Thoughts on turnkey investments

[Lucas Gonzalez]

Hey all,

I am interested in passively investing in real estate via turnkey properties and wanted to get the BP community’s thoughts and recommendations on what turnkey provider to use and what market is best for both appreciation and cash flow.

For background I am living in the NY metro area where it is too expensive to invest in real estate. Ideally I’d like to partner up with a turnkey provider that provides property management services as well.

Any insight is greatly appreciated.

Thank you!

[Drew Sygit]

@Lucas Gonzalez

The biggest challenges with Turnkey providers:

1) Terrible renovation work - we've taken over many properties that investor bought turnkey and they were shocked to learn the true condition of their property from our TakeOver video.
---So, get a GREAT property inspector NOT recommended by the turnkey company to avoid bias.

2) Misrepresenting Property Class - have seen many turnkey providers in Metro Detroit area sell OOS investors Class C properties as Class B.
---So, learn the neighborhoods where you plan to invest and use Google Streetview to virtually explore them.

3) Poor Tenant Screening - they typically can't sell a property until they place a tenant. So, they have a conflict of interest in waiting for the right tenant.
---So, insist on them providing the rental application and supporting docs for your review. This means YOU need to learn how to evaluate a rental application!

4) Poor Property Management - Where do you think a turnkey provider will put their best staff, on selling properties and making $5k+/transaction or on property management and making $80/month transactions?
---So, ask about their standard operating procedures and make sure your management contract has an easy termination clause.

What are your options if you experience one of the above? Everyone thinks they can sue to solve the problem.

Do you realize how much it will cost to hire an OOS attorney to sue the turnkey company?

Unfortunately, the majority of investors that experience terrible service from turnkey companies, figure out that it's not worth spending tens of thousands of dollars suing their turnkey provider and just move on - which allows the turnkey provider to not change their ways and stay in business:(

You should also check out this BP thread about the topic:

https://www.biggerpockets.com/forums/88/topics/976647-turnkey-company-suggestion?highlight_post=5648876&page=1#p5648876

[Joe Hammel]

@Lucas Gonzalez

Personally, rather that using a turn key provider; I’d recommend buying a turn key property (meaning move in ready) without the tenant placed, then finding a good PM to manage it from there.

It’s 2 simple steps; 1. Buy the property 2. Transfer to PM

Instead of 1 step; Buy with turn key provider

BUT you avoid paying the huge premium of a Turn key provider and avoid some risk of turn key providers questionable motivation but double dipping the deal (arguably triple/quadruple dipping) in such a away.

Here in Metro Detroit MI our market has the move in ready properties around that price in solid locations and you can chat with @Drew Sygit about PM.

[Mio Chee]

I have been using a turn key provider for the last 7.5 years and I am more than happy with the service I received from them as well as the results. My first house did so well that I was able to buy 2 more using the equity I cashed out + cash flow I saved from the first property (I did pay some out of pocket, but not much). My TK uses a very unique model and charge a very little fee (no fee unless/until you buy. They create a long term game plan for you and you can request as many phone/zoom meetings as you like with your account manager) and that is why I love my TK company. Just like NY metro, in Honolulu, Hawaii where I live, the median SFH is more than $1M (crazy!) and the rents are too low. That makes buying a rental here nearly impossible. Feel free to PM me if you are interested in learning more about my TK.

[Theresa Harris]

I would buy a turnkey property on your own and find a property manager to look after it if you don't want to manage it.  If you buy remotely, go and check out the place yourself. Do your homework on the company, there are some scam operations out there. If it sounds too good to be true, it probably is.

There is nothing wrong with buying a turnkey property.  Everyone has their own niche. Do what works for you.

[Melinda McDonald]

Good morning Lucas - 

As far as turnkey, I have seen a great many turnkey properties that have rehabbed correctly with no issues.  I think the bigger issue is to have an independent inspection completed prior to purchase.  Also, a solid and reputable separate property management company would also be my recommendation.  They can take many of the headaches away from you so you can focus on other investment opportunities.  Please feel free to reach out if I can be of assistance.

Best,

Melinda

[Cade Edwards]

Hi @Lucas Gonzalez, when it comes to picking a turn key provider I highly suggest in using one that you can trust and has a very good reputation. The Southeast market has experienced good appreciation as well as cash flow. 

[Aldrin Gacuya]

Quote from @Nick Giulioni:

Hi Lucas, I'm from California but had my first turnkey in Indianapolis. Now, I have almost a hundred doors. I would love to help/share my experiences and chat with you more if you're interested.

 Hey Nick,

I'm also based out in California and I kinda eyed turnkey for a first time investor and the market like Indianapolis was on my list. If you have time would really like to chat some time.

Thank you

[Aldrin Gacuya]

Quote from @Melinda McDonald:

Good morning Lucas - 

As far as turnkey, I have seen a great many turnkey properties that have rehabbed correctly with no issues.  I think the bigger issue is to have an independent inspection completed prior to purchase.  Also, a solid and reputable separate property management company would also be my recommendation.  They can take many of the headaches away from you so you can focus on other investment opportunities.  Please feel free to reach out if I can be of assistance.

Best,

Melinda

 Hi Melida,

I wanted to ask, if the turnkey property company already has a PM in place would you say that is okay as well or would it better to have a separate PM handle that property?

[Darius Ogloza]

Honest advice? Buy a publicly traded REIT. Unless you are lucky or plan to make a quasi full-time job of it, you will very likely lose money speculating in unfamiliar, low income neighborhood properties far from your home base.

[Nicholas L.]

OP seems long gone...