What exactly is a "co-living turnkey package"?

I'm brand new to this, so please assume I know nothing.

Someone at a meetup pitched me on a 3 bed house he'd sell me at 240,000 already set up for room rental. Furnished, tenants already in two of the three rooms, and his company would manage it for 15% of collected rent plus a leasing fee of half a month's rent per room per lease.

He showed me a sheet saying 2,550 a month gross at 850 a room, and a net of about 1,100 after everything.

Things I don't understand:

The leasing fee is per room. If rooms turn twice a year each, that's 6 leasing fees a year, which by my math is 2,550 a year, or a full month of gross rent. Is that normal or is that a lot?
The two tenants in place, do their leases come with the house? Nobody explained that part.
He said the 850 includes utilities. His sheet has a utility line of 180 for a three bedroom house with three people. That seems low even to me and I've never owned anything.

I'm supposed to give him an answer this week. I don't have a reason to say no yet other than I don't understand it.

Answer

2raj_mehta14CapitalPRO6

I spend my time reading about notes so I'm out of my depth on the operations, but the thing that jumps at me is that he's the seller and the manager. He sets the price you pay and then earns a fee on the rent roll he told you to expect. Those two roles pulling in the same direction is a normal arrangement in this business, and it also means every number on that sheet came from a person who gets paid twice if you believe it. I'd want the actual bank deposits for the last twelve months, not a sheet.

2 replies

2gregpowell66AG4BPRO8

180 for utilities on a three bedroom with three people running showers and laundry on their own schedules is not a real number. In most climates you're at 280 to 400 once you include water, sewer, trash, power, gas, and internet. Ask for twelve months of actual bills.

The leases do usually transfer with the sale, and you should get copies of all of them plus proof of what deposits are held and where, before closing. If he can't produce signed leases for the two occupied rooms, the rooms aren't occupied the way he says they are.

And yes, six leasing fees a year is a lot. That's the cost of the model, and it should be sitting in the expense column of his sheet, not hidden in the deal-week rush.