Hey new friends. I'm brand new to BP and the real estate investing world. I run a growing book publishing business and want to use our profits to invest in real estate. Searching for properties, negotiating, buying, rehab, renting, and managing are NOT in my sweet spot. I'm considering Turnkey and perhaps Syndication.
Does anyone have experience, counsel, or warnings that could help as I investigate my options?
Hey new friends. I'm brand new to BP and the real estate investing world. I run a growing book publishing business and want to use our profits to invest in real estate. Searching for properties, negotiating, buying, rehab, renting, and managing are NOT in my sweet spot. I'm considering Turnkey and perhaps Syndication.
Does anyone have experience, counsel, or warnings that could help as I investigate my options?
Thanks so much.
Michael
If you follow the punch list below, you'll probably have success in the space.
Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area.
Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
Make sure your property manager is a licensed real estate brokerage.
Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estate
Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.
Hey new friends. I'm brand new to BP and the real estate investing world. I run a growing book publishing business and want to use our profits to invest in real estate. Searching for properties, negotiating, buying, rehab, renting, and managing are NOT in my sweet spot. I'm considering Turnkey and perhaps Syndication.
Does anyone have experience, counsel, or warnings that could help as I investigate my options?
Thanks so much.
Michael
If you follow the punch list below, you'll probably have success in the space.
Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area.
Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
Make sure your property manager is a licensed real estate brokerage.
Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estate
Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.
Rental Property Investor · Centreville, VA · Member since 2019 · 1k+ posts · 799 votes
4y
Hi Michael, I would love to chat about turnkey investing out of state. I am also an out of state investor and used turnkey companies to scale my portfolio. let me know if you want to connect.
Real Estate Agent · Kansas City, MO · Member since 2020 · 1k+ posts · 492 votes
4y
@Michael DeLon Smart guy to use your resources rather than crash and burn trying to do it yourself. I am in the Kansas City market. Feel free to reach out to view some of the turnkey properties I am working on!
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
4y
@Michael DeLon as a newbie investor that is busy running a business, you are probably a good candidate for turn-key. Just like with any business, there are reputable ones and not so reputable ones. It's pretty easy to sort them out if you know what to look out for. Here are some things to look out for. This should help you avoid most mistakes.
Don't allow financing or a finance contingency (it can be a good indication they are selling above market value)
Don't allow for your own independent property inspection
Are not realistic with their pro forma's (i.e. they don't include vacancy or maintenance projections or use unrealistically low vacancy factors)
Require you to pay for any renovation upfront
Sell only in cheap. low end neighborhoods
Don't accurately represent the neighborhood/property classification
Don't have consistent rehab standards for all properties
Specialist · Southlake, TX · Member since 2021 · 213 posts · 157 votes
4y
I would suggest working with a team that has an excellent reputation, years of experience, operates in multiple markets, transparent about the renovations and provides data to back up their average maintenance and average length of stay across the portfolio. What markets are you interested in investing? @Michael DeLon
Seth… thanks. I think to begin I want to stay around Arkansas since I live in Little Rock. Arkansas and the contingent states would be ideal I believe.
I appreciate your insights. Very helpful. Have a great day.
Investor · Heber Springs, AR · Member since 2019 · 88 posts · 38 votes
4y
We have three good ones that I have sold a lot of properties to that I would highly recommend. Welcome to the Central Arkansas market. It is a great place to invest.
Rental Property Investor · Green Bay, WI · Member since 2016 · 150 posts · 94 votes
4y
Greetings @Michael DeLon and welcome to the real estate investing universe. These forums provide a wealth of information and sources of ongoing support. Many new investors look to turnkey to get started, as it provides an entry point that requires less hands-on and allows an investor to participate in markets that offer higher returns. If you go this route it is important to realize that there is no common definition of turnkey. In terms of rehabbing the property, the workflow can range from throwing a coat of paint on a wall or two, to an entire gut of the mechanicals, windows, siding, and flooring. Some providers take the approach that a furnace or water heater with several years of expected life shouldn't be replaced in the rehab, but that the final product should be priced accordingly. That furnace will need to be replaced in the next few years, but just not yet... Some turnkey companies sell the property to investors at the point where the rehab work is identified and quoted, but not yet completed. The investor then waits for completion and tenant selection prior to earning any income. Other providers sell the units only after the rehab is completed and the tenant in place.
Any turnkey investor should ask very probing questions of the turnkey provider regarding the condition of all mechanicals, roof and windows prior to entering into a deal. As you will soon find, there is no common definition of a turnkey property, and it can be very risky (and expensive) to make any assumptions.
The ongoing management of the property is another area of vastly different approaches to turnkey investments. Some providers simply sell the property and the investor is left to find a management company, maintenance personnel, snow and lawn care providers, etc. Other providers offer up recommendations for these services, and still other turnkey companies offer these services as part of their overall package. The range of offerings is great, and no assumptions should be made; you need to ask very specific questions regarding who is to do what.
All the best to you as you begin your investment journey!