Are there any down sides to turn key investments?

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Are there any down sides to turn key investments?

Vivian Hernandez
Bridgeport, CT · Member since 2015 · 39 posts · 1 vote

l have been interested in passive income in addition to wholesaling, how does one get into Turn key investing?

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James B.Pro Member
Investor · Monterey Area, CA · Member since 2011 · 150 posts · 81 votes
10y

@Vivian Hernandez

Turn-key is not fully passive, as it takes effort on your part- but again, what's your time worth?

I think @James Wise and @Jay Hinrichs said it: you must vet the team and manage those that manage your property. Go meet them and do a tour of the market with several providers, talk to several Property Management companies.

Technology is also your friend. Have your PM's send you videos, pics of everything, if they perform any work, know what is a fair, competitive cost. They must account the income and expenses of the property with a software platform that you can log into and track. Also, email, text, Skype, and BP are an efficient way to communicate with your managers.  Ask tons of questions and learn as you earn-good luck!

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    simply shop for a a market that interests you and then compare offerings and vette the team thoroughly . all real estate has risk  its how you mitigate it.

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  • Ron H.
    Investor · Orange County, CA · Member since 2015 · 136 posts · 57 votes
    10y

    Turnkey investing is designed to be easier than fully involved investing, hence the term Turnkey.  Marco Santorelli has a great podcast on passive investing.  The link below is to an episode he dedicates to explaining the Turnkey process.

    Disclaimer - I have no personal or business connection with Marco or his company, Norada Real Estate Investments.  I may decide to partner with them in the future though.

    http://www.passiverealestateinvesting.com/turnkey-...

    1Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    10y

    With turnkey investing you are usually far away from the properties and are paying others to do everything for you. With this and anything else in life when you sub it out vs do it yourself the cost will of course increase on everything you do. This goes from management to toilet repairs. You will need to have to let go and entrust a very large investment into others. That can be very scary.

    The flip side is that you do not have to do it. It is all about what you best and highest use of your time is. If you can do I.T. work for $100 an hour and decide to pay someone $50 an hour to fix your house vs you fixing your house for free are you really loosing $50 an hour or making $50 an hour as you can spend the time you would have been fixing your house doing more I.T. work.

    3Reply
  • James B.Pro Member
    Investor · Monterey Area, CA · Member since 2011 · 150 posts · 81 votes
    10y

    @Vivian Hernandez

    Turn-key is not fully passive, as it takes effort on your part- but again, what's your time worth?

    I think @James Wise and @Jay Hinrichs said it: you must vet the team and manage those that manage your property. Go meet them and do a tour of the market with several providers, talk to several Property Management companies.

    Technology is also your friend. Have your PM's send you videos, pics of everything, if they perform any work, know what is a fair, competitive cost. They must account the income and expenses of the property with a software platform that you can log into and track. Also, email, text, Skype, and BP are an efficient way to communicate with your managers.  Ask tons of questions and learn as you earn-good luck!

    4Reply
  • Vivian Hernandez
    OP
    Bridgeport, CT · Member since 2015 · 39 posts · 1 vote
    10y

    How much can l start with?

    0Reply
  • Vivian Hernandez
    OP
    Bridgeport, CT · Member since 2015 · 39 posts · 1 vote
    10y
    Originally posted by @James B.:

    @Vivian Hernandez

    Turn-key is not fully passive, as it takes effort on your part- but again, what's your time worth?

    I think @James Wise and @Jay Hinrichs said it: you must vet the team and manage those that manage your property. Go meet them and do a tour of the market with several providers, talk to several Property Management companies.

    Technology is also your friend. Have your PM's send you videos, pics of everything, if they perform any work, know what is a fair, competitive cost. They must account the income and expenses of the property with a software platform that you can log into and track. Also, email, text, Skype, and BP are an efficient way to communicate with your managers.  Ask tons of questions and learn as you earn-good luck!

     How much can l start with?

    0Reply
  • Vivian Hernandez
    OP
    Bridgeport, CT · Member since 2015 · 39 posts · 1 vote
    10y
    Originally posted by @James Wise:

    With turnkey investing you are usually far away from the properties and are paying others to do everything for you. With this and anything else in life when you sub it out vs do it yourself the cost will of course increase on everything you do. This goes from management to toilet repairs. You will need to have to let go and entrust a very large investment into others. That can be very scary.

    The flip side is that you do not have to do it. It is all about what you best and highest use of your time is. If you can do I.T. work for $100 an hour and decide to pay someone $50 an hour to fix your house vs you fixing your house for free are you really loosing $50 an hour or making $50 an hour as you can spend the time you would have been fixing your house doing more I.T. work.

     Does the upside out weigh the downside?

    0Reply
  • Jim Pellerin
    Real Estate Consultant · USA · Member since 2014 · 1k+ posts · 751 votes
    10y

    Here are a few ways you can have passive Real Estate investments:

    1. Turnkey Fully Management Solutions ... as you mentioned

    2. Become a joint venture partner with an active investor (rentals, fix and flips)

    3. Money Lender

    You can usually find these by attending local real estate investing group meetings. You can also do a search on "real estate investing" or "mortgage investments".

    1Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    10y
    Originally posted by @Vivian Hernandez:
    Originally posted by @James Wise:

    With turnkey investing you are usually far away from the properties and are paying others to do everything for you. With this and anything else in life when you sub it out vs do it yourself the cost will of course increase on everything you do. This goes from management to toilet repairs. You will need to have to let go and entrust a very large investment into others. That can be very scary.

    The flip side is that you do not have to do it. It is all about what you best and highest use of your time is. If you can do I.T. work for $100 an hour and decide to pay someone $50 an hour to fix your house vs you fixing your house for free are you really loosing $50 an hour or making $50 an hour as you can spend the time you would have been fixing your house doing more I.T. work.

     Does the upside out weigh the downside?

     I am a provider so my answer to that would question would be biased. 

    1Reply
  • Vivian Hernandez
    OP
    Bridgeport, CT · Member since 2015 · 39 posts · 1 vote
    10y
    Originally posted by @Jim Pellerin:

    Here are a few ways you can have passive Real Estate investments:

    1. Turnkey Fully Management Solutions ... as you mentioned

    2. Become a joint venture partner with an active investor (rentals, fix and flips)

    3. Money Lender

    You can usually find these by attending local real estate investing group meetings. You can also do a search on "real estate investing" or "mortgage investments".

     Thank you Jim!!!!

    0Reply
  • Vivian Hernandez
    OP
    Bridgeport, CT · Member since 2015 · 39 posts · 1 vote
    10y
    Originally posted by @James Wise:
    Originally posted by @Vivian Hernandez:
    Originally posted by @James Wise:

    With turnkey investing you are usually far away from the properties and are paying others to do everything for you. With this and anything else in life when you sub it out vs do it yourself the cost will of course increase on everything you do. This goes from management to toilet repairs. You will need to have to let go and entrust a very large investment into others. That can be very scary.

    The flip side is that you do not have to do it. It is all about what you best and highest use of your time is. If you can do I.T. work for $100 an hour and decide to pay someone $50 an hour to fix your house vs you fixing your house for free are you really loosing $50 an hour or making $50 an hour as you can spend the time you would have been fixing your house doing more I.T. work.

     Does the upside out weigh the downside?

     I am a provider so my answer to that would question would be biased. 

     Understood. Thank you for this though!!

    0Reply
  • Vivian Hernandez
    OP
    Bridgeport, CT · Member since 2015 · 39 posts · 1 vote
    10y
    Originally posted by @James B.:

    @Vivian Hernandez

    Turn-key is not fully passive, as it takes effort on your part- but again, what's your time worth?

    I think @James Wise and @Jay Hinrichs said it: you must vet the team and manage those that manage your property. Go meet them and do a tour of the market with several providers, talk to several Property Management companies.

    Technology is also your friend. Have your PM's send you videos, pics of everything, if they perform any work, know what is a fair, competitive cost. They must account the income and expenses of the property with a software platform that you can log into and track. Also, email, text, Skype, and BP are an efficient way to communicate with your managers.  Ask tons of questions and learn as you earn-good luck!

     Thank you!! I have to get out of the 9 to 5!!!

    0Reply
  • Derrick Craig
    Memphis, TN · Member since 2013 · 969 posts · 524 votes
    10y

    @Vivian Hernandez

    I think my comments would be biased as well since I am a turnkey provider, I would use the forum searches to learn all the good, the bad, and the ugly of turnkey investing. Bottom line you have to do your due diligence and Property Management is the key regardless if you purchase turnkey or not.

    1Reply
  • Bryan O.
    Specialist · Lakewood, CO · Member since 2014 · 1k+ posts · 1k+ votes
    10y
    Originally posted by @Vivian Hernandez:

     Does the upside out weigh the downside?

     As with all personal investing strategy questions the answer is "it depends." Can you invest near you? Do you have some free time? Do you like the idea of buying low and forcing equity? Do you trust others to control the entire process? Do you think you "make your money when you buy?" Are you okay knowing your provider gets all the upside from buying distressed? The list goes on and on...

    You are really asking a world of people "Does this taste good?" Every person is different. Turnkey is a model that is awesome for some, horrible for others, and everywhere in between.

    2Reply
  • Marc M.
    Contractor · Rockville, MD · Member since 2014 · 423 posts · 135 votes
    10y

    @Justin B. is doing great with his turn keys. He's on his tenth I believe, I'm sure he'd be happy to share his experience with you.

    1Reply
  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    10y

    @Vivian Hernandez, if you are already adept at wholesaling, why not turn some of those deals into keepers instead of giving away profit to your end-Buyers?

    Turnkey providers aren't really doing anything that you can't do, except you are THEIR end-Buyer (ie. no more retail profit left for you). If you insist on this approach, please be aware that you cannot factor in any expected future appreciation to the property value. The numbers will need to work without any "bought at the right price" instant wholesale equity. Cheers...

    2Reply
  • Justin B.
    Investor · Gaithersburg, MD · Member since 2013 · 659 posts · 441 votes
    10y
    Originally posted by @Marc M.:

    @Justin B. is doing great with his turn keys. He's on his tenth I believe, I'm sure he'd be happy to share his experience with you.

    Actually, I have 10 properties, only 2 are turnkey (both with Memphis Invest).  I've been happy so far.  They aren't any better or worse than my other 8 which is saying more than it sounds like :)  All positive so far....

    1Reply
  • Douglas SkipworthBusiness Member
    Rental Property Investor · Memphis, TN · Member since 2014 · 1k+ posts · 1k+ votes
    10y

    @Vivian Hernandez,

    You've got a bunch of great info above from all the BP turnkey experts, especially about performing due diligence on the property, the neighborhood, and the management company.

    The only other thing I'd add is that turnkey investing is a long-term real estate strategy, not a short-term make-a-quick-buck plan.  

    Said another way, if you buy a turnkey property you are likely going to be paying full price (because the turnkey service provider has earned it by assuming the initial risk and doing lots of work), which means can be hard (if not impossible) to sell the turnkey house for a profit immediately after you have purchased it.  There are several horror story posts on BP about owners buying turnkey and then trying to sell in the first couple of years.  I'd advise you to read a couple of those posts just to make sure that you're really going to commit to the long haul, which is what turnkey requires.

    Best of luck to you!

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  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    10y

    Hi @Vivian Hernandez,

    Welcome to BiggerPockets!

    Glad to hear you're interested in building passive income.  It's a great way to get out of the "rat race".

    I might suggest downloading, The Ultimate Guide to Passive Real Estate Investing.  And check out my 10 Rules of Successful Real Estate Investing.

    Also, be sure to set up some Keyword Alerts so you'll be notified when people mention that which interests you here in the forums.

    Continues success!

    0Reply
  • Vivian Hernandez
    OP
    Bridgeport, CT · Member since 2015 · 39 posts · 1 vote
    10y

    Thank you so much!!! l will do that...need to get out of rat race...hour and half traffic driving me nuts!!!

    0Reply
  • Mark Shaffar
    Real Estate Agent · Madison, WI · Member since 2015 · 328 posts · 88 votes
    10y
    Originally posted by @Vivian Hernandez:
    Originally posted by @James B.:

    @Vivian Hernandez

    Turn-key is not fully passive, as it takes effort on your part- but again, what's your time worth?

    I think @James Wise and @Jay Hinrichs said it: you must vet the team and manage those that manage your property. Go meet them and do a tour of the market with several providers, talk to several Property Management companies.

    Technology is also your friend. Have your PM's send you videos, pics of everything, if they perform any work, know what is a fair, competitive cost. They must account the income and expenses of the property with a software platform that you can log into and track. Also, email, text, Skype, and BP are an efficient way to communicate with your managers.  Ask tons of questions and learn as you earn-good luck!

     How much can l start with?

     Hi Vivian I'll punt on the upside vs downside as I too am biased but to answer this question I've seen banks offer loans as low as 15% down on investment properties like this. In Milwaukee that looks like 9k plus closing costs

    0Reply
  • Engelo RumoraBusiness Member
    Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
    10y
    Originally posted by @Vivian Hernandez:

    l have been interested in passive income in addition to wholesaling, how does one get into Turn key investing?

    Biggest downside to turnkey IMO would be the difficulty of buying a turnkey property with in-built equity.

    Many investors are always after some fat being left on the bone and this is hard when buying turnkey as the provider wants to make sufficient margins on the product for the services provided.

    Thanks and much success.

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