Contrasting Turnkey Real Estate Investments And The Dot-Com Craze!

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I have written this statement so many times in articles on this blog, but it always seems relevant:  I love to read books and have found that may be a huge reason for my growth as a business person.  That and stumbling and bumbling through mistakes, but both can teach us a TON of lessons about being better in our business lives.

Recently, our company started studying a classic business book from the early 2000‘s to help us stay on track and define our goals for the next few years.  We got all of our employees a copy of Good To Great by Jim Collins.  We take business books and study them as a company, going chapter by chapter and letting everyone spend a few minutes discussing  what applies to our company.

Two weeks ago we read chapter 7 and I could not help but think about the Turnkey real estate industry while I was reading it.  The story of that starts on page 144 had me hooked and I thought it offered a great parallel to the Turnkey real estate world.  Let me tell one other story quickly though, and then I will tie the two together.

Practical Value Vs. Intrinsic Value

I was lucky enough to spend a few days of down time recently with my older brother Kent and he said something to me that helped me relate what I was reading in Good to Great with the statements I wanted to make about Turnkey real estate.  He made a statement about the difference between practical value and intrinsic value.  Companies have used their knowledge of consumers for years to differentiate their products and take advantage of these two values to sell their goods.  But, only those who sell intrinsic value remain successful over long periods of time.  Only those who sell intrinsic value can count on customer loyalty to build a brand that carries them through any economy, good or bad.  There is a real difference between the two.

Practical Value

Practical value is the nuts and bolts of a product.  In real estate, practical value boils down to the return on investment.  No sense in beating around the bush and making it about something it is not.  It is all about the return.  Now, there are other elements depending on the deal such as the price of the property or the renovation costs, the rental rate, etc.  Those are all very important numbers, but they are tied to practical value.  In no way am I suggesting that they are not important, but realize that practical value has a limit and no matter what the scenario, a practical value is stuck in place.  It is what it is.

Intrinsic Value

Intrinsic value on the other hand is made up of intangibles.  It is the value that comes from the feeling someone gets when they buy something, own something or do business with someone and they know it was the right decision.  Intrinsic value is created and marketed outside of price.  Intrinsic values from a company may be the amount of time someone has been in business, the number of employees they have, the programs they have in place or the little extras they provide when you do business with them.  They are the values that hard to put a price tag on because they are often the values that provide comfort, security and good feelings about a decision.

So Practical Value is very different from Intrinsic value and as they relate to real estate investing, and especially Turnkey investing, they need to both exist for a company to be great and have a chance at staying in business.  I know some out there are going to read that statement and think I am crazy, but let me explain by going back to Good to Great.

New Technology Will Change Everything

The statement was made multiple times in the book because it was the mantra of the dot-com world in the late 1990’s.  Business was being revolutionized and the value people put on businesses was changing almost overnight.


Because everyone thought that technology accelerators would make business basics and fundamentals obsolete.  Business were literally popping up with “theoretical sales papers” and going straight to IPO generating billions of dollars in stock value and yet the business did not even exist!  The demand was there, the economy was right and investors wanted in!  There was a feeding frenzy to buy stock in any dot-com IPO you could get your hands on.

In the real estate world, the mid and late 2000’s offer a great contrast.  The housing bubble was bursting and the market was falling apart and seemed to be falling apart a little more every single day.  The news was bad, the economy was bad and foreclosures were not only going through the roof, but as the properties were re-entering the market they were being sold at incredible discounts.  In the middle of the country, real estate was being sold for dimes on the dollar.  Suddenly, everything lined up perfectly and a new opportunity became a buzz word – Turnkey.  Turnkey real estate will change everything.

The properties were “cheap”.  The properties were plentiful and as the stock market plummeted, demand for a solid investment rose.  Many companies began to pop up in markets all over the country offering the same thing…”cheap houses”.  Marketing was geared toward investors who had the money to invest, but no where to put it.

This new opportunity was suddenly all the rage and investors from all over the world were buying Turnkey properties anywhere and everywhere.  Did some buy properties sight unseen?  Absolutely.  Some bought properties by the fist full and many Turnkey companies took full advantage.  Sell, sell, sell….”cheap properties”.  Companies did not worry about adding staff, adding services or adding other value benefits.  Many tried to sell properties right over the internet – just point and click and the house is yours.  If it is cheaper than you can buy in your hometown then just “click here” and the property can be yours.  We’ll adda link to Zillow, a link to a calculator and a little button so you can tell all your friends you just bought a property on-line!  It was supposed to revolutionize real estate investing.

Just as the dot-com companies were built on practical value – a new technology that would revolutionize business and those on the ground floor of the IPO would make all the money, the Turnkey explosion was also built on practical value.  It was built on the idea that “cheap properties” were a great value because investors needed to put their money somewhere and they could never find properties this “cheap” where they lived.  It was built on the belief that people would buy anything on the internet and all you had to do was “ build a website and they will come.”

Why Intrinsic Value Always Wins In The End

Some Turnkey vendors learned lessons very quickly during the volatile years from 2009 – 2010.  These companies looked at how they could change their models from offering only a practical value of price to intrinsic value of services.  When I say companies, it may be plural, but that does not mean many!  Most companies have held tight to the belief that real estate buyers make buying decisions based on “cheap properties”.  That may be the case.  But Real Estate Investors make buying decisions based on value.

Steve Cook recently wrote an article for Real Estate Economy Watch discussing the declining inventories and declining price discounts on foreclosed properties.  We continue to read articles almost daily about housing markets improving, prices going up and inventories moving quicker.  I cannot tell you the number of phone calls and emails I have received from other Turnkey companies’ owners and employees asking what we are going to do.  It is as if the sky is falling and for some it is.  If the business was built to sell cheap properties then you have two choices.  Go out of business or start selling even cheaper junk than before.  Most are simply looking for advice on what to do next as they have watched company after company slowly disappear.

When I look around the landscape of Turnkey vendors, I don’t see as many companies as there were even two years ago.  Many have disappeared as the market has improved.  Most, like the dot-coms of the past, built companies that were not built to last.  They were not built on the Intrinsic values that some real estate investors are looking for.  When the companies are built to sell “cheap properties” with the click of a mouse, their success will be limited by the economy and the market.  When the company is built to provide long-term property management, high-touch customer service, no-hassle response and the highest level of experience possible for a passive investor, then that product exists in any economy and any market.  Does the practical value have to be there?  Of course it does!

No one should expect an investor to declare that their return does not matter as long as they “feel” happy.  That is absurd.  But many passive investors today, who are very experienced real estate investors, are looking for opportunities with companies that provide taylor-made services and investment properties where the risk and the reward are balanced.  That is what the smart investors did during the dot-com bubble.

If you have not read chapter 7, I will help you out a little bit.  It tells the story of and Walgreens.  The practical value of buying things online and cheap and the intrinsic value of buying things from a drugstore you are comfortable with and know.  It is a story about how one soared to a valuation of 398 times revenue and the other lost $15 billion in market value to 1.4 times revenue.  It is a story of how trust and long-term relationships with companies were downgraded as relics of the past and the new, fast-paced business plans who sold cheap and convenient would win the day.

I would love to take a poll of all the readers and you can respond right in the comments.  I would be willing to bet a box of donuts (i’m not a gambler) that out of 100 people, 100 will say they have shopped at a Walgreens in the last 30 days, while we would be lucky to find even one who has shopped at  Good to Great is a book that all entrepreneurs and real estate pros should read.  And for Turnkey vendors…times are changing and the practical value of “cheap properties” are not going to keep you in business.  Figure out how to offer intrinsic value and follow Walgreens example.

Photo: Stefan

About Author

Chris Clothier

In 2005, Chris Clothier (G+) began working with passive real estate investors and has since helped more than 1,100 investors purchase over 3,400 investment properties in Memphis, Dallas and Houston through the Memphis Invest family of companies.


  1. Glenn Schworm

    Great article Chris! I really enjoyed it. I read Good to Great many years ago and after your article I know I will be pulling it off the shelf again. We don’t have many Walgreens in our area but about a month ago we were traveling and they carry Blue Bell, my wife’s favorite ice cream, so we stopped. Your article made me smile as by chance, I am one of the 100! Great read to start my day, thanks brother.

    • Chris Clothier

      Glenn –

      You said my four favorite words in the English language…Blue Bell Ice Cream. I’m originally from Dallas, TX. and Blue Bell was a staple of my childhood.

      Good to Great is a very good book to read again and again. I recently wrote an article about the Hedgehog Concept and it very well may be the one lesson from a book that I will NEVER forget. I credit it with the reason my families companies have done so well – no matter the market or the industry. Definitely pull it back off the shelf.

      Well, there is one vote for Walgreens!


      • Glenn Schworm

        LOL, you Texans and your Blue Bell!! My wife is from Dallas. Born in Dallas, raised in North Richland Hills, and worked for her Dad’s business in Irving. I have had Blue Bell shipped here to NY numerous times. I must admit, it is good stuff! I have also had Pappasittos (I may have butchered the spelling but I am sure you know where I mean) shipped here several times as well. I do my best to keep my girl happy! 🙂 Thanks again for the book reminder, I am going to look for it tonight.

  2. Hi Chris,

    Great article. I love to take ideas that I read in business books and see how I can apply them to my situation in real estate and other businesses. I read Good to Great when I was in college, but I lacked the proper frame of reference to apply it to my life in a meaningful way. After this article, I want to go back and review my notes or maybe even give it a full read.

    I am always trying to expand my reading list whenever I can. Do you have an Amazon wishlist or some other service to catalog some of the books you have read or are in your queue?


    • Chris Clothier

      Hey Sean –

      I think I have posted a reading list on LInkedIn before or some other site connected with Amazon where I wrote reviews of books I have read. I know I have written a few “Must Read” lists or “My Favorite” lists on my blog and here on BP. The funny thing about a wish list, I actually go to the book store and buy books – kind of old fashioned in todays’ world, but I like collecting the books and my kids one day can rad them as well. When I am looking for new books I will use my smart phone to take a picture of a group of title together on a business book display. I’ll go home and pull up the pictures and search for reviews of the books. Then I go back and buy the ones I want. So I guess that is my wish list…it is all kept in pictures on my phone!

      I am getting ready to read Time Traps by Todd Duncan next. I’d be happy to list out a few of my favorite business books and real estate books if you would like – just ask.


  3. Great article Chris!
    I buy run down properties because of the value I can add to them, but there is an advantage to turn key. Like you said, if you can buy a property and have someone else do all the management and work, there is definite value if it makes money.
    You have less cash into the property with turn-key due to no repairs, or holding costs while repairs are being made. On the other hand, I can make so much more money by purchasing the run down properties.

    I did shop at Walgreens.

    • Chris Clothier

      Hey Mark –

      Thanks for the comments and for voting. Just for the record that is now two for Walgreens.

      My big point, maybe lost by too long an article and not just directly saying it (!), is that Turnkey companies will continue to disappear and those that remain in business into this next real estate cycle will be the ones who sell their intrinsic value. Those that made a living off of dumping “cheap” properties onto investors and built fake companies that were really small operations will no real structure will be gone. There is no real value being added for long-term relationships and loyal brand clients.

      Guys like you who can find and create value out of the deals you do may never need or want the service of a Turnkey company. I really appreciate you reading and writing your comments.

      Take care – Chris

    • Chris Clothier


      I’ll count a CVS as a vote for Walgreens….because it was not! Can you believe that a that had been in business less than a year and had not turned a profit was valued by Wallstreet at 398 times revenue? crazy…

      Thanks for taking the time to read the article and to harass me!


  4. Excellent article that makes you stop and ponder.

    You would be great at writing an article on how Practical Value Vs. Intrinsic Value applies to the real estate business. Many younger generations of “investor” are only, or primarily concerned about how much money they will make today and not about buying, creating, and owning an enduring investment that is attractive to tenants and a contribution to the neighborhood and community.

    Please put this on your bucket list.

  5. Great article Chris. I think you nailed it by comparing the practical versus intrinsic values. I remember reading ‘Good to Great’ when it first came out a long time ago. Now you have me wanting to go back and re-read it just to brush up on what I forgot in the book.

    Back to your article: I remember between 2005 and 2007 there were dozens of so-called “turnkey” companies online. I still have many of them bookmarked in by browser today, however, if you try going to their website you end up at GoDaddy or some other obscure place since they’ve been out of business for so long. All of these companies died on the vine shortly after the housing markets stalled. I have to agree that these “businesses” failed because there was no intrinsic value to sustain them.

    In fact, many of them even failed when it came to having any practical value because they were selling you something with negative cash-flow with the hope of gaining some appreciation sometime in the future. That’s simply called speculation (also known as gambling)!

    Technology is simply a tool and an enabler. There is no question that it helps you conduct business better and faster, but it doesn’t provide intrinsic value on its own. You must have it to start with, then leverage it through technology. That could explain the reason so many “dot-com” companies failed.

    Practical value is important, but I agree with you in that intrinsic value always wins in the end.

    Good job!

  6. It’s a hard choice when it comes to bricks-and-mortar vs. online. I’m a natural born penny counter; on the other hand, I really see the value in supporting local businesses. Still, frugal habits die hard, and I generally go with whomever has the best deal – as long as it’s not coming from my spam filter. 🙂

    The same goes for real estate. You’re definitely right, Chris: cheap is not the same as a good value, and I know most of this see this every day when we look at houses. When there are a LOT of cheap properties out there, as in the last several years, then it’s much easier to do a turnkey strategy. However, if that’s your only focus, once inventory drops, you’d better either be the one who provides the best service (long-term property management, high-touch customer service, no-hassle response, as you mentioned) or you ought to be looking into another niche. Everyone ought to know that there’s another cycle coming up sooner or later, and have some sort of preparation for it!

    • Chris Clothier

      Ben –

      Good stuff! Thanks for your comments. I think you nailed it when you said that Turnkey vendors need to know that another cycle is coming and as a business person in general you should always be preparing for what comes next.

      I really appreciate your comments.


  7. You hit it Chris. I saw exactly what you talk about here happen in my turnkey doings. I started buying turnkeys in 2011 when everything was so cheap and it was all the craze. The craze had gone even crazier in Atlanta because that market had just popped up as the hotspot. Most definitely, the turnkey providers who started there, the majority are not there now for the exact reason you mention- they lacked intrinsic value. It was companies like Ken’s (GRP) that did make it because they offered that intrinsic value.

    A lot of people ask me now to tell them about my turnkey buys and the companies I bought from and how I like them. Of the ones I bought, I only bought one from a company that offered the intrinsic value, hence them still be around today, and the others were bought from companies I couldn’t stand and who are now out of business.

    You are exactly right when you talk about how many turnkey companies existed a couple years ago and how few of them are still around now. It’s really a breathe of fresh air now because of the turnkey companies I know, they really do offer value to their buyers, they are nicer to work with, and the quality is typically really good. It’s nice to have fewer companies around but who have better products! Now it’s just a matter of changing people’s perspective of turnkeys, because yes there were really bad ones back in the day so people have a reason to be cautious.

    And some of the companies meant well but they grew so fast they couldn’t keep up and everything went to the handbasket.

    • Chris Clothier

      Hey Ali –

      Thanks for the comments both here and on the forum topic. You know, some people will misunderstand this as an article talking about how great Turnkey investing is and it really has nothing to do with that. Turnkey is only a good option for some investors. It is really geared more towards those companies out there or entrepreneurs who want to start a company. The best advice I can give that is not in the article is to have respect for your client. They should be A LOT more than just an opportunity to make money or a one and done hit and run. Provide something real and tangible and you can be around for a long time!

      Thanks – Chris

  8. For an investor who has limited knowledge and skills in construction I can see Turnkey properties, no work or repairs for at least five years. A few years ago one could buy them at 50 cents on the dollar, now they are rare in my area. For me the equity and value I create along with the cash flow far outweighs Turnkey properties.

    • Chris Clothier

      Hey Jim –

      Thanks for reading and responding. Chances are Turnkey investments would probably never be an investment that you would feel makes sense – regardless of any services or value-adds that a company has. I think it is really important for all of us to remember that there are a lot of investors just like you…but there are a lot who want what a Turnkey company provides. They are willing to give up equity – but the Turnkey companies have got to provide something in return. Something more than just the promise of a property cheaper than they can buy at home.

      Thanks again for your comments.


  9. Chris Clothier

    Hmmm…so it may not have been a good bet!

    But hey, to my point, have you shopped online at That was the remarkable thing about the example in Good to Great. This was a company that many predicted would replace Walgreens as the place where people would buy their HBC. And it did not happen. In less than a year they were laying off people and scrambling to save money because the premise of their company was flawed. They were not adding any REAL value to their clients.

    Thanks for reading the article. I hope you liked it and spread the word about the great articles over here on BP.


  10. Yes, I loved the article! I actually have gone the opposite and shop at a smaller mom & pop pharmacy instead of the corporately owned one. I really like to sustain my local community ~ and I feel like real estate can do that in a round about way also. Rebuilding neighborhoods, upgrading and restoring homes and pulling people together to add to community pride.

  11. I have shopped at walgreens in the past 90 days. Never once tried

    On the topic of turnkey properties, I purchased two in your area a year and a half ago and I have to agree with what you are saying. Now that the sale is over, it is the property management that matters.

    • Chris Clothier

      Hey Chad –

      Thanks for the comments! We will mark one more vote for Walgreens ~

      I hope things are going well with your properties and yes, I agree, the value-added extras like property management are what will make or break a turnkey investment.

      Thanks for reading – Chris

  12. Great article Chris!

    Count me as another Walgreens vote!

    One of the first things that popped into my mind when you talked about intrinsic value especially related to the .com bubble is People still today sit around and think, “How did Amazon make it through the bubble and become of the most successful companies of all time?”

    I mean at the time of it’s founding, there were all kinds of other .com companies popping up doing things somewhat similar to what they were doing. Jeff Bezos however has spoken on this before (He has YouTube videos talking just about this topic…you should check them out because they are awesome!) and what set Amazon apart from all of the other guys was intrinsic value and customer experience. He says over and over again how Amazon has always been customer obsessed. It’s not just about offering a wide selection of goods at cheap prices…it’s about creating a customer experience that is unparalleled by your competition!

    I think with most business that fail or stay small, their biggest problem is not necessarily their product but rather that they have not created a system that creates intrinsic value and delivers that all important superior customer experience!

    • Chris Clothier

      Nick –

      Your comment is spot on! I wrote an article on Customer Service on my personal blog last week where I talked about a recent interview with Jeff Bezos. He and Tony Hseih are two individuals that I have made it a point to meet and spend some time with in the future. Just a discussion across the table would be incredible because “they get it”. More than any other business builders of our generation – they understand intrinsic value.

      IN my blog I wrote about Jeff Bezos leaving an empty chair at the conference table when he gathers his managers and telling them to consider that chair occupied…by our client, the most important person at this meeting. I thought that was awesome!

      Thanks for your comments –


  13. Have never shopped at, but has been 5 years since I was in a Wallgreen, needed photo for a passport. I am looking hard at turnkey options but have not devceloped a name brand comfort level yet.

  14. Chris!
    First Vote! I don’t use either of them..but Wallmart 🙂 same for your analogy.
    Great article!!!
    Anyway, I am doing extensive research on turnkey properties and you seem to have knowledge to answer one of my questions. Why turnkey properties are more expansive than MLS listed ones ?
    Only reason I can think of repairs done and tenant in place…any other reasons???

    • Chris Clothier

      Hi Nil K. –

      So I think you are correct with your observations (in many cases anyway) that a property listed “as is” in the MLS and needing repair will be less expensive than a Turnkey property due to work being done. That is not always the case as turnkey is nothing more than a marketing phrase and lots of people can use it to their benefit. So, there is no universal meaning to the word turnkey.

      But, on the surface, your assumption is correct. A good turnkey opportunity is going to cost more because you are paying a premium for someone else having invested their time and money into the project first.

      Thanks for the question!


  15. Hey Chris –

    I’m glad you reminded me about this book. I need to dust it off and read it again. I think you can take those lessons and apply them to just about most other businesses and business models. Landlords can certainly enhance their “customer experience” so the prospective tenant chooses their property over the next guy that is $15-20 a month cheaper. You just have to sell them on the added value.

    It is a little more difficult for folks like me who are primarily wholesalers. I have to say that I have never had a buyer go away unhappy. I make working with me easy, I always deliver what I say I will deliver, and in short they know 100% that they can count on me. They certainly can’t say that with many other folks in this niche. The top buyers on my list are there because I can count on them to perform EVERY time.

    I recently told my closing attorney (that I have worked with for many years), that I always come back to them because they are easy to work with and everything is flawless every time. They provide an excellent customer experience every time. I would use them even if they cost a little more. And he looked at me and said that everyone in the office loves to work with me because I am so easy to work with; I make their job easier. I send every detail of the transaction over to them when I send the contacts listed on a separate sheet of paper.

    I have all the contact information, I note anything that is unusual about the contract , point out deposits made and anything that might be different or unusual. If I know of a lien or a loan, I provide as much detail as I can get. These are all things that I assumed everyone did, but apparently that isn’t the case. Sure they can find out all of this and they will verify it. But I want their job to be easy. On the rare occasion that I need something special or in a hurry I always get it. So I think there are ways for each business owner to add intrinsic value to almost any business if you just give it some thought.

    BTW, I think those meetings and discussing the books are a great idea. One of the larger real estate firms here used to do that. I remember when “Raving Fans” came out. They bought a copy for each agent.

    Thanks for another great post.

    • Chris Clothier

      Hi Sharon –

      I could not agree with you more that any business owner can add intrinsic value to their offering – any business.

      I love that you mention Raving Fans. That is a great book by Ken Blanchard and it is so important for businesses that want to build a brand and are reliant on repeat business and customer loyalty. You’ve reminded me of another good one to peruse through soon.

      Thanks a ton for taking some time to leave such a great comment.

      All the best – Chris

  16. Hi Chris,

    This comment is a little late so I’m not sure you’ll see it.

    It’s funny you bring up Walgreens and specifically. I work for the former and has been in the Walgreens Family of Companies for several years now. The supposed replacement has become much more of a synergy.

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