Turnkey markets. First time buyer

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Turnkey markets. First time buyer

Abdul R.
Union City, CA · Member since 2015 · 29 posts · 3 votes

Hello, 

Bay area native here.  Looking to invest in turn keys untill the passive income allows me to be  rent free by year 5 ( provided I have an flow of income at 3500).  From there who knows,  but that's the current goal.  

I have narrowed down my markets to Indianapolis, Memphis and Kansas city.  

They all seem preety similar in terms of cash to cash percentage gains.  Still not sure what provides better equity,  as that would be a plus.  Anyone have advice as to which starting market would be best? 

Companies the caught my interest are fshomes, Memphis invest,  and buyMemphisnow.  No turn key company I'm familiar with in Kansas city.  Any suggestions there? 

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James Martin
Property Management · Memphis, TN · Member since 2009 · 667 posts · 362 votes
10y

Check out Memphis Turnkey as well. Great company!

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

    Hi, @Abdul R.

    You should definitely check out Memphis.  It's a great market!  I personally own rentals here and am constantly adding to my portfolio.

    The guys at both Memphis Invest and Buy Memphis Now are top notch.  You shouldn't go wrong with either of them.

    Best of luck to you!

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  • Jason Hawk
    Real Estate Services · Olathe, KS · Member since 2015 · 329 posts · 57 votes
    10y

    Abdul,

    I'm located in Kansas City.  We are getting excellent returns here.  Feel free to message me with questions. 

    Jason Hawk

    0Reply
  • Larry Fried
    Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes
    10y

    @Abdul R. I do have a very good turnkey team in Kansas City.  I will PM you.

    0Reply
  • James Martin
    Property Management · Memphis, TN · Member since 2009 · 667 posts · 362 votes
    10y

    Check out Memphis Turnkey as well. Great company!

    4Reply
  • Douglas SkipworthBusiness Member
    Rental Property Investor · Memphis, TN · Member since 2014 · 1k+ posts · 1k+ votes
    10y
    Originally posted by @James Martin:

    Check out Memphis Turnkey as well. Great company!

    I agree with James.  Memphis Turnkey is first class!

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

    @Abdul R.  curious how many homes do you think you need to own in the turn key markets that will create 3500 a month NET revenue year in year out.?

    unless of course you paying cash... then that answer is much simpler.. and if your financing do you think you can get more than 4 mortgages?

    If you need a portfolio loan and can actually qualify for one its probably advisable t have the assets in one location so a portfolio lender can do a blanket mortgage with release clauses.

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  • Abdul R.
    OP
    Union City, CA · Member since 2015 · 29 posts · 3 votes
    10y
    Originally posted by @Jay Hinrichs:

    @Abdul R.  curious how many homes do you think you need to own in the turn key markets that will create 3500 a month NET revenue year in year out.?

    unless of course you paying cash... then that answer is much simpler.. and if your financing do you think you can get more than 4 mortgages?

    If you need a portfolio loan and can actually qualify for one its probably advisable t have the assets in one location so a portfolio lender can do a blanket mortgage with release clauses.

     From my calculations, I can purchase 3 turnkeys a year with financing.  Each one netting a conservative 225 a month.  675 a month first year x 5 =3375.  Ok,not 3500  but close enough. So 15-16 homes. What your  thoughts Jay? 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Abdul R.  my thoughts are how are you going to finance past 4 properties.

    and if your strong enough to go from 4 to 10  how are you going to go above that.

    the portfolio lenders are out there but a day does not go buy when I hear from those trying to borrow from them that they HAMMER the values.. so you may get a portfolio loan but your cash into the deals will probably have to be far more than what your thinking.

    just something to consider

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  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    10y
    It's do able but tough. I've talked to a bunch of people with the #tomanypropertiesproplem and lots of people try the 6.5% 30yr fix with 3-4pts. I found a local bank that can do 4.25 15 year and 25 year 5 arm for 5.25 but they will only lend in one state. I'm sure you can find one in every state but it's going to take some searching.
    1Reply
  • Engelo RumoraBusiness Member
    Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
    10y
    Originally posted by @Abdul R.:

    Hello, 

    Bay area native here.  Looking to invest in turn keys untill the passive income allows me to be  rent free by year 5 ( provided I have an flow of income at 3500).  From there who knows,  but that's the current goal.  

    I have narrowed down my markets to Indianapolis, Memphis and Kansas city.  

    They all seem preety similar in terms of cash to cash percentage gains.  Still not sure what provides better equity,  as that would be a plus.  Anyone have advice as to which starting market would be best? 

    Companies the caught my interest are fshomes, Memphis invest,  and buyMemphisnow.  No turn key company I'm familiar with in Kansas city.  Any suggestions there? 

    Quick tip Abdul,

    Focus on the people and team first over the stats and demographics of an area.

    Team work makes the dream work and working with the wrong people even if the area is great is a recipe for disaster.

    Thanks and much success ;)

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  • Abdul R.
    OP
    Union City, CA · Member since 2015 · 29 posts · 3 votes
    10y
    Originally posted by @Lane Kawaoka:

    It's do able but tough. I've talked to a bunch of people with the #tomanypropertiesproplem and lots of people try the 6.5% 30yr fix with 3-4pts. I found a local bank that can do 4.25 15 year and 25 year 5 arm for 5.25 but they will only lend in one state. I'm sure you can find one in every state but it's going to take some searching.

     Thanks Lane. Exactly what I was thinking.  I believe there are ways to work around the 10 mortgage limit, and from what I hear is it possible to have my wife buy her own 10 properties as well without encountering major stumbling blocks?  Thoughts on this? 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Abdul R.  she can buy her properties with enough income and reserves like you would.

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  • Abdul R.
    OP
    Union City, CA · Member since 2015 · 29 posts · 3 votes
    10y
    Originally posted by @Jay Hinrichs:

    @Abdul R.  my thoughts are how are you going to finance past 4 properties.

    and if your strong enough to go from 4 to 10  how are you going to go above that.

    the portfolio lenders are out there but a day does not go buy when I hear from those trying to borrow from them that they HAMMER the values.. so you may get a portfolio loan but your cash into the deals will probably have to be far more than what your thinking.

    just something to consider

     Regarding a portfolio loan to cover 4 or less properties,  would that count as one mortgage? Or 4?

    0Reply
  • Michelle T.
    Indianapolis, IN · Member since 2014 · 205 posts · 74 votes
    10y

    Hi @Abdul R.  I represent a turnkey provider here in Indianapolis. If you are interested pm me.

    0Reply
  • Kevin M. Rooney
    Turn Key Supplier · Indianapolis, IN · Member since 2015 · 111 posts · 21 votes
    10y

    We are a direct turn key seller here in Indianapolis.We have had much success here over the past 15 years. Feel free to reach out with any questions. 

    0Reply
  • Account Closed
    Professional · Noblesville, IN · Member since 2014 · 222 posts · 66 votes
    10y

    Hello @Abdul R.,

    I'm a private investor that is moving toward retirement and transitioning my portfolio of turnkey units in Indianapolis over the next few years. I remodel them with my crew and rent them out to great tenants.   I have some great units fully remodeled and cash flowing nicely if you would like to review them.

    2Reply
  • Phillip Gant
    Investor · Great neck , NY · Member since 2017 · 36 posts · 13 votes
    8y

    Anyone do any work in Syracuse, Atlanta or Jacksonville?

    0Reply
  • Kierra Moore
    Atlanta, GA · Member since 2018 · 13 posts · 4 votes
    8y

    i work in the Atlanta area!

    0Reply
  • Account Closed
    Multifamily Syndicator · Conifer, CO · Member since 2018 · 80 posts · 84 votes
    8y

    @Abdul R.

    Turnkey Passive Income!

    Who doesn't like the sound of that? 

    Instead of SFR have you considered apartments??

    You can build a relationship with a strong team of operators & plug into their experience.

    Once you have identified a team that you know, or get to know, and trust - your involvement will truely be passive.

    Leverage a quality, & proven, teams experience. Let your co-owner partners run the business so that you can spend your time elsewhere, doing what you love, while your money & team work for you. 

    Now that's the cash flow life that you deserve.

    To Your Wealth!

    Dino Pierce

    PS for more information regarding the benefits of passively investing into a Multifamily Syndication vist my blog here on BP!

    0Reply
  • Ivan BarrattBusiness Member
    Investor · Indianapolis, IN · Member since 2015 · 764 posts · 953 votes
    8y

    @Abdul R. Another moth to the flame. 

    Take the TK model and add a new line item expense: turnover (which is different from repairs, maintenance, vacancy). It's the cost to make the home rent ready again when a resident moves out.  That expense is the dirty little secret that will destroy your model somewhere in years 3 to 5. Add in $1 to $2 per sqft for turnover costs. It can go higher if you're buying low end rents in Indianapolis for example.  

    For every 100 TK providers there's 1 good one and 99 "others."

    Keep getting educated my friend. Real Estate is truly awesome but there are no shortcuts and no easy path! Also, we are at the top of the cycle! Beware! I have to look at 200 opportunities to find one true DEAL!

    All the best! Sincerely!

    1Reply
  • Ross Denman
    Real Estate Consultant · Whitestown, IN · Member since 2014 · 547 posts · 933 votes
    8y

    @Ivan Barratt you have found the magic bullet. I see too many pro forma's with numbers like 6% or 8% vacancy. I always figure 10% vacancy rates (or higher) not just because of the lost rents, but the cost of getting a home rent ready. At a minimum, our clients pay to have the locks changed, change smoke detector batteries, provide some furnace filters, and do a light clean to the property. That's if the tenant left the home in nearly immaculate condition (which only happens about 5-10% of times.) At a minimum, it's going to cost about $350 for the bare minimum. The tenants will be responsible for damages and excessive wear and tear and that can be held from the security deposit, but owner's are responsible for "normal" wear and tear. The average make ready is usually $2,000+ and I have seen them as high as $12,000 in the larger, older homes in the downtown areas. It really sucks to rent your $175K Fountain Square home to 3 young professional roommates at $1,950/mo to have to spend $12,000 after 3 years to deep clean, change flooring, repaint the entire home, etc. It will wipe out most of your cash flow. If you are leveraging with bank money, you cash flow is going to be so reduced, you will find yourself coming out of pocket more than you planned. 

    Turn-key properties can be great, but I've also seen turnkey companies cost investors a lot of money. There's no equity. They are completely leveraged and don't cash flow the way that you think. You can't look at a monthly snapshot, but look at a 3 or 5 year picture and it tells a completely different story.

    You think you are cash flowing $200/mo, but when you look at all of your income vs expenses over a 3 or 5 year period, you'll find that you only made $4,000-$6,000 which is a lot different than $200/mo.

    You can start with turnkey's but the real play is to build a team and find lightly distressed homes with equity and have your team renovate the property. This saves you quite a bit of money and allows you to have more equity in your investment. Probably a 10% difference or greater. Turnkey providers keep that. There are conveniences to purchasing turnkeys, but I don't usually consider them "advantageous."

    1Reply
  • Whitney T Redfield
    Huntington Beach, CA · Member since 2018 · 47 posts · 14 votes
    8y

    This is an absolutely amazing thread and I am interested in everything everyone has offered. I'm new to REI, and have a few partners here in Southern California willing to invest with me out of state. I'd love to put a team together if anyone else is interested.

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    8y
    Originally posted by @Ivan Barratt:

    @Abdul R. Another moth to the flame. 

    Take the TK model and add a new line item expense: turnover (which is different from repairs, maintenance, vacancy). It's the cost to make the home rent ready again when a resident moves out.  That expense is the dirty little secret that will destroy your model somewhere in years 3 to 5. Add in $1 to $2 per sqft for turnover costs. It can go higher if you're buying low end rents in Indianapolis for example.  

    For every 100 TK providers there's 1 good one and 99 "others."

    Keep getting educated my friend. Real Estate is truly awesome but there are no shortcuts and no easy path! Also, we are at the top of the cycle! Beware! I have to look at 200 opportunities to find one true DEAL!

    All the best! Sincerely!

    Ivan, so are you saying that turn over costs only apply to turn key properties? You raise a very valid point but that is true of any rental property regardless of the method in which it was bought. Turn over costs are certainly not unique to turn key properties.

    0Reply
  • Christian BachelderBusiness Member
    Real Estate Broker · Marina del Rey, CA · Member since 2018 · 105 posts · 25 votes
    8y
    @Whitney T Redfield Definitely interested. I have a small team as well. I am a real estate agent in CA and mortgage broker with access to out of state lenders. Also have a great commercial contractor on the team and 2-3 passive investors. Maybe we could join forces at some point!
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  • Christian BachelderBusiness Member
    Real Estate Broker · Marina del Rey, CA · Member since 2018 · 105 posts · 25 votes
    8y

    @Whitney T Redfield

    Definitely interested. I have a small team as well. I am a real estate agent in CA and mortgage broker with access to out of state lenders.

    Also have a great commercial contractor on the team and 2-3 passive investors. Maybe we could join forces at some point!

    *Sorry for the duplicate post. First @ link did not work for some reason.

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