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Turnkey properties

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Jason Burton

Multi-family Investor from Utah

Feb 21 '13, 08:07 PM


Hey BP just looking for more information about turnkey deals. I'm in the military so I am moving a lot and have limited time off to travel back and forth to visit properties and do landlording myself so I've determined that turnkey deals are the best for me right now. Is this a good idea? I've read a lot about "hands-off" investors here and noticed a few people who are big fans of turkey deals like @Ali Boone so I'm thinking this is a good place to start. The only problem is how do I find these deals? Does anyone know of someone or someway to find legitimate deals that I can purchase. I'm ready to get in the game.

NOTE FROM MODERATOR: THIS THREAD IS IN A DISCUSSION FORUM. OFFERS TO BUY OR SELL PROPERTIES CANNOT BE POSTED HERE. THOSE MUST BE IN THE MARKETPLACE FORUM. REQUESTS FOR MEMBERS TO "CONTACT ME" WILL BE TAKEN AS ATTEMPTS TO DO BUSINESS TOGETHER. ADS WILL BE REMOVED FROM THIS THREAD WITHOUT NOTICE.


Edited Feb 25 2013, 14:05 by Moderator


Marco Santarelli Verified Donor

Real Estate Broker from

Feb 21 '13, 08:13 PM


Hi Jason,

First of all, thanks very much for your service!!

The BP community is a good place to start. There are a lot of good people and good information here.

Of course, you can do a Google search for very specific phrases to target the markets that you're considering.

Aside from that, you may want to Direct Message some of the members on the BP site for suggestions or referrals.

Feel free to contact me with any questions.

Continued success!



Medium_norada_real_estate_investmentsMarco Santarelli, Norada Real Estate Investments
Telephone: (800) 611-3060
Website: http://www.NoradaRealEstate.com
"Live where you want. Invest where it makes sense!" (tm)


Will Barnard Video Moderator Donor

Real Estate Investor from Santa Clarita, California

Feb 22 '13, 10:42 AM
1 vote


One thing to keep in mind regarding "turnkey" properties, you will likely be paying top dollar to, at best, slight discounts on properties,Mathis cutting into cash flow you could be earning had you done your own investments.
This comes from a guy who spec built homes, duplex units, and small apartments then sold them turn key. Granted the turnkey portion came with management in place, new unit so no capital expenses during warranty period, and handyman services to provide repairs for tenant damage. That is what makes the deal "turnkey", just know you pay a price for that.



Medium_be_logoWill Barnard, Barnard Enterprises, Inc.
E-Mail: [email protected]
Website: http://www.barnardenterprises.com
http://www.InvestorExperts.com


Jon Holdman Moderator

SFR Investor from Wheat Ridge, Colorado

Feb 22 '13, 11:20 AM
5 votes


I've looked at a number of these deals over the years. So, let me give you a series of assumptions you should make at the start. Then, do your due diligence to invalidate ALL of these assumptions. Then, realize what @Will Barnard says is very true. So, if you can invalidate ALL these assumptions and you're willing to pay something of a premium as Will describes, proceed.

1) The value of the property is less than the seller claims. You must do your own assessment of value.
2) The neighborhood is worse than the seller claims. GO THERE. If you are unwilling to get on a plane or in your car and drive the neighborhood, don't buy. Pictures can tell a far different story than what you see on the ground.
3) The true rent is lower than claimed.
4) You're buying a junker that has had a shoddy, cosmetic rehab. You're going to be hit with an ongoing stream of "repairs" that are really the result of a sloppy rehab.
5) Tenants are harder to find than the seller claims.

I've seen too many of these where a junk property is given some lipstick, sold at an above-market price with a tenant in place "paying" above market rent using the seller's management. The rent is being subsidized by the seller. A few years later you discover the real rent is much than you thought. Repairs are never ending. You try to find another PM and they just laugh that you own property in that area. You try to sell and discover you will take a significant loss to be rid of the property.

Now I have seen some deals where my assumptions are not true. Those are OK deals. Never as good as if you really invested your own time, but that's the tradeoff you accept for turnkey. But I've also seen ones where my assumptions are ALL true. You MUST do your own research!



Jon Holdman, Flying Phoenix LLC


Marco Santarelli Verified Donor

Real Estate Broker from

Feb 22 '13, 11:38 AM


You should always do your due diligence, regardless of what you're buying, as Jon and Will point out. However, be sure to compare apples to apples when it comes to turnkey investments. They are NOT all the same, which is why I am careful to clearly define what that means with other investors.

While it goes without saying that your purchase price will be more buying a true turnkey property over a distressed or wholesale deal (because the work has been done for you); what is not necessarily true is that you will be paying full retail for it. I've purchased many turnkey properties over the years from 5% to 20% below FMV.

These are all things you can easily check and verify!

Continued success.



Medium_norada_real_estate_investmentsMarco Santarelli, Norada Real Estate Investments
Telephone: (800) 611-3060
Website: http://www.NoradaRealEstate.com
"Live where you want. Invest where it makes sense!" (tm)


Will Barnard Video Moderator Donor

Real Estate Investor from Santa Clarita, California

Feb 22 '13, 12:08 PM
1 vote


Originally posted by Marco Santarelli:
While it goes without saying that your purchase price will be more buying a true turnkey property over a distressed or wholesale deal (because the work has been done for you); what is not necessarily true is that you will be paying full retail for it. I've purchased many turnkey properties over the years from 5% to 20% below FMV.
In most cases, it is true and I did state you can get small discounts to retail, hence your 5% example, but getting a deal 20% under market after all work is completed means the investor selling the property had to get one hell of a discount unless he/she plans on working for free!



Medium_be_logoWill Barnard, Barnard Enterprises, Inc.
E-Mail: [email protected]
Website: http://www.barnardenterprises.com
http://www.InvestorExperts.com


David Niles

Real Estate Investor from Buffalo, New York

Feb 22 '13, 01:45 PM


We are currently working to help out a few out of state owners who were sold "turnkey" properties through a large company at a seminar in Vegas. Pretty much everything they were promised was a lie.
There is money to be made this way for the hands off investor but as everyone has stated, your own due diligence is probably the most important ingredient in the equation.



Jason Burton

Multi-family Investor from Utah

Feb 23 '13, 12:05 PM


Thank you all for the sound advice. Definitely some things to think about here. I guess the thing I need to ask myself is what would be more manageable: doing a lot of investigating on a turnkey deal or working a rehab from long distance. I started to look into turnkey deals because I actually found a great deal on a REO property in Colorado. It's a great deal as far as the numbers go and I'd get a great ROI but once I started thinking about the work that would need to be done to get it rented (I hope I'm not overestimating the work it requires) I realized I don't have the time to travel back and forth and I don't know the area as much as I'd like to (for finding general contractors, PM, etc.). Any suggestions? Is a rehab difficult from long distance? I don't want to get suckered into buying a "lemon" turnkey like David mentioned but at the same time I don't want to have a property under rehab that I can't check on regularly.



Jon Holdman Moderator

SFR Investor from Wheat Ridge, Colorado

Feb 23 '13, 12:19 PM


I'm pretty skeptical that you've found a good deal on a rental here in CO right now. Its become very competitive and prices are up.

I do agree with you that doing a long distance rehab seems like a nightmare. I wouldn't attempt this without having a very trusted crew on the ground.



Jon Holdman, Flying Phoenix LLC


Will Barnard Video Moderator Donor

Real Estate Investor from Santa Clarita, California

Feb 23 '13, 12:21 PM


Jason, a rehab from long distance will require a person with boots on the ground there who can be trusted to get it done. This person would likely need to be compensated in such a way that the compensation aligns his/her interests and priorities with your own.



Medium_be_logoWill Barnard, Barnard Enterprises, Inc.
E-Mail: [email protected]
Website: http://www.barnardenterprises.com
http://www.InvestorExperts.com


David Niles

Real Estate Investor from Buffalo, New York

Feb 23 '13, 12:27 PM


I have never even thought about doing a long distance rehab so wouldnt have all the answers you need about it, but if I was to, I would probably narrow it down this way.
Find the part of the country I am most comfortable with that is going to achieve the results of they type of investing I am going to do. Then look around at forums such as BP to find people from that area and open discussions with them on advice and referrals they may have.
They key IMO is to find a reliable main GC who can handle the entire project for you vs trying to piece it all together from a distance, a good GC should be able to provide you with the amount of updates including photos etc that will keep you assured that your project is on schedule and money is being spent wisely. I would want to see previous projects and budgets as well.



Jason Burton

Multi-family Investor from Utah

Feb 23 '13, 01:04 PM


Will, Jon and David thanks for the realistic vision of the situation. I think I might hold off on the deal in CO for now and just keep saving and waiting for a good opportunity. I'm not sure where to start investing but I'd rather wait and do something that is feasible and realistic versus jumping into a 2 foot deep pool head first. I'm glad I found the BP nation to help me out.

Jon, according to the numbers the property I was looking at could have profited ~$130/door using very conservative calculations (I don't want to throw my money away :)). According to my agent it had four offers in the four days since it became available.



Jon Holdman Moderator

SFR Investor from Wheat Ridge, Colorado

Feb 23 '13, 01:33 PM
1 vote


@Jason Burton how about some number on the CO deal? Price? Rent? Rehab? I could care less about the seller's estimates of expenses.

Multiple offers isn't unusual. Doesn't mean it was a deal. Just means there are a lot of buyers. Many willing to overpay.



Jon Holdman, Flying Phoenix LLC


Nechelle Vanias

Charlotte, North Carolina

Feb 23 '13, 01:45 PM


Turnkey properties are the only deals we would recommend to our out of state/country investors. Don't be lured by the very low priced properties with "super hero" sized returns, those are in very depressed neighborhoods where collecting rents and renters taking care of your property is a crap shoot. If your property is delivering 8-12% then that is a really great return on your money compared to any other place it could be sitting right now. You want recently renovated and rented properties. You might benefit from Section 8 tenants as the majority if not all of the rent is sent directly to you as a direct deposit in most cities.



Ben Leybovich Video

Real Estate Investor from Lima, Ohio

Feb 23 '13, 01:46 PM


@Jason Burton First of all, thank you for your service.

What separates investments in the real estate market verses any other market is CONTROL. We buy a piece of real estate, we chose the tenants that will live there, we are able to be nimble in reacting to problems. Control is the key. Even if you hire a manager, you still have to control the manager. If you are not in position to actively control your investment, then unfortunately RE may not be the right vehicle for you at the moment.



Medium_logo_03Ben Leybovich, JustAskBenWhy.com
E-Mail: [email protected]
Telephone: 1.888.508.9643
Website: http://www.JustAskBenWhy.com
Ben Leybovich, Syndicator / Creator of Cash Flow Freedom University http://www.JustAskBenWhy.com


Jason Burton

Multi-family Investor from Utah

Feb 23 '13, 05:56 PM


Ben, you're welcome and I feel honored to serve. Thank you for your comment. I will remember that moving forward.

Jon, here are the numbers on the property:

Quadruplex
List price: $121K
Rehab costs: $5K
Monthly gross rents: $2000

I'm looking to buy and hold for the long haul. I was told by a bank that they will give me 30 year fixed @4.5% with 20% down. So if I were to buy it at list price the monthly mortgage would be $490/month.

$2000 less expenses (10% for management, maintenance, vacancy, $75/month taxes, and mortgage) is ~$800/month. The only variable not included is the insurance. That is the only thing I am unsure of. How much does it actually cost to insure a quadruplex? If it costs $300/month or less than the property will cash flow.

It seems like a pretty good deal to me, but I'm obviously new to this whole thing and need the wisdom of others. The only part I don't like about this deal (besides being 2000 miles away) is the money out of pocket. But even with the 50% rule I'd still get a 20% COC return. Is this a decent deal or am I crazy?



Jon Holdman Moderator

SFR Investor from Wheat Ridge, Colorado

Feb 23 '13, 06:05 PM
1 vote


This looks like a pretty good deal to me. Certainly won't find that here in Denver or anywhere nearby. But I'm not sure where in Colorado is 2000 miles from anywhere in Utah. I think your $800 (less insurance) is optimistic, but it still looks good.

I'd be pretty skeptical of a rehab estimate of $5000 for a REO quad.

Insurance is dependent on many factors. Simplest thing is just to call an insurance agent in the area and ask. Not all companies write rental policies. Try Foremost, Farmers or Safeco, and then look for an agent in the area of the property.



Jon Holdman, Flying Phoenix LLC


Jason Burton

Multi-family Investor from Utah

Feb 23 '13, 07:03 PM


@Jon Holdman sorry about the confusion. I am actually stationed in Hawaii and I was off, it's about 3000 miles to Colorado. I'm from Utah originally. :)

Thank you for the feedback. I'll make some calls to research the insurance just for future reference. This seems like a great deal and even at $10K for the rehab the numbers look good since I would do a buy and hold for the long term. Now I just need to decide if I want to try to pull off a long distance rehab. Probably not though. I'll keep learning and looking.



Harry M.

Real Estate Investor from Dallas, Texas

Feb 23 '13, 07:49 PM


@Jason Burton - just wanted to say thanks for your service, first.

I'm just bouncing ideas around here, since I don't have experience with managing rentals long distance. I take "turnkey" to mean properties that a company has bought below market value, done a minimal rehab, and placed tenants in, and then sell to the unwary investor at a large markup. It seems like the middle ground between that and purchasing a property where you do the rehab would be finding properties that are rented/rentable but not from a company that fixes and sells as "turnkey". People do decide to sell performing rentals for a variety of reasons, so they're out there. For example, we bought our first property, a duplex, from an old lady in her early eighties. She had three of them, all on the same street, and her grown children were helping her dispose of them. I imagine that most likely she was going into assisted living. It seems like this kind of thing may be doable long-distance if (and this is a big if as they are hard to find!) you had a good property manager that had your interests at heart.

-Harry



Mike H.

Real Estate Investor from Manteno, Illinois

Feb 25 '13, 10:56 AM
1 vote


I've looked at some of these turnkey groups as well and would have to echo a lot of Jon stated on their numbers.

It seems like you're paying full retail on the deals.

To me, what I would do is find an investor in the area you're interested in adding properties and seeing what they would charge you to do a real deal for you.

i.e. They find it, they rehab it, and they lease it.

To me, I think you'd be able to find an investor that would do all that for you for 5k. And that would mean you could probably be pretty likely to get into a house at about 80% LTV instead of 100% which is what you'd be paying for those turnkey ones.

I'm sure some investors would scoff at the 5k but thats still a pretty good chunk of money for most people and I'm sure you'll get some good ones that would take it.

Its basically like a wholesale deal but with a little more effort.
But 5k is still 5k. Plus, I could give my contractors more work and thats always a plus - people helping people.

I know I would do that in a heartbeat and I'm sure you'd find someone like me in just about every area.

As long as they're investing themselves and have 10 or more properties, then you should be good.



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