We buy in strategic areas of the city where we have a track record of success. Typically the rents in these areas are $895 and above. Rents and values generally follow each other; in most cases, a $750 home will not be in a $90,000 area, nor will a $950 home be in a $65,000 area. The map below shows a track record of where we have bought homes since 2013.
Our goal is to sell you a home with very little maintenance required in the first couple of years of ownership, which we have been successful in achieving. With most homes we purchase in a distressed state, even with our renovation and the buyer’s home inspection, we are realistic that when a tenant moves into the home, a few other minor issues may arise. Therefore we offer a 90-day warranty within the four walls of the home, and 180 days’ warranty on the HVAC system.
Most of the houses we sell have new HVAC systems with a manufacturer’s warranty. Also keep in mind that anything we work on during the rehab is covered by our vendors for one year. In other words, if we installed a faucet and that faucet leaks, we would cover that for the first year.
We do an extensive rehab to each and every house. If you look at our prior completed projects, you will notice that all the houses look very similar. That is because regardless of the condition of certain items, we take and replace with our spec item. For example, we have bought homes with brand new carpets in the living room and den only to pull them up and install vinyl plank flooring, because we know it will save our investors thousands over the lifespan of the property.
Our typical scope of work includes ceramic tile in the kitchen, new countertops, designer ceiling fans in the den/living room and master bedroom, faucets replaced with brushed nickel designer faucets, new light fixtures installed throughout, interior/exterior paint, blinds, mirrors in bathrooms, landscaping and exterior improvements. We also address any deferred maintenance such as tree limbs over the house, faulty gutters, bad irrigation, fence issues, etc.
Our goal is to provide the best-looking rental home in our market that will attract tenants and reduce maintenance. On average, if we put on a roof and install a new HVAC system and hot water tank, we are spending $25,000 to $30,000 per renovation.
We believe we are unique in our market in several areas. While we do not have insight into every company, we feel that on the surface, our homes end up being the nicest rental homes on the street. Because we have taken over management from several other turnkey providers’ management companies, it seems a lot of deferred maintenance is ignored by other companies such as tree branches over the house, external structures and fences. These are all items we address. We’ve also noticed during these management transitions that many of our competitors are still using carpet in high-traffic areas.
From an acquisitions standpoint, we see a lot of other turnkey companies buy houses throughout much larger areas, whereas we are strategic in selecting our locations. Other aspects that make us stand out include our customer service which is a daily focus and constant conversation regarding how we can take it to the next level. Finally, our Property Management is routinely recognized as innovative with great customer service.
We get this question all the time. Many companies, regardless of the business they are in, will have a tough time answering this question. We have been buying rental homes for ourselves since 2007 and have no plans to quit. The model of how our company does business has dramatically changed since we first started, in conjunction with market evolution, thus why several businesses who started offering cash flow properties to investors are no longer in operation.
There is no doubt that there have been challenges along the way, but being able to adapt is crucial in any business. In the past three years we introduced Little Rock within our offering, and in the past year started offering multi-family deals to our investors. In the next five years, we plan on continuing and building on the success we have had while watching the real estate market closely to stay relevant and evolve as necessary. We see ourselves doing larger multifamily deals and continuing to grow our Property Management company.
We love what we do in real estate and plan to be in this business for decades to come. The foundation of our business is solid and we are a family-owned company that could certainly be handed down to the next generation.
Our entire business model is geared towards offering complete services to out-of-state investors. It is what we do on a daily basis. We encourage all our investors to come visit the market and meet the team; that alone helps most new investors get over their fears of out-of-state investing.
Next, we encourage all our investors to order a home inspection to make sure they are not buying a maintenance money pit. Most of our investors typically purchase property with conventional financing, which requires a third-party appraiser to verify the value of the home. Our Property Management makes every attempt to be transparent. We scan and upload anything we can such as material receipts, manufacturer’s warranty, vendor invoices, and “before and after” pictures of our repairs, and inform investors regarding every maintenance call that comes into our office.
If you still have questions or concerns about anything, simply call us and we will walk you through these concerns. The bottom line is that this is a relationship business, and we desire to forms these relationships on the front end so that we have a great long-term partnership.
Absolutely! This is a great question; after all, it says something if those you are considering buying any financial product from, including real estate, are not actively vested themselves. Currently among ownership, we have more than 50 units in Little Rock and Memphis. Our business was founded on the simple concept of doing what we have been successful at and offering those services to our clients. We continue to purchase for ourselves and seek to have all our units paid for over the long term.
Yes, we go on title of everything we sell. After the purchase, we will rehab the property with the intention of selling the home to another investor. Typically we are on title for 90 days as that is our cycle to buy, renovate and sell.
No, you should never pay more than the value of the home. We will never expect you to pay more than the house is worth as that is simply not necessary. We can provide a high level of service and great product without asking you to overpay. When providing 100 deals a year to our investors, realistically, not every property can be profitable from our end. We acquire several properties a year knowing the margins are slim, but we feel they are a good opportunity for our investors.
Flipping homes to investors is much different than flipping homes to owner occupants like you see on cable TV. Because flipping homes to owner occupants is a one-time transaction, then a high profit margin should be desired to make it worth the risk. However, flipping homes to investors is different as it is not a one-time transaction and there is much lower risk than flipping to owner occupants, because we have a large pool of buyers for our investment homes. In other words, it is worth our time to supply a home, even at a very low margin, to an investor simply because we know we will sell it and we are able to grow the property management company with each transaction. Just because it is a low margin for us does not mean it should be overpriced to you.
Sometimes, but most of the time no. To get deep discounts, you would need to purchase direct and facilitate the renovation, which is not our business model and not what our clients are seeking. With the turnkey model, when working with a responsible turnkey provider, there is a premium price to the home that is often close to the appraised value. This is because our investors are seeking a passive investment that is only possible if the renovation of the home is done correctly and all deferred maintenance items are addressed.
It is virtually impossible to provide a high-quality product that will maximize cash flow if corners are cut. A good example of this is looking at two properties hypothetically as if they were next door to each other. House #1 is being sold for $70,000 and house #2 is being sold for $80,000. House 1 has a 15-year-old roof and 15-year-old HVAC system with carpet throughout and vinyl rolled kitchen flooring. House 2 is renovated retail for the area, with a new roof, new HVAC, ceramic tile in the kitchen and vinyl plank flooring in high-traffic areas.
Which house is going to cash flow more? House 1 has almost $9,000 in deferred maintenance within the first 5 to 7 years of ownership, which could eat four years’ worth of cash flow, not to mention replacing the carpet in the high-traffic areas every two to three tenant turns. House 2 will provide more cash flow through less maintenance, as the large capital expenses are moved out by 15 to 25 years. By then, your property could be paid off or you could consider refinancing and taking the equity out tax-free to make improvements to your property or invest in more real estate. If you use financing to purchase the home, then that $10,000 in upgrades only costs $2,000 to $2,500 in additional out-of-pocket cost (with a down payment of 20 to 25%).