Buying turnkey for first investment property?

Rental Property Investor · Member since 2023 · 21 posts · 19 votes

Being out of state and to minimize risk I don't want to do any major rehab, what do you think about buying turnkey property so that it casflows around 200 bucks a month with all costs associated? I know I won't be able to force appreciation and refinance like the BRRR method but at this moment being out of state I would like to build a steady cashflow stream of income and in future years maybe start applying the BRRR method because I will be able to take more risk.

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Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

Most of the rentals I bought are turnkey or only needed minimal work (painting and a few small things). There are many different ways to invest in real estate, find what works for you and do it. If the place you found cashflows $200 a month, then that is pretty good.

If you are investing out of state, make sure you take the time to tour the home before buying it. Make sure it is in a good area and will attract good tenants. Some places in less desirable areas look great on paper, but they have higher turnover and attract more problematic tenants that quickly use up any cash flow.

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
2y
Most of the rentals I bought are turnkey or only needed minimal work (painting and a few small things). There are many different ways to invest in real estate, find what works for you and do it. If the place you found cashflows $200 a month, then that is pretty good.
If you are investing out of state, make sure you take the time to tour the home before buying it. Make sure it is in a good area and will attract good tenants. Some places in less desirable areas look great on paper, but they have higher turnover and attract more problematic tenants that quickly use up any cash flow.
5 Reply
Stephanie Walker
Realtor · Charlotte, NC · Member since 2023 · 245 posts · 231 votes
2y
Personally, we only buy turn key new construction for our investment properties. It’s my preferred method - no surprises, warranties for everything, etc.
As for our clients, I’d say about 90% of them are out of state and highly prefer turn key as well.
The small group of clients that opt for BRRR method are typically more experienced and have had at least 1-2 BRRRs under their belt. The most difficult challenge with an out of state BRRR is finding a team you can trust to follow through.

3 Reply
Christian EhlersBusiness Member
Real Estate Agent · NH & MA · Member since 2021 · 457 posts · 291 votes
2y
Not a bad plan depending on your goals and risk tolerance. I bought out of state and got something that was good to go for my first one so I could Airbnb and I learned a ton along the way, however it does take longer to build equity and save up for the next deal.
If you are happy with the return and know you're in a good area then go for it, especially if it is expected to appreciate.
[email protected]978-396-9939
1 Reply
Austin McClainBusiness Member
Real Estate Agent · OH · Member since 2021 · 347 posts · 602 votes
2y
Turn key makes sense for your first property. That way you can start to make relationships with contractors through minor maintenance jobs to have a solid team ready to BRRRR in the future.
[email protected]614-710-4827
1 Reply
Taz Zettergren
Real Estate Agent · Memphis, TN · Member since 2019 · 365 posts · 264 votes
2y
@Duarte Marques I work with hundreds of clients that are doing that exact thing because they don't have the time to build systems and processes so they take advantage of the companies that have already built them. Some companies are even doing forward commitments with lenders so they can offer rates in the 5's.
Feel free to reach out if any questions arise, I'd be happy to help. Best of luck investing!
1 Reply
Duarte Marques
OP
Rental Property Investor · Member since 2023 · 21 posts · 19 votes
2y
Quote from @Stephanie Walker:

Personally, we only buy turn key new construction for our investment properties. It’s my preferred method - no surprises, warranties for everything, etc.
As for our clients, I’d say about 90% of them are out of state and highly prefer turn key as well.
The small group of clients that opt for BRRR method are typically more experienced and have had at least 1-2 BRRRs under their belt. The most difficult challenge with an out of state BRRR is finding a team you can trust to follow through.

SFR or multifamily?
0 Reply
Duarte Marques
OP
Rental Property Investor · Member since 2023 · 21 posts · 19 votes
2y
Quote from @Christian Ehlers:

Not a bad plan depending on your goals and risk tolerance. I bought out of state and got something that was good to go for my first one so I could Airbnb and I learned a ton along the way, however it does take longer to build equity and save up for the next deal.
If you are happy with the return and know you're in a good area then go for it, especially if it is expected to appreciate.

Taking longer to build equity and save up for the next property is a problem indeed, I'm focusing more on multifamily (3/4 units) so that it cashflows more
0 Reply
Stephanie Walker
Realtor · Charlotte, NC · Member since 2023 · 245 posts · 231 votes
2y
Quote from @Duarte Marques:

Quote from @Stephanie Walker:

Personally, we only buy turn key new construction for our investment properties. It’s my preferred method - no surprises, warranties for everything, etc.
As for our clients, I’d say about 90% of them are out of state and highly prefer turn key as well.
The small group of clients that opt for BRRR method are typically more experienced and have had at least 1-2 BRRRs under their belt. The most difficult challenge with an out of state BRRR is finding a team you can trust to follow through.

SFR or multifamily?

SFH
0 Reply
Christian EhlersBusiness Member
Real Estate Agent · NH & MA · Member since 2021 · 457 posts · 291 votes
2y
Quote from @Duarte Marques:

Quote from @Christian Ehlers:

Not a bad plan depending on your goals and risk tolerance. I bought out of state and got something that was good to go for my first one so I could Airbnb and I learned a ton along the way, however it does take longer to build equity and save up for the next deal.
If you are happy with the return and know you're in a good area then go for it, especially if it is expected to appreciate.

Taking longer to build equity and save up for the next property is a problem indeed, I'm focusing more on multifamily (3/4 units) so that it cashflows more

That's awesome! Usually if you can that's a great route to go. More units = More opportunity to cashflow (generally speaking).
[email protected]978-396-9939
1 Reply
Sunil Kurian
Investor · Bucks County, PA · Member since 2020 · 41 posts · 52 votes
2y
@Duarte Marques
Sounds like you're going into your choice with eyes wide open in terms of expectations. You pay more of a premium for reducing risk and the need for your actual labor...but for many of us who are primarily w2 employees, it can be worth it. Barring a macroeconomic generational event... don't expect to get fabulously wealthy off of just one turnkey property, but it does get you in the game. (Think "basehit" vs "homerun")
My main advice if you are choosing turnkey, is to spend time vetting your provider. There are some that are excellent in all phases from selling you a quality property with well done reno to providing great property management after acquisition. Some providers struggle with some or all of these tasks.
Wish you much success.
3 Reply
Jeff Cooke
Member since 2023 · 2 posts · 1 vote
2y
@Duarte Marques

I own an out of state rental in the state of MI and it works for me. Of course this wouldn't be easy without a great property manager, so do your research. Let me add one more thing to consider. You are about to tie up your valuable capital. It may be a few years before you can make a second purchase. Make sure this first purchase is the best investment you can make. The first purchase will set the pace of everything that comes after.

1 Reply
Jake AndronicoBusiness Member
Realtor · Reno, NV · Member since 2019 · 1k+ posts · 938 votes
2y
@Duarte Marques
If you're looking to slowly grow and in it for the long haul, I think it's a great strategy.
We're seeing some great new build deals in Reno, NV with prices actually decreasing on some as they need to hit end of year metrics.
415-233-1796
2 Reply
Todd CrippenPro Member
Rental Property Investor · Kansas City, MO · Member since 2016 · 116 posts · 49 votes
2y
@Duarte Marques
Investing in turnkey property is a solid way to grow your portfolio by taking advantage of markets that maximize your returns. There are a few initial market research tips I will provide first. I will then move to good return benchmarks and close with the most important piece of choosing a turnkey company.

Important market focus points: 1. Stable and desirable rental market (seasoned turnkey providers know these markets and utilize them with economic fluctuations in mind); 2. Diverse employment drivers; 3. Ability to get as close to 1% rent to value as possible (.85-1%).

Important return benchmarks: 1. Cash on cash return (8-12%); Cap rate (6-10%); and Rent to value ratio (.85-1%).

Choosing a turnkey provider: This is the most important step of the process. In effect, you’re not only investing in real estate, you're investing in that turnkey company. You want to share the same vision with your contact there and seek how transparent they are.

Key Questions:

How responsive are they?

Do they have in-house property management or is it referred to a third party?

How many doors do they manage in comparison to how many employees are on the payroll (should be at least 1 per 100 doors)?

Do they have up to date software with the ability to provide accurate reports for your income?

Do they offer routine maintenance programs?

Are they willing to readily provide references?
I hope this helps a bit!

[email protected]
2 Reply
Jason Allen
Attorney · Columbus, OH · Member since 2023 · 193 posts · 145 votes
2y
Quote from @Duarte Marques:

Being out of state and to minimize risk I don't want to do any major rehab, what do you think about buying turnkey property so that it casflows around 200 bucks a month with all costs associated? I know I won't be able to force appreciation and refinance like the BRRR method but at this moment being out of state I would like to build a steady cashflow stream of income and in future years maybe start applying the BRRR method because I will be able to take more risk.

I would invest in the Columbus, Ohio. I just walked a turnkey property that beats the 1% here in town. This property should collect at least 1800 - 2100 a month in rent. There are plenty of opportunities like this in Columbus currently, both on and off the market. With $150k, you could easily pick up 2 or 3 cash flowing properties.

2 Reply
Michael SmytheBusiness Member
Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
2y
Just be sure to find your own inspector to go through the property and do NOT trust anyone!
Logical Property Management4.9453 Reviews
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1 Reply
Peter W.
Member since 2020 · 351 posts · 329 votes
2y
That's what I did. (I Close on Monday). I am time limited between little kids and W2 work obligations so there is a question on return on time as well as investment. Get feet wet and see how forcefully I want to pursue REI vs just buying Microsoft. On number 2 or 3 I can give BRRR a try.
2 Reply
Mehdi Haider
Rental Property Investor · Chicago, IL · Member since 2023 · 8 posts · 3 votes
2y
I agree, don't start with BRRR now, its too early for people like us that are new, you have to build a team. Goal should be investment property less than 100K or max upto 150K but cashflows really well between $200-400 a door on a mortgage, without mortgage its way better. There are some good options, I came across and I have my 3rd going now. Feel free to reach out and I can discuss more. There are off-market wholesellers out there. Also ensure property taxes are low.
Remember one thing with multifamily you have to pay for some additional expenses like trash and utilities etc, so its not worth. Whatever stays in your pocket more is better.

My properties are in IL btw, with Section 8 or other supporting organizations tenants, rents on time, no hassle with a Section 8 property manager I have. I always get appraisals done first to see the value then negotiate the price, get a tenant sorted, stabilize it.
0 Reply
John MorganPro Member
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
2y
@Duarte Marques
Your base bit of only $200/month will look like a home run in 5-7 years as market rent rises quite a bit and it appreciates. At that point you can do a cash out refi and pull some equity out and scale up. The biggest con I see with a turnkey property is if a tenant moves out in less than 3 or 4 years. Turnovers crush all your properties for obvious reasons. But if you get someone in there for 7-10 years, then it turns into a cash cow.
1 Reply
Duarte Marques
OP
Rental Property Investor · Member since 2023 · 21 posts · 19 votes
2y
Quote from @Jeff Cooke:

@Duarte Marques

I own an out of state rental in the state of MI and it works for me. Of course this wouldn't be easy without a great property manager, so do your research. Let me add one more thing to consider. You are about to tie up your valuable capital. It may be a few years before you can make a second purchase. Make sure this first purchase is the best investment you can make. The first purchase will set the pace of everything that comes after.

Hi Jeff, thanks for the reply! Do you have any property manager recommendations?
0 Reply
Duarte Marques
OP
Rental Property Investor · Member since 2023 · 21 posts · 19 votes
2y
Quote from @Todd Crippen:

@Duarte Marques
Investing in turnkey property is a solid way to grow your portfolio by taking advantage of markets that maximize your returns. There are a few initial market research tips I will provide first. I will then move to good return benchmarks and close with the most important piece of choosing a turnkey company.

Important market focus points: 1. Stable and desirable rental market (seasoned turnkey providers know these markets and utilize them with economic fluctuations in mind); 2. Diverse employment drivers; 3. Ability to get as close to 1% rent to value as possible (.85-1%).

Important return benchmarks: 1. Cash on cash return (8-12%); Cap rate (6-10%); and Rent to value ratio (.85-1%).

Choosing a turnkey provider: This is the most important step of the process. In effect, you’re not only investing in real estate, you're investing in that turnkey company. You want to share the same vision with your contact there and seek how transparent they are.

Key Questions:

How responsive are they?

Do they have in-house property management or is it referred to a third party?

How many doors do they manage in comparison to how many employees are on the payroll (should be at least 1 per 100 doors)?

Do they have up to date software with the ability to provide accurate reports for your income?

Do they offer routine maintenance programs?

Are they willing to readily provide references?
I hope this helps a bit!

Hi Todd, thanks for the reply, it helps a lot! Do you have any turnkey provider recommendation?
0 Reply
Duarte Marques
OP
Rental Property Investor · Member since 2023 · 21 posts · 19 votes
2y
Quote from @John Morgan:

@Duarte Marques
Your base bit of only $200/month will look like a home run in 5-7 years as market rent rises quite a bit and it appreciates. At that point you can do a cash out refi and pull some equity out and scale up. The biggest con I see with a turnkey property is if a tenant moves out in less than 3 or 4 years. Turnovers crush all your properties for obvious reasons. But if you get someone in there for 7-10 years, then it turns into a cash cow.

Hi John, thanks for the reply! Indeed, if the tenant moves out after 3 yeas it's bad but that's why we have the rent cover at least 7% vacancy, it helps a bit and then you have your other reserves for maintenance + repairs and cap exp.
0 Reply
John MorganPro Member
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
2y
Quote from @Duarte Marques:

Quote from @John Morgan:

@Duarte Marques
Your base bit of only $200/month will look like a home run in 5-7 years as market rent rises quite a bit and it appreciates. At that point you can do a cash out refi and pull some equity out and scale up. The biggest con I see with a turnkey property is if a tenant moves out in less than 3 or 4 years. Turnovers crush all your properties for obvious reasons. But if you get someone in there for 7-10 years, then it turns into a cash cow.

Hi John, thanks for the reply! Indeed, if the tenant moves out after 3 yeas it's bad but that's why we have the rent cover at least 7% vacancy, it helps a bit and then you have your other reserves for maintenance + repairs and cap exp.
That’s good that you’re saving 7% for vacancies. Vacancies cost 4k on average plus a month of lost rent for most. And property managers charge a big fee for the next tenant so I factor in that big cost. But if you don’t have a vacancy for 7-10 years, then you’re good.
0 Reply
Devin PetersonBusiness Member
Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 665 votes
2y
Quote from @Duarte Marques:

Being out of state and to minimize risk I don't want to do any major rehab, what do you think about buying turnkey property so that it casflows around 200 bucks a month with all costs associated? I know I won't be able to force appreciation and refinance like the BRRR method but at this moment being out of state I would like to build a steady cashflow stream of income and in future years maybe start applying the BRRR method because I will be able to take more risk.

Your investment, your choices! I think any strategy works if you know and believe it will. Just always have contingency plans in place.
[email protected]860-538-3672
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0 Reply
Becca F.
Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes
2y
I bought turnkey (renovated but house was built in 1920) out of state of the MLS using a real estate agent in a market I know well (Indianapolis). I considered buying through a turnkey provider in Memphis and other parts of the Midwest (St. Louis, Cleveland and Detroit) but I didn't know those markets so I stuck with Indiana. Their numbers on paper look good but in reality, I'm not sure.
That SFH#1 had some minor repairs so it was truly not turnkey. I don't know what kind of due diligence a turnkey provider does as far as inspections, etc. but I would advise getting a full inspection and a sewer line scope. There are Four and Five Point Inspections vs. Full Inspection - it's worth the extra $100 for the full inspection. Old houses may have problems even if they're renovated and look pretty (a dishonest or unknowing seller could have old knob and tube wiring hiding behind nice updated kitchen and bathroom).
I've done a local renovation so I thought I could BRRRR OOS. It's really difficult after 6 offers. It's definitely not as easy as the social media gurus make it look. Not to dissuade you but if you plan to BRRRR my recommendation it's better within 2 hour driving distance of where you live so you can check on the property. I'm risk averse so I'm not planning on BRRRRing far away but everyone is different.
Feel free to DM me if you have more questions :) I could write a 5 page essay on my experiences in California and OOS.
4 Reply
Bob S.
Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
2y
Quote from @Duarte Marques:

Being out of state and to minimize risk I don't want to do any major rehab, what do you think about buying turnkey property so that it casflows around 200 bucks a month with all costs associated? I know I won't be able to force appreciation and refinance like the BRRR method but at this moment being out of state I would like to build a steady cashflow stream of income and in future years maybe start applying the BRRR method because I will be able to take more risk.

200 a month, why bother, Find another market. All mine are about 75k all in, rents from 1100- 1400, taxes about 1200- 1500 ALL cash purchases. Even if I refi still will be about 500- 600 a month cash flow
All the best
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