A while back, I came across a topic asking people to elaborate on their long-term experiences owning turnkey rentals. At the time, the number of responses were low, and the few people who did respond had only owned their properties for a short time. Likewise, I had owned two properties (for barely a year) and didn’t feel qualified to weigh in. A couple of years and a few properties later (eight total), I finally feel like I can provide some meaningful input.
The Time Commitment
First off, since I was practicing medicine full time, I wanted to own income property in the least time-intensive way. I recognized that I would sacrifice some degree of return, compared with that of a full-time real estate pro who was sourcing his own deals. After thoroughly researching the concept of turnkey rentals, I decided to take the plunge. As anyone who has followed this category of real estate investing can attest, your mileage may vary significantly depending on the provider, property condition, and location — just to name a few key factors.
I think the intrigue of turnkey stems from the promise to turn the landlord experience into more of a passive investment. This is particularly appealing to the time-starved, high-income professional like myself.
Dealing with Tenant Issues
With that being said, I thought it would be an interesting exercise to share an email correspondences with my turnkey provider for this calendar year. From it, you’ll be able to see how I dealt with certain issues beyond the occasional late payment.
The first message details a routine tenant turnover. Fortunately, my units have averaged nearly two years of occupancy. Tenant turnover has been a relatively infrequent occurrence. The expenses are in line with what I’d been told to expect. As a testament to the quality of our units relative to the marketplace, we were able to bump up the rent and have retained strong interest from rigorously screened applicants, resulting in a vacant period of just about one month.
I reviewed this email for approximately five minutes in between patients and responded in the affirmative — go ahead with the process. I honestly didn’t think much about it until later in the month when I reviewed the rent roll and noticed the less-than-usual amount. Several uneventful months later, things seemed back to normal. But in late August, another email came through describing issues at two separate properties.
In the first instance, the tenant unfortunately lost his job and fell behind on his rent. He had been rock solid for 18 months before his payments got sporadic and ultimately stopped. The property management team attempted to find alternative lodging for him, which included exploring various social programs and charitable organizations. I believe that in recognition of this, he ultimately decided to make it easier on us and move out, rather than trying to squeeze out more occupancy time through the eviction process. There was no undue damage to the property. This resulted in another routine turnover.
The second half of the email explains that a small section of the kitchen ceiling was falling to the floor, due to water damage from a roof leak. Squirrels damaged a roof vent boot, ultimately resulting in a leak and a $700 repair bill. In my three-and-a-half years of ownership, this was the only instance that required after-hours authorization to move ahead with a repair.
As I came to the end of the calendar year 2017, I characterized these emails as typical in regards to the frequency and scope of issues I’d faced as a turnkey owner with an excellent provider. The communications are concise, but detailed enough to take executive action. There’s also a thorough digital trail, documented via a robust online owner portal. I received an additional seven emails that resulted in either slight delays in rent payment or automatic authorization for minor (less than $150) repairs.
While it is impossible to expect to maintain an income property as effortlessly as a paper asset, with a good turnkey provider, you can come pretty darn close. My experiences thus far have reassured my decision to slowly build my portfolio with confidence that my properties will not be a significant time hindrance as I continue to enjoy practicing medicine full time.
Hear my story on BiggerPockets Podcast episode 219.
What has been your long-term experience owning turnkey rentals?
Do you feel more like a landlord or an investor? Tell be in the comments below!