Landlording & Rental Properties

Are Turnkey Investments Really Worth It?

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Is turnkey real estate worth it? There is a huge stigma around turnkey and rightly so. At the end of the day, there are just too many operators selling properties for far more than they are worth in bad areas. There are also property management companies associated with turnkey properties known to nickel and dime to death. So what you're promised on paper is never actually what you make in real life. Are there good turnkey companies out there? Sure. But unfortunately, the majority of them are pretty crappy.

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Are Turnkeys Ever Worth It?

Look, I speak to so many investors, and many of them want to buy turnkey real estate. Of all those, the majority we turn down. I’ll tell you why. In my honest opinion, if you understand real estate deals well, you should do the work of finding properties yourself. Find the property, buy the property, renovate the property, put a tenant in the property, and manage it. You do not need a turnkey company.

Related: Sorry, But Turnkeys Aren’t 100% Hands-Off. For Success, Know THIS.

So, when is turnkey worth it? Honestly, you are probably going to get better deals yourself. But if you do want your investments to be passive, you don't want to do any work, and you don't want to control the entire process, then turnkey real estate might be for you. But you have to understand that you are not going to get the best deals. And in many instances, you will be paying more than what the property is worth. Then, of course, you're going to have a property manager who is going to charge their fees to make ends meet and to cover costs.

I’d love to hear from you, especially investors that are buying turnkey properties and are able to buy them at below market value. I personally have not heard of anyone able to do that successfully.

So if you have done that, I would love to hear from you.

Engelo Rumora, a.k.a."the Real Estate Dingo," quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate al...
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    Charles Borrelli Investor from Palm Bay, Florida
    Replied about 2 years ago
    Good Post. I always watch your video blogs! I agree. Turnkey is great for Doctors or other professional people with not time to work investments. As a full time investor / rehabber I always find the absolute best way move forward in wealth is to do it yourself. A good rehab can double the value of a property in 6 weeks.
    Isaac Agbolosoo Rental Property Investor from Grosse ile, MI
    Replied about 2 years ago
    I am Electrical Engineer – weekday and I rather find properties myself. Next, I will only invest close to where I live – mid west. Turnkey investment to me, could be another form of white collar crime , where management companies charges more that necessary on repairs, and many others.
    Engelo Rumora Specialist from Toledo, OH
    Replied about 2 years ago
    Thanks Isaac, I would disagree on investing “close to where you live” I moved from Sydney, Australia to Toledo, Ohio and achieved my dreams in 4 years due to that move. It’s great being mobile and not anchored down to one location Much success
    Engelo Rumora Specialist from Toledo, OH
    Replied about 2 years ago
    Hi Charles, Thanks for your comment and support I’m glad that you find my content valuable Keep the dream alive and I’ll catch you in the next blog
    Rob Cook from Powell, WY
    Replied about 2 years ago
    Hey Engelo, I loved this post. FINALLY, the truth comes out, and most notably by a relatively big turnkey operator like yourself. Good on you. Your last statement mirrors my own thoughts on this: “I’d love to hear from you, especially investors that are buying turnkey properties and are able to buy them at below market value. I personally have not heard of anyone able to do that successfully.” Agreed. PLUS, I would add that this next thought is an important addition: Most Turnkey deals are NOT in high-appreciation areas. Therefore, cashflow is much more important. And turnkey, if properly accounted for, makes getting a cashflow almost impossible. And I define proper accounting as not leaving out large expense considerations like I always use in pro-form analysis for rentals = 10% each for Maintenance, management, Capex, and vacancy. That is 40% of gross rent right there alone, and until a track record is established, assuming any less than 10% for each of these is no justifiable. PLUS add taxes and insurance, which often come to another 10% and you have the fabled 50% Rule of thumb in effect. ANy stated ROI that either neglects to account for any of those expenses, at a realistic assumed rate OR have actual historical PROVABLE historical data to use instead, is bogus. And that is where most “turnkey investors” fall into the precipice and find out too late that they are screwed and without inflation to bail them out, it is not going to be a happy ending. Thanks! Rob
    Engelo Rumora Specialist from Toledo, OH
    Replied about 2 years ago
    Thanks Rob, Agreed 40-50% is a great expense ratio to use “Under estimate your income and overestimate your expenses” I always tell investors to use whatever formula they feel comfortable with even if that means taking the bubble gum they bought at Walmart while “thinking” about the property as en expense lol Over the past 3 years we have seen our investors getting around an 8% net “year after year” I’m looking forward to seeing what those numbers will be as the years keep passing But all in all I think that’s a decent return Have a great day
    Ron Mccord Investor from Fort Lauderdale, Florida
    Replied about 2 years ago
    Good short Post….. I have used First Trust deed investing for the passive cash flow… a couple of bad tenants can mess with those very small, narrow positive cash flow returns on the Turnkey Deals but if inflation keeps going should turn out in the end for those that buy them
    Engelo Rumora Specialist from Toledo, OH
    Replied about 2 years ago
    Thanks Ron, I always advise investors to buy with cash It helps with cashflow Safety also comes in numbers Not even David Copperfield can help you if you own only 1-2 properties lol 7+ should be the goal Thanks again
    Kim Martin Rental Property Investor from Wenatchee, WA
    Replied about 2 years ago
    Engelo I believe it depends on how we do the math. I was becoming a stressed out, burned out, do it myself landlord with a full time job on the side. When I factor in the cost of my time, the stress in my life and my earning potential when I can focus on my day job, I am coming out WAY ahead financially with turnkey. (Yes it is hard to let go of the control at first.) Thank you for providing an honest, reputable service for those of us that want to focus on what we do best.
    Engelo Rumora Specialist from Toledo, OH
    Replied about 2 years ago
    Thanks Kim, It’s a pleasure having you on board I know exactly what you mean as I also recently started putting a cost on stress and even my thoughts (Weird I know hehe) If I have to think about something that I don’t want to be thinking about How much am I actually loosing by not thinking about something else that is more profitable lol Have a great day and speak soon
    Christopher Smith Investor from brentwood, california
    Replied about 2 years ago
    I am a passive investor who bought in the 2010 to 2013 time frame. The properties were nearly new then so no turnkey intermediary was necessary, they were in effect already turnkey ready, and there were so many offerings at that time they were easy to find. Now really attractive deals are very hard to find because of pricing so I’ve turned to some turnkey providers to help with that process of finding acceptable properties in this more competitive environment. What I have found are that most TKPs are selling inferior properties in mediocre neighborhoods at unreasonably high prices and charging very high management fees. In my view, publicly traded REITs are a much better deal alternative than turnkey for the passive investor. Sure I got a number of grand slam deals back in 2010 to 2013 and still hold those properties currently, but those days are long past for any more direct additions by myself and TKPs appear to be a very poor substitute to make up the difference. In contrast publicly traded REITs are still reasonably attractive, totally passive, highly marketable and tax advantaged under both old tax law and even more so under the new tax law. TKPs appear to be a dud of an investment from my perspective, very little long term upside and not much current return either.
    Christopher Smith Investor from brentwood, california
    Replied about 2 years ago
    I am a passive investor who bought in the 2010 to 2013 time frame. The properties were nearly new then so no turnkey intermediary was necessary, they were in effect already turnkey ready, and there were so many offerings at that time they were easy to find. Now really attractive deals are very hard to find because of pricing so I’ve turned to some turnkey providers to help with that process of finding acceptable properties in this more competitive environment. What I have found are that most TKPs are selling inferior properties in mediocre neighborhoods at unreasonably high prices and charging very high management fees. In my view, publicly traded REITs are a much better deal alternative than turnkey for the passive investor. Sure I got a number of grand slam deals back in 2010 to 2013 and still hold those properties currently, but those days are long past for any more direct additions by myself and TKPs appear to be a very poor substitute to make up the difference. In contrast publicly traded REITs are still reasonably attractive, totally passive, highly marketable and tax advantaged under both old tax law and even more so under the new tax law. TKPs appear to be a dud of an investment from my perspective, very little long term upside and not much current return either.
    Isaac Agbolosoo Rental Property Investor from Grosse ile, MI
    Replied about 2 years ago
    @McCain. Investment is usually 15-25%. where are you getting your 3% funds from?
    Casey Maeda Rental Property Investor from 港区, Tokyo
    Replied about 2 years ago
    As a foreign investor (from Japan), I look to turnkey providers to get the yield I am looking for (over 10% cap rates) that I can’t get where I am currently living. I am ok with a lower return not having to deal with the headaches of rehabbing etc. turnkey can be a fabulous option for people like me provided the property management is on top of their game. But I agree, choosing the wrong tkp will lead to a poor investment
    Engelo Rumora Specialist from Toledo, OH
    Replied over 1 year ago
    Thanks Casey, A solid property manager is the key when investing in turnkey. It’s even better if the PM is in-house or owned/controlled by the turnkey provider. It makes them vested in that investors success. Have a great day.
    Nguyen Trinh from Lynnwood, WA
    Replied over 1 year ago
    Does anyone have a recommended turnkey company they use?
    Engelo Rumora Specialist from Toledo, OH
    Replied over 1 year ago
    Yes, Ohio Cashflow is the best. Check them out. They have a cool guy called Engelo who is the owner. He is a crazy Australian Thanks
    Tom B.
    Replied over 1 year ago
    Newbie here who really appreciated this information and all the comments I am still 50/50 on doing my first purchase with a turnkey but this information really has given me pause. I’ve done a lot of research but my limitations led me to believe turnkey was the answer to my problems. I’ve run the numbers on BP calculator and I’m curious what I’m missing; a particular one I’ve looked into (GC investments Chicago) all come out with numbers that look 200+ cash flow and 12% above COROI. What could I be missing on these numbers? Cap expenses-10% . Maintenance-7%. Vacancy 6% and this is all for a newly rehabbed property with new appliances. On the other hand, considering I am not handy, work full time, and need instant cashflow -where do I go? Is there any hope for someone like me with a buy and hold in today’s market? For example, this year I only have enough saved for a 30-50 k for down payment. From what I understand properties under 50k, without major renovations don’t unusually work out too well. Appreciate any feedback and big thanks for all of your input!
    Engelo Rumora Specialist from Toledo, OH
    Replied over 1 year ago
    Hi Tom, Thanks for your comment. If you only have $50,000 or so you shouldn’t invest in turnkey IMO. One property isn’t going to provide you with financial freedom so what’s the point of tying up the only $50,000 that you have to invest. “Money makes money” so you should use those funds to go out into the real estate market with another strategy other then turnkey. Just my opinion. Also, over underestimate your income and overestimate your expenses whenever doing the numbers on a deal. I wish you much success
    Chandler Burns from Kansas City, MO
    Replied over 1 year ago
    Thank you for posting this video!
    Engelo Rumora Specialist from Toledo, OH
    Replied over 1 year ago
    My pleasure, Much success
    Oleg Enik New to Real Estate from Studio City, CA
    Replied 10 months ago
    Thank you for this post! I got out a lot of valuable information out of this. What would you recommend to someone who is looking to invest out of state for cashflow purposes? The market that I'm in (Los Angeles) is just very hard to start out in REI for cash flow purposes. I have been ready many forums on BP about out of state investing and many people recommend turnkey investment. Thank you again Engelo!