​Part 2 – Choosing a Turnkey Company

Part 2 – Choosing a Turnkey Company

In my last blog post I discussed why I chose turnkey over the other REI options. In this post I will describe how I chose the company I am going to invest with. I’ll leave out the company’s names in this post.

I got most of the below questions from multiple BP forums/blogs, determined which were important to me, and consolidated them.

1.Are you an investor?

2.How many investors do you work with?

3.How long have you been in the business?

4.What has been your biggest mistake as an investor?

5.Do you own all facets of the operation?

6.Do you actually own the homes you are listing?

7.Do you defer maintenance?

8.Do you manage the properties?

9.What is included in the listed price? Cash Price?

10.Do you have renters in all your homes?

11.What’s your normal lease term?

12.Do you have a rent guarantee?

13.Do you have any other warranties?

14.What percentage of your customers are repeat buyers?

15.Can you give me a list of referrals?

16.What’s your property management fee?

17.What’s your placement fee?

18.What’s the average stay of tenants?

19.Average vacancy rate?

20.How many properties do you manage?

21.How many did you turn over last year?

22.What company is financing the homes?

23.What happens to my property if that company goes bankrupt?

24.What’s your appreciation rate based on?

25.What’s your rent growth rate based on?

26.Do you have any special programs in place to keep tenants happy?

27.What is your process for keeping owners up to date?

There were 4 companies I started out vetting. I’ll call them company’s Company 1-4.

Company 1

This is the only company I vetted that didn’t come recommended from the BP Forums. This company didn’t start out well. I booked an appointment for the first interview online and did not hear from them. Two days later they called and said he just got the notification. I was busy and couldn’t talk so I set up a new day and time to talk. He ended up calling me 2 hours earlier than we scheduled. I didn’t answer the call, but I did send a text back promptly letting them know that I need a turnkey company I can rely on and if they can’t even get this right I probably don’t want to invest with them.

Company 2

This company was awesome with great customer service. They were going to work out a thorough plan on how we were going to reach our passive income goals and help me pick the properties. They owned all the houses, renovated them, had tenants in place…everything you expect from a good turnkey. One deterrent was they are currently only in 1 city and we want some diversification as we start to buy more properties. This wasn’t a deciding factor though because we could always invest with different turnkeys in the future if we wanted diversification of markets. The real reason I didn’t go with Company 2 was because their price to rent margins just weren’t there. None of them met the 1% test. He started to try to sell me on appreciation but I called them out on it and he quickly retracted the statement.

Company 3

This was a company that came highly recommended from BP forums. This company has a great podcast that really got me interested in them. The only reason I didn’t go with them is because we had a phone conversation scheduled for Friday and he had to reschedule for Tuesday, and after that I found Company 4 and the perfect house so I chose to take the leap before vetting this one. I will definitely give this one another look before we go with our next property because they have properties in 10 different cities.

Company 4

This is the company we ultimately chose to invest with and again was highly recommended by BP forum posters. Their answers to the above were all what you would want from a legit company, their customer service for owner and tenants is awesome, and all of their properties exceed the 1% test. I also liked their YouTube videos that show their renovation work so I know what to expect in the house without having to travel out of state to see it. Their tenant placement and property management fee is lower than others, 75% and 8% respectively, but they do add 15% to any maintenance. They are in 2 different cities and one of them is only 30 minutes from where my mother lives. The advantage of this being that I can tax deduct business travel there every so often. Other great stats are ¾ tenants renew their leases and 90% of their sales are to return customers. All in all, this company did everything right, was in the right locations, and had numbers that worked.

In the next few posts I’ll speak more about how I chose the particular property and things I learned in getting financing and closing the property.