Newbie trying TurnKey Investment

Newbie trying TurnKey Investment

Rental Property Investor · Charlotte, NC · Member since 2015 · 128 posts · 29 votes

Good Morning Fellow Investors,

I am writing this post in hopes of getting some advice, recommendations, or prudent remarks from investors who have a lot more experience with real estate than I do. Since my time is limited (working FT as a finance analyst and PT as an adjunct), I decided my first real estate venture would be through a turnkey investment property company.

Therefore, I researched several companies and narrowed my selection to the following: JWB Real Estate Capital (Jacksonville, Fla), Norada Real Estate Investment Co. (Laguna Niguel, Ca). and HomeUnion Investment Services (Irvine, Ca).

There are many other turnkey investment companies depending on location and services to be provided, but these three to date, have answered all of my questions.Each company offers different services with different cost, which I am prepared to fund, if necessary.

However, before signing a contract, I was hoping my fellow Bigger Pockets investors would reply to this post. Please interject, if anyone has recommendations or cautious words that I should be aware of? Your feedback is appreciated and I thank you in advance for reading my post.

Nancy E.

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Alex CraigBusiness Member

Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes

Here is the advice that I would give you.

Go to the market that you want to invest in and meet the team. This is a minimal cost to make sure you're spending your money wisely. See the thread on the Birmingham turnkey provider ripping a BP investor off
Be comfortable I am impressed with the property manager. To be impressed though, would mean talking to a few property managers within the market. That being said, I do advise sticking with the turnkey provider for management on the back end to create accountability
Leave the properties with abnormally high ROI with rents under $850 (maybe $795 depending on the market) to the local investors. These are very high maintenance, intense hands on management, that really should be done by the person that owns the property. These are commonly referred to as C class
Order a third-party property inspection
Make sure the property has been rehabbed to turnkey quality that will maximize your cash flow (roof and HVAC updated, ceramic tile it kitchen and bath, vinyl plank hardwood in high traffics areas, durable carpet installed in bedrooms, external fences and buildings addressed during the rehab, supply hoses replaced under the sinks, etc) otherwise your cash flow will go to maintenance
Be skeptical of the one-year tenant warranty, that just means the turnkey provider is making a abnormally large profit who uses gimmick marketing to secure investors
Verify rent range through other property managers, Craig's list and Zillow
Ask if permits were pulled during the rehab
If a tenant is in place, ask to see the tenant file
Remember, you can fix the house, you can fix the tenant, you can fix the property manager, but you can't fix the area. The very conscientious to the area that you invest. If it is a area in decline now imagine what it will be in 10 years

I could probably think of some more, but that is what I could come up with off the top of my head. Do research, take into consideration what I said and then take action! Don't let other BP members talk you out of turnkey because there are a lot of turnkey haters, just because it is not right for them, does not mean that is not right for you. There are plenty of success stories within my company and my competitors companies that disprove the turnkey haters.

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Alex CraigBusiness Member
Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
10y
Here is the advice that I would give you.
- Go to the market that you want to invest in and meet the team. This is a minimal cost to make sure you're spending your money wisely. See the thread on the Birmingham turnkey provider ripping a BP investor off
- Be comfortable I am impressed with the property manager. To be impressed though, would mean talking to a few property managers within the market. That being said, I do advise sticking with the turnkey provider for management on the back end to create accountability
- Leave the properties with abnormally high ROI with rents under $850 (maybe $795 depending on the market) to the local investors. These are very high maintenance, intense hands on management, that really should be done by the person that owns the property. These are commonly referred to as C class
- Order a third-party property inspection
- Make sure the property has been rehabbed to turnkey quality that will maximize your cash flow (roof and HVAC updated, ceramic tile it kitchen and bath, vinyl plank hardwood in high traffics areas, durable carpet installed in bedrooms, external fences and buildings addressed during the rehab, supply hoses replaced under the sinks, etc) otherwise your cash flow will go to maintenance
- Be skeptical of the one-year tenant warranty, that just means the turnkey provider is making a abnormally large profit who uses gimmick marketing to secure investors
- Verify rent range through other property managers, Craig's list and Zillow
- Ask if permits were pulled during the rehab
- If a tenant is in place, ask to see the tenant file
- Remember, you can fix the house, you can fix the tenant, you can fix the property manager, but you can't fix the area. The very conscientious to the area that you invest. If it is a area in decline now imagine what it will be in 10 years
I could probably think of some more, but that is what I could come up with off the top of my head. Do research, take into consideration what I said and then take action! Don't let other BP members talk you out of turnkey because there are a lot of turnkey haters, just because it is not right for them, does not mean that is not right for you. There are plenty of success stories within my company and my competitors companies that disprove the turnkey haters.
901-848-9028
10 Reply
Justin Ericsson
Professional · Glenview, IL · Member since 2015 · 114 posts · 65 votes
10y
nancy... The companies you mentioned are mostly marketing agencies for Turnkey companies meaning they don't usually sell the actual homes you would purchase. I hear they work with quality turnkey companies in different markets so you should do fine. I'm an actual turnkey operator here in chicago if you want to explore the chicago market. Happy hunting!
1 Reply
Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
10y
@Nancy E., that's a very good list of potential red flags given by @Alex Craig. From real life cautionary tales that I have heard, the two biggies are:-
- Be skeptical of the one-year tenant warranty, that just means the turnkey provider is making a abnormally large profit who uses gimmick marketing to secure investors; and:
- Make sure the property has been rehabbed to turnkey quality that will maximize your cash flow (roof and HVAC updated, ceramic tile it kitchen and bath, vinyl plank hardwood in high traffics areas, durable carpet installed in bedrooms, external fences and buildings addressed during the rehab, supply hoses replaced under the sinks, etc) otherwise your cash flow will go to maintenance.
Are you happy to give them an "abnormally large profit"? All the best...
1 Reply
J Benoit
Residential Real Estate Agent, Investor and Mentor · Birmingham, AL · Member since 2013 · 257 posts · 61 votes
10y
Well said @Alex Craig
@Nancy E. be sure to follow his advice!!
1 Reply
Nancy E.
OP
Rental Property Investor · Charlotte, NC · Member since 2015 · 128 posts · 29 votes
10y
Hello,
Thank you @Alex Craig, @Justin Ericsson, and @Brent Coombs! I am sure your comments just saved me money. I am grateful for your willingness to provide guidance. I posted this message because several items you mentioned made me a little uncomfortable such as the tenant warranty.
I will keep researching before signing a purchase contract.
2 Reply
Jim BroznyPro Member
Investor · Batavia, IL · Member since 2015 · 58 posts · 24 votes
10y
Nancy Emineth you might consider contacting Mark Ainley from GC realty in Chicago. He's written several posts on BP about turnkey investments.
0 Reply
Alex CraigBusiness Member
Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
10y
@Nancy E. If you are going through 3rd party services/referral networks, research them too. These services can be valuable as they can leverage the amount of business they send Turnkey providers to (for a lack of better work), police the TK experience after the sell. If something is not going right or the TK provider did not do as promised, they can step in and use the amount of referral business as leverage for the TK to make it right. Read the Birmingham Turnkey Fraud post about the investor who went through Maverick and got totally hosed and it appears Maverick either did not step in or did not have the ability with their provider to make anything happen. A good 3rd party service should be referring so much business that they have a big influence over the TK provider, not to mention vetting them before they even start doing business. I am not real familiar wit Home Union, but from what I can gather, the additional fees they charge for services is something that a well organized, professional property manager and Turnkey provider can provide. I am not familiar with JWB at all. I have done business with Marco and he has a good reputation on BP. Within that Birmingham Fraud BP post, I believe Marco (and I apologize to Marco if I am wrong) jumped in and shared an experience where he stepped up to the plate when their was a TK issue on a sale through his network. That is what you want to see out of these 3rd party services.
901-848-9028
1 Reply
Alex CraigBusiness Member
Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
10y
Sorry for typos. Bad Grammar and typos is the world we live in with tiny mobile devices for adult hands!
901-848-9028
2 Reply
Account Closed
Redwood City, CA · Member since 2014 · 83 posts · 19 votes
10y
Originally posted by @Justin Ericsson:

nancy... The companies you mentioned are mostly marketing agencies for Turnkey companies meaning they don't usually sell the actual homes you would purchase. I hear they work with quality turnkey companies in different markets so you should do fine. I'm an actual turnkey operator here in chicago if you want to explore the chicago market. Happy hunting!
Justin - you comment about the companies mentioned being marketing agencies is incorrect for both JWB and HomeUnion. I can't speak for Norada. While HomeUnion does from time to time offer properties from TKP, the majority of our business is from inventory we personally find, vet and manage.
0 Reply
Alex CraigBusiness Member
Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
10y
@Account Closed Thank you for the clarification. I thought Home Union was a referral network. I apologize for my comments in my post as they appear not to be accurate.
901-848-9028
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Account Closed
Redwood City, CA · Member since 2014 · 83 posts · 19 votes
10y
Originally posted by @Alex Craig:

@Account Closed Thank you for the clarification. I thought Home Union was a referral network. I apologize for my comments in my post as they appear not to be accurate.
No a problem. We were two years ago, but our model has changed significantly to better serve our investors.
1 Reply
Alex CraigBusiness Member
Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
10y
@Account Closed I need to loop my wife in this post; she would love to hear me admit I was wrong! :)
901-848-9028
2 Reply
Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
10y
@Nancy E., the Fraud in Birmingham thread has been mentioned a couple of times in this thread, but there hasn't been a link.
Check this out.
I am so sad for the original poster's experience. She was totally taken advantage of. Read through her story, so you can get an idea of what to keep your eyes out for. There are good-quality turnkey providers out there, but no shortage of people who will take advantage of you. Do your research. If it seems to good to be true, it is.
@Alex Craig advised you to go to the city and meet with the team. Excellent advice.
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2 Reply
Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
10y
Hey Nancy! Great question actually....very well posed. I would say there are a lot of considerations to think about when looking at the turnkey providers. I live in LA and have always bought turnkeys for myself, and while I'm not buying right this second, I am working heavily with turnkey buyers in several markets.
In short, a couple things to be aware of:
- As mentioned in another comment, there are turnkey providers themselves and turnkey marketers (unofficial term). I have always worked through the marketers personally because a) they don't charge me anything to do so, b) they have, what feels like, a much less biased version about what markets to hone in on, c) they offer me a ton of help and leverage against the turnkey providers should anything go wrong, and d) they have vetted (well, a good company would have vetted, not sure they all do) all the turnkey providers and have figured out the good from the bad.
(in your comment, you mention 2 marketers and 1 provider...if that helps differentiate)
- There are such things as good and bad turnkey companies (and marketers), for sure. Knowing who you are working with, and what makes them "good", is key.
- Not sure if any of those companies are trying to charge you anything other than just the purchase of the property, but if they are...I recommend steering clear. There's no reason they should be.
- There are a lot of different markets available to buy turnkeys in. I would make sure you understand the pros and cons of each market so you can have a better feel of what kind of risk factor you are taking on. That will play a major role in whether you actually see the advertised returns or not.
If you have any questions, or want to talk more about the different companies, reach out anytime!
0 Reply
Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
10y
@Alex Craig
I would encourage you to make sure you know more details about a situation before making claims as to what a company is or isn't doing. I know personally that what you say about Maverick not doing anything is untrue, and in fact quite the opposite of what is happening right now.
Can't trust everything you hear on the internet. Especially BP.
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Alex CraigBusiness Member
Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
10y
@Ali Boone that fair. The forum, as many do, went on for several pages. I must have missed some key points. But I did not see the original poster mention anything about the Referral Network stepping up, I only recall seeing someone say they encouraged that referral network to cease doing business with that TK provider to which the referral network did not listen. Seems like someone from the referral network would have stepped up and posted something in their defense.
But your right. Certainly 2 sides to every story.
901-848-9028
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Alex CraigBusiness Member
Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
10y
@Ali Boone Jeez, I just ready through this forum post and the original post. Are you just picking on me? My comments were nothing compared to what others have said. I think you just don't like Memphis!!! It's all good though and I am just joking! :)
901-848-9028
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Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
10y
@Alex Craig
I've stayed out of that forum...only replied to you here because it's outside of that one (not going to try to contend with an entire 10-page forum chain, especially when most of the posters have never even worked with Maverick to actually know what they are talking about).
Trust me, there is more to the story. Some of which the poster knows and she didn't mention (in favor of Maverick), and some she doesn't know about yet. And Maverick does plan to respond...just not yet. Waiting until what they are doing to remedy it is completed. It's staying under wraps until then. (and they have ceased with that TK company)
I don't like Memphis, but that's irrelevant :)
@Nancy E.
Sorry Nancy! Didn't mean to distract from your original post. Will keep anymore of the side discussion on direct messages.
1 Reply
Nancy E.
OP
Rental Property Investor · Charlotte, NC · Member since 2015 · 128 posts · 29 votes
10y
Hello fellow BP,
I want to thank everyone for your comments. I have a lot more research to do before signing a turnkey purchase contract. This post has provided me with essential questions, I need to ask and several other companies, I can research. I am greatly appreciative to all your comments.
Nancy E.
0 Reply
Brian Lacey
Rental Property Investor · Hailey, ID · Member since 2015 · 218 posts · 143 votes
10y
Nancy, I'm looking at turnkey as well. One thing to also look at, is to find out who from these turnkey companies are active on BP. I know, I'm working with Norada right now on a property, and their founder Marco Santarelli is a frequent visitor to the BP forums. To me, that speaks a lot to the issue of credibility. Not to mention the other various associations, and appearances on podcasts.
1 Reply
Crystal SmithPro Member
Moderator
Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
10y
312-681-7487
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Barbara G.
Hartsdale, NY · Member since 2015 · 874 posts · 218 votes
10y
Now that you have some idea of the markets I would suggest that you connect with local real estate people that understands your investment goals and look at some inventory within your immediate area.
You should be looking at newer properties or properties that have been rehabbed. Compare the numbers with the turnkey properties. Talk to the real estate people about your goals and talk to some managment companies.
Join some Real Estate Investment Groups and or some Meet up Real Estate clubs. Run your deals by BP
0 Reply
Drew Castleberry
Investor · Simpsonville, SC · Member since 2015 · 132 posts · 54 votes
10y
Several things you should do before you settle on a specific company.
1. Identify the markets you want to invest in.
2. Develop rules on the type of property you want to buy, i.e. rent ratio, taxes, capex, etc. You need a system, that way you can easily identify or eliminate properties quickly.
3. Validate rent for the area using Zillow, and calling at least 3 property managers in the area
4. Any specific property you are looking at, good tools to evaluate the area are crimereports.com and trulia.com
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Alex Craig some excellent advice on vetting the potential deal.. JWB is in fact one of the biggest TK providers in the country... As well as to critics of those TK companies that don't own a lot of their own rentals. JWB does..
@Ali Boone While I understand you work with Maverick the issue unfortunately for these situations is when a marketing company ( any marketing company) brings on a new vendor and the vendor does not work out like these guys did.. I told Larry Fried this many times when they started and Asked him to pass it up the flag pole.. you have some collateral damage while your figuring it all out.. So some folks are going to get burnt by a poor TK vendor pick by the marketing company.. now its admirable that Maverick kicked these guys to the curb but you have about 7 to 8 months of sales activity that is caught up with this re org situation... I know no one can be all things all the time.. I know I get snookered occasionally but its on me not the public LOL. And its nice to hear that Maverick will indeed step up here. I also agree that there is always two sides to the coin on these deals.. Its why us Real Estate brokers have E and O insurance :)
@Crystal Smith Thanks for the mention Brie has done a great job we have 114 TK providers on our one site and you can compare product side by side ... pretty neat really.
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Nancy E.
OP
Rental Property Investor · Charlotte, NC · Member since 2015 · 128 posts · 29 votes
10y
Hello Crystal,
Message from @Crystal Smith.
I was on Turnkey Review last night researching two different turnkey investment companies. Thank you for the heads-up; BP members provide a wealth of information.
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