it's 100% a buy and hold, long term game.

Yeah, absolutely. I mean, it's one of those things that, you know, you and I have maybe even talked about this earlier. You know, say, for example, we have a property that's, you know, forecasted around $1,000, but you may only get 950. You know, you would probably say that that's not the end of the world. Like, hey, it's rented. You, I mean, you're paying your mortgage.

Absolutely.

I feel like sometimes and, and even me as an investor, I look at, you know, so here's my cap rate today. If I were to raise it, you know, a few percent each year, knowing what my rent is, what's my cap rate for the future.

Right. Yeah. And then factor in appreciation and, and all that stuff.

Exactly. So I mean, you're talking about future cap rates. So you know, in particular, like say, say this, this performer we were talking about on the duplex that had 11%.

Right.

I mean, look at like what his cap rate is right now. Right. 20. And so, and then some of these other wins along the ways, same thing. We probably had it somewhere around eight, maybe even nine or something, you know, like our typical cap rates. But, you know, two, three years after owning these houses, they're probably at a 10% cap rate. And so that's, you know, also I think something to keep into consideration is as we've turned the corner here in Covid, your cap rates are going to go up.

Absolutely.

So.

Yep. So, yeah, I guess I Mean, that's. That's pretty much it. I mean, forecasting is. I guess, with. Like we said, it's. Yeah, there's many factors that go into it. Yeah.

And I'll continue to chase you down the hall and pick your brains on whether my rent numbers are right. I mean, it definitely helps that you have, you know, over 500 doors. So. Yeah, there's not a lot of neighborhoods that we don't have at least a few properties in, so.

Yeah, there's not very many that we don't have at least one.

Yeah, that's a great asset. That's a great asset.

Yeah. Well, you know, that kind of comes back to, like, we forecast it. It's coming from multiple. Like Packer, right. When he's doing an acquisition, doesn't always look at my rent. Right. He looks at what's like. He'll look probably a Rentometer or there's another software we use that does something similar also. Just personal experience, because we're all experienced in our fields. And then when we're doing the rehab and we're getting through that process and you're starting to build a performer and we're preparing it for sale, we kind of start pulling in my portfolio and then Rentometer and other projects we've done and all of those things to kind of build an idea. And then when I say, hey, we're going to actually build the leasing profile, we have additional tools that we use in our company in addition to the tools that we've already talked about, including our portfolio. So by the end, by the time we get to leasing, the rent is pretty much locked in to fair market, above market, if possible, pricing. Now, whether or not the property performs, that's a whole nother layer of complexity beyond that.

Yep.

But that's more than black and white ink on a paper that can project that. There's a lot of things that go into that. So I think that that's kind of why we brought these properties in today, because they look great on paper. They may not have performed the greatest in the first couple of months, but now they're. The owner's in a better position on all of these properties than when he first bought the property. And I think that that's a key thing to take away from this.

Definitely got to celebrate the wins.

Yeah. Celebrate the wins.

Celebrate the win.

All right, well, I don't have anything else.

That was fantastic.

Yeah, I'm pretty excited now. I have to go call one of these clients, by the way. All right, well, that's all we got for today, episode 50 for Real Talk. It's real talk for real estate investors, but nice talking to you guys. We like to end these by saying invest smart, live happy. Take care.

Thank you.

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