Turnkey for First Rental Investment?

Turnkey for First Rental Investment?

Jeremy BakerPro Member

Real Estate Investor · Aurora, CO · Member since 2014 · 240 posts · 109 votes

So, I guess this isn't going to be our first investment since we have a vacation rental property in Maui, but this will be our first buy/ hold / rent property. We've been looking locally here in the Denver metro and quickly found that this is not the best market when it comes to price/ rent ratios.

I've been reading up on some of the forum posts and BP articles about turnkey rental properties. We've got friends/ family in Dallas, Austin, KC and Atlanta so we have already started asking them and their real estate sources to get a feel for those areas. We are real familiar w/ Atlanta since we lived there for 5 yrs before moving to Denver.

So as much as we would like to stay here in Denver, would an out of state turnkey be a wise move for a first investment? The more and more we read up on turnkeys the more we like these options. Thanks in advance for any input and advice!

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Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes

Turnkeys are, in theory, fully fixed up properties that are ready to rent. Often with tenants and management in place.

Do your own due diligence. Verify everything turnkey seller tells.

I've looked at quite a few of these. While there may be acceptable deals out there many are overpriced, with overly optimisitic rent projections, and a shoddy rehab job. After the one year rent guarantee runs out the buyer, almost always distant, discovers they have bought a property at an above retail price that needs continual maintenance and doesn't rent for anywhere near what the seller claimed.

At best you'll give up some of your profit in exchange for not having to do any work. At worst you'll take a beating. Get on a plane or in the car and go see the property. Drive the area. Do your own research. Forget about what properties are worth in your own area and learn values where the property really is.

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Bill S.Pro Member
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Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
12y
@Jeremy Baker you are way behind the curve on foreclosures. That market is very very competitive. Lots of people doing it and fewer and fewer to choose from. It would be my advice since you are starting out to find another niche to locate distressed sellers in.
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Jeremy BakerPro Member
OP
Real Estate Investor · Aurora, CO · Member since 2014 · 240 posts · 109 votes
12y
@Bill S. , thanks for that insight. As beginners, my wife and I are basically not going to leave any stone unturned when looking for properties. Some may see it as a waste of time, but even if a certain niche is drying up and very competitive, at least we get some experience looking within those avenues.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Marco Santarelli

Thanks Marco for the reply,,, as you know out of area clients need an EXTREME amount of help both in Quality of property but Quality of the people they are dealing with and all vertically integrated. from wholesaler to Marketer to rehabber to PM. The trail of broken hearts and pocket books ( non pun intended on Big pockets) is long and tragic for those that get lined up with the wrong folks.
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Marco Santarelli
Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
12y
Originally posted by @Jay Hinrichs:
@Marco Santarelli

Thanks Marco for the reply,,, as you know out of area clients need an EXTREME amount of help both in Quality of property but Quality of the people they are dealing with and all vertically integrated. from wholesaler to Marketer to rehabber to PM. The trail of broken hearts and pocket books ( non pun intended on Big pockets) is long and tragic for those that get lined up with the wrong folks.

Hi Jay -- I completely agree with you.. I started this company over 10 years ago, and I've talk to my fair share of investors with broken heart & pocket books. It's part of the reason why I hold them by the hand to help them make the right/best choice. I spent hours on the phone with them, even when I know they probably won't do business with us. I figure Karma is at work. They need the help whether they realize it or not. :-)
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Marco Santarelli

Same here but sometimes you can't lead a horse to water and they still end up buying some Ghetto property for 25k ....

I will tell you who wins in all this its HOMEDEPOT fix up Ghetto property,, Ghetto property gets trashed,, New buyer thinks Hey for 25k I can make it work property is sold to local rehabber for 5k with 10k to Home Depot to get it up to speed property is sold for 25k to the next out of area buyer and add detergent rinse cycle and repeat.. Now I am being facetious but not really right? :)
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Jeremy BakerPro Member
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Real Estate Investor · Aurora, CO · Member since 2014 · 240 posts · 109 votes
12y
@Jay Hinrichs , so you're saying we should invest and open a home improvement store :)
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Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
12y
The story goes that the people that made money in the gold rush are not the ones who found gold but those who sold the shovels. Buy a shovel new for $2 and sell it to someone on their way in for $5. That person gets disillusioned and sells that shovel back to the person for $0.50. The vendor then sells a used shovel to someone else for $3. Either way they make money.
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