Trust is Built Over Time
A real estate investing story told by Joey Noel of RookieRealEstateInvestors.com
Things started off really good with my turnkey investments. No repairs, no vacancies, and no complaints. The money was rolling in and life was good. I thought it was easy. You find a house, buy it, rent it, and make some money. I managed to purchase 5 properties and I truly thought I had turnkey investing in the bag. I guess you could say I was in the “Honeymoon Stage” of turnkey investing. Then 6 months later reality set in and my honeymoon turned into a nightmare. It was at this time when I started to refer to the companies I used as the “Good Turnkey” and the “Bad Turnkey” company.
My nightmare began slowing and obviously came from Bad Turnkey. I had used several turnkey companies, but Bad Turnkey had some red flags right from the start. Naïve to investing and living on cloud nine I was determined to make it work. I had a deal to purchase 2 homes completely renovated and rented. It took some financial creativity but eventually I found a way to make it work. I got inspections on both homes and both needed and extensive amount of small repairs. I didn’t think much of it, because bad turnkey reassured me he would take care of everything. He sent me pictures of all the repairs on the first home so I didn’t feel it was necessary to get a re inspection. I ended up buying this home all cash and it was actually my best performer for the first few months.
The second home began with an issue with the current tenant not paying her rent and needing to be evicted. This was my first red flag. I couldn’t understand why a tenant is in this situation after only being in the home less than 3 months. I asked to see the tenant application and found out she had a credit rating in the 400’s and a horrible history. I also learned that the home was most likely overpriced for the rent. My Good Turnkey tends to keep the rents just under market price with hopes of decreasing vacancies and retaining good tenants. Good Turnkey also would never accept a credit rating in the 400’s. I immediately expressed my concerns to Bad Turnkey but he reassured me that his property manager is one of the best at what he does and that they would have another tenant in there in not time. I fell for it and moved on with the process.
Like the first home pictures of the repairs were sent to me, and I felt comfortable that everything was getting done properly. However this time I decided to get a re inspection. The thing that caught my eye the most was that the report identified termites in the crawl space along one of the main beams. The report advised to get a termite inspection to determine if they were active or not. A small termite trap device was also identified in the front of the house. Why was this trap there? The re inspection came back and half of the stuff that was agreed to be fixed was not fixed. I sent Bad Turnkey a text message of a list of things that still needed to be done and also advised him that I was going to get a termite inspection. His reply via text message was “I’m backing out of the deal”. Another red flag arouse. How does a professional business man back out of a deal like this through a text message without a reasonable explanation? We also had a contract. Do these contracts really mean anything if someone can just back out like that whenever they feel like it? Regardless with growing suspicion of Bad Turnkey I was not all that disappointed when he backed out of the deal. After a few choice words between the both of us life went on. But remember I still had purchased that 1st property from him.
4 months after the purchase the tenant complains to the health department that there is mold in the basement. The health department does an inspection and determines that the mold is due to a pipe in the laundry room that is not draining properly and a dryer that was not connected properly. The home was past the 3 month home warranty however Bad Turnkey felt he should try to help. So he goes there and makes his own determination that the mold is the tenants fault because of the improper connection of a dryer and the fact that a storm drain was plugged and totally disregards the part that says it is partly related to a pipe that is not draining. I decided to review my home inspection once again and found a part where it stated “There are signs of water intrusion and possible mold”. I brought this to Bad Turnkey’s attention and his reply was “I checked that place for mold, and there was no mold”. My inspector suggested that I get a mold specialist to assess the issue which makes me think what qualifies Bad Turnkey to determine if the home has mold or not. I blame myself for this one as I should have followed the recommendation and got the mold checked out.
I spoke with Bad Turnkeys property manager and we agreed to get the mold taken care of right away. Although it was partly due to an improper dryer connection and partly the tenants fault I decided I would pay for it anyway to keep the peace in the home and the tenant. However the PM misinterpreted my clearly written email to fix the issue and approached my tenant to fix it. The tenant refused to do so, quit paying her rent, and ultimately vacated the property without telling the PM. I did not find this out until I contacted the PM 2 weeks later. At that time he advised me that the home was vacant and that he had already started the process of eviction before she vacated the property without even consulting me on the decision. And despite all of this the mold issue was still never fixed and I was 5 days late for the deadline to get it fixed as stated by the Board of Health.
There was only one thing to do…Call Good Turnkey and ask for help. I fired Bad Turnkey’s PM and Good Turnkey went to the property immediately after I contacted them. The property was completely trashed top to bottom and according to Good Turnkey it was going to need another rehab to get up to rental grade again. I thought to myself how could this be? The property was just rehabbed months ago. The entire home needed to be painted and new carpet as the tenants completely destroyed the home. Due to the mold the entire basement had to be gutted as well. The initial quote from 2 contractors came to $9,000. However Good Turnkey managed to be creative and got it down to $6,000. On top of all this Good Turnkey immediately contacted the board of health and explained the situation. She also investigated with the courts to determine the status of the eviction process in case I wanted to pursue the tenant for damages. Most important Good Turnkey reassured me that she had my back and put me at ease with the situation.
Good Turnkey truly saved my ass. What would I have done if I didn’t have Good Turnkey to fall back on in this situation? Think about it… I am a million miles away and know absolutely nobody else to help except for them. Can you imagine how difficult it would have been to coordinate the repairs of the property, finding a new property manager, and transitioning the property to that manager from out of state? Moving forward I have learned that you need to protect yourself in all situations to prevent these kind of things from happening. Listen to the red flags that pop up, and trust your gut feeling about people. Verify everything that is being told to you, and slowly build a trusting relationship with your turnkey provider. Keep your guard up and ask others for help when you need it. Bad Turnkey gives turnkey investing a bad name. Good turnkey is hard to find, but if you do find them you can be very successful in out of state real estate investing.