For Newbies...To Turnkey or Not to Turnkey

For Newbies...To Turnkey or Not to Turnkey

Real Estate Investor · Olathe, KS · Member since 2015 · 100 posts · 26 votes

I need some advice. After making the decision to get off the sidelines and start investing I've hit the MLS pretty hard looking for the deals. I'm a numbers guy. As you're probably thinking, my unfamiliarity with the rental market does make me nervous. I've been listening to the BP Podcasts for the past year and i heard a common theme of buying off the MLS to add value through rehab.

I'm fortunate enough to have some money set aside to allow me to pay the 20% down, since i'm way past the FHA / live in option. But i don't think i should start my first property with that kind of goals to complete on my own. My REI goal is to create passive income, while keeping my day job, to secure a ~20 portfolio in the next 10 years. I plan to buy in B Class neighborhoods in the KC market, at least to start. I plan to re-invest my profits to help me purchase multiple houses a year to get there.

My question: I see a lot of different paths to go down, and since i'm looking to be hands off and not manage my properties, do Turnkey's make sense?  Anyone have advice, good or bad, for using a turnkey company?

Thanks in advance!

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

Don't over complicate things. You live in a low barrier to entry market. Have a good agent show you some properties in your area. Target homes that are priced well and in decent shape. 

No need to do a gut job renovation. A lot of the value ad mumbo jumbo people discuss is really overhyped. The real key to long term wealth through rental properties is principle pay down. Your tenants will buy your houses for you, very simple but often completely overlooked and underappreciated.

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

    Chad you live in Turnkey central... there are some fine one's in your market you get the benefit of being able to just drive over to the office's and then drive the properties.. no mystery there.

  • Investor · Bothell, WA · Member since 2015 · 214 posts · 104 votes
    10y

    I know ppl who went with turnkey and are very happy with their decision. They wanted to start with something small to get their feet wet, learn from the process instead of diving in the whole thing. They chose their turnkey providers cautiously. So they are completely hands-off after the acquisition.

    I, on the other hand, like to do things myself. I'm a numbers gal too. I enjoy doing my own calculations, negotiating my deals, and managing my portfolio. I don't manage my properties, but I manage my people. To me, turnkey companies would take the fun away. Besides, I don't like making that commitment to a company. I do it myself, so I'm not committed to buy if the property don't appraise. I'm not committed to a designated loan agent. I'm not committed to a property manager. I'm not committed to a handyman. It maybe more headaches, but it's more flexible.

  • Real Estate Investor · Olathe, KS · Member since 2015 · 100 posts · 26 votes
    10y

    @Fay Chen Great feedback.  When starting my business plan i structured it like you.  I don't want to add to my already time consuming day job, but i like being more in control of my destiny. However, i'm all about understanding all options before I make a decision.

    Running the numbers have been a blast, but without having the 'gut' for what will rent i'm missing a key piece.  Thanks again.  

  • Investor · Bothell, WA · Member since 2015 · 214 posts · 104 votes
    10y

    Glad I can help, Chad! When I was searching for a PM, I called up about 20 different companies in my target area. Asked them about the market. A lot of them didn't return my call, but a few spent hours talking to me. I think ppl who love real estate are very generous with their knowledge and experience. They ended up giving me a free education on their local market without me having to sign any contracts! When I flew out to meet my contacts, they were so welcoming. Even my insurance agent spent a few hours sharing her real estate experience with me. I spent 6 month studying the market, calling and talking to ppl (turnkey companies included). It is absolutely essential.

  • Sterling WhitePro Member
    Rental Property Investor · Indianapolis, IN · Member since 2014 · 554 posts · 153 votes
    10y

    Great insight @Fay Chen. I believe calling the numerous TK providers in your location can really provide some insight @Chad Hotovec you will start to see a common thread "hopefully" of the good areas from the bad areas(to acquire property) pulling from their market knowledge. Then you can drive the area and get a good feel for it yourself.

    What has been your experience thus far from researching on the MLS Chad?

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

    Don't over complicate things. You live in a low barrier to entry market. Have a good agent show you some properties in your area. Target homes that are priced well and in decent shape. 

    No need to do a gut job renovation. A lot of the value ad mumbo jumbo people discuss is really overhyped. The real key to long term wealth through rental properties is principle pay down. Your tenants will buy your houses for you, very simple but often completely overlooked and underappreciated.

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

    @James Wise  Extremely good points James about principal pay down.

    And one reason why break even cash flow or a little negative in a market like SF Bay ARea is wholly acceptable and not some stupid maneuver.. it really depends on your market and what is the best move for said market.   and liquidity of the market place as well.

  • Real Estate Investor · Olathe, KS · Member since 2015 · 100 posts · 26 votes
    10y

    @Sterling White So far i've found some options that look like they will provide the COC percentage that i've set at my goals. The hardest thing right now is the fact that i've decided to start this over the holiday season. It's given me lots of time to look at properties online and run numbers, but no one to talk to. Can't blame anyone for that!

  • Sterling WhitePro Member
    Rental Property Investor · Indianapolis, IN · Member since 2014 · 554 posts · 153 votes
    10y
    Originally posted by @Chad Hotovec:

    @Sterling White So far i've found some options that look like they will provide the COC percentage that i've set at my goals. The hardest thing right now is the fact that i've decided to start this over the holiday season. It's given me lots of time to look at properties online and run numbers, but no one to talk to. Can't blame anyone for that!

    Completely understand your minor frustration not reaching operators due to holiday season . It's great you have found some properties that fit your criteria however. Just takes some patience. The locations where the COC fits your criteria are you familiar with the area?

  • Real Estate Investor · Olathe, KS · Member since 2015 · 100 posts · 26 votes
    10y

    @Sterling White Unfortunately i'm not familiar enough to make myself comfortable.  I've been in KC for 10 years but haven't become familiar with the areas i'm looking at investing. 

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