I am starting out on my buy and hold journey and have encountered some interesting turn key "opportunities" that appear to be great for new investors. Please share your experience if you've dealt with companies that offer (1)property, (2)management, (3)tenant screening/placement, and (4) the monthly income--all from under the same roof.
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Dealt with them? No. Evaluated a bunch of turnkey deals? Yes. I find they are very often over priced for the area. Claimed rents are higher than reality. There have been several posts here that discuss ongoing maintenance issues that lead me to believe the rehab was shoddily done. And posts where the buyer eventually gave up, after discovering the returns weren't there, only to find they couldn't possibly sell the property without a significant loss. Many of these companies seem to target far-away investors who will evaluate the properties based on where they live, not where the property is. Your own due diligence is ESSENTIAL to avoid being stuck.
You're going to get a bunch of replies from people either selling turnkeys or collecting referral fees if they refer someone to a turnkey seller. Again, do you own due diligence.
Where do you suggest I start to ensure I have the infomation needed to make a good business decision?
Hi Ro'Maine -
You are so close to Memphis that the best way to do your due diligence is to visit the companies themselves. Visit with them and ask lots of questions about how they operate, how they profit, how they provide service to you and importantly how they provide service to tenants in their property management company.
Once you've done that go visit properties that they are managing and properties that they show are available for you to purchase as an investor. You are already going to be familiar with the areas and will have a good idea of what you are comfortable with and what you are not comfortable with. So follow your own instincts with the areas and spend time if you need to going and looking at the areas at different times of day and night so you are familiar with how the areas look. Lastly, ask for lots of referrals. Local investors, out of area investors, new investors, old investors. Those are ways you are going to do due diligence.
You will find a lot of advice on here from people that absolutely hate turnkey deals and companies and regardless of market or company or deal, will always tell you to run the other direction. Many as, Jon noted, have no experience actually dealing with a turnkey company. But we all read about and hear about very bad situations where investors have been taken advantage of when buying real estate, turnkey or not, without taking all the steps to protect themselves.
I am going to tell you that regardless of who you are doing business with or what city you are buying in or how you are buying --- you are 100% responsible for your decision! So take NOTHING on faith. Even if you were dealing with my company, you have to verify for yourself. You cannot afford to take anything on faith from anyone. Make any company or person you are going to do business with earn your trust. Verify, verify, verify and be patient. Do not be afraid to ask questions and more importantly do not be afraid to say no if it does not work.
If you follow that advice, you will do great!
You are very close to Memphis so it will not be hard for you to do your investigation/due diligence of each turnkey company before you decide to do any business with them. Start out by searching here on BP for Turnkey providers in the Memphis area then I would suggest a Google search ask a lot of questions and if you think you are asking to many questions ask more. If they are unable or unwilling to answers the questions then that's a red flag.... Immediately RUN!!! LOL.... Or if they get frustrated with all the questions you may ask then RUN faster!! Turnkey providers should have great customer service skills or people that work for their company that posses those skills...
Congrats on taking the next steps to Real Estate Investing you are going to do GREAT!!
Perfection is not attainable, but if we chase perfection we can catch excellence.
@Ro'Maine Pryor do not be afraid to ask other folks on here what kind of quality they found with any turnkey companies. Many on BP have used turnkey companies and can give you feedback. Be careful of rave reviews however of folks with only a few posts. Some companies get an account only to rave about themselves then close the account. look for hundreds or even thousands of posts to show they are real members.
Hey @Jerry W. - that's a good point. The biggest catch-22 though is that people who invest in turnkeys happen to not be quite as active on the forums since they deal with a very narrow subsection of real estate investing. I fully agree that you should listen to advice of people who have a lot of posts, but in this case, it might be difficult. I don't really have a solution, but just pointing that out.
living in the area you can probably buy off of MLS which will give you a better deal than from someone who has had to buy the property for you, and has incurred holding costs to bring the property to you,, and or has to use some one like Ali Hipster who they have to pay a commission to to introduce you to the TK person. I believe you can buy on your own and then contact the better management companies ( one being Memphis Invest) and just have them manage the property for you... Put a little elbow grease into the acquisition and you will probably save some hard earned money in the process.
Some of the better management companies might only manage for their clients whom they sell to. That is kind of the perks of buying from a company like Memphis Invest. I dont know if they do that or not but some do.
It's great that you are checking in at BP as part of your due diligence. It is wise to take your time and scout out the possibilities. I talk to people every week that have sad stories of deals that have gone very wrong or they're trying to sell properties that they bought that were WAY over priced.
I don't know why anyone would buy a turnkey from the mls unless they found a rockin deal. Why pay retail? There are many good turnkeys available in good areas that have good tenants, property management in place and are still 20% under market value.
Best of Success to you
If time permits, with you living so close to the area, you could always try it yourself. We have done a few deals in Oakland and have found that with the property taxes so cheap, that the cash flow is great. Each month there is a real estate local networking group (MIG) that meets in Memphis. I started out very green and by going to this group, I met several people who helped me for free. Fast forward 8 years later and I have a nice size portfolio of homes. I really do credit MIG to helping me get started the right way. To this day, I still lean on some individuals within that organization to help me in some sort of capacity. Going to that meeting is worth a start. @Curt Davis normally does a Getting Started Right group prior to the meeting. I don't think he is doing it this time due to his new baby arriving later today. BTW @Curt Davis congrats!
I tentatively plan on going for the first hour or so. I would be happy to talk further about Memphis real estate and give you pointers.