Rental Property Investor · KY · Member since 2013 · 1k+ posts · 539 votes
What, in your opinion, are the best turnkey rental markets for cash flow in 2017?
I've been listening to a lot of podcasts and playing catch-up on some of them. In other words, I might discover a new podcast I like and I'll begin listening all the way back from episode 1 to current. I've been hearing a lot about different ("good") cash flow markets but some of these podcasts are back in late 2014 and 2015. Obviously things change. Just wanted to hear some opinions on different turnkey markets where the primary goal is cash flow. Here are some I'm considering:
Memphis, TN
Atlanta, GA
Kansas City, MO
Jacksonville, FL
Indianapolis, IN
Bronx, NY · Member since 2014 · 25 posts · 34 votes
9y
I think you'll get a lot of that - people in the business suggesting their market, whether on your list or not - you are not likely to get an unbiased assessment of which market is best. I personally invest in Jacksonville and Indianapolis, but I can't tell you those are the best for cash flow in 2017. There are simply too many markets for me to understand them all. But since Indy and Jax are the markets I know, they are the ones I'd recommend. But I'm sure in any of the markets you listed, there are turnkey operators that have good cash-flow deals. And of course in other markets.
I like Indy because the cost of entry is pretty low with a strong rental market, and I'm working with partners I feel I can trust and have shown to do good work, and I like Jax because of all the job growth and infrastructure improvements, and again because I have partners on the ground I'm comfortable working with. I passed on KC as a market because it is a bit too far for me to drive there myself and flights there tend to be expensive, although there certainly were deals with good cash flow.
My advice - pick a market based on criteria important to you, contact the turnkey operators, visit the market to look at deals and see their work firsthand (very important), find ones with cash flow that meet your criteria, and dive in.
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
I prefer Memphis myself and invest there. I’ve bought turnkey before and have been pleased so far. If it’s truly turnkey it’ll have mostly new big ticket items (roof, furnace, AC, etc). If you do that your capex will be small the first 3-5 years.
Also important to remember that not all turnkey properties are created equal. Some are better deals than others , at least on paper. So it’s important to filter the turnkey deals just like you to any other source.
Finally, you need to consider your situation and think about the long term process. If you buy one turnkey and then you’re done buying for a year, that’s probably a bad strategy. If you can scale to say 5 in 1-2 years that could be better. I also think you should have a mix of turnkey and non turnkey, multifamily etc.
Bumping this thread - any updates from other investors? Is Memphis played out? How is Kansas City doing now?
Does anyone recommend Arizona or Nevada? What about Utah?
Cleveland and other Midwest cities have really been taking off. Some of those others have been kind of tapped out. Investors find that they have bidding wars now, or the prices are inflated.
Investor · Albuquerque, NM · Member since 2017 · 133 posts · 83 votes
8y
Thanks, we have a couple rentals in our hometown of Albuquerque, however prices vs rents are high here. Not an ideal market, and not a lot of growth.
I'd prefer to be a short flight or not to long drive away from the properties we purchase. Kansas City isn't too far. But that's why I was wondering about Utah, Arizona, and Nevada, which I haven't heard mentioned at all for turnkeys yet.
Has anyone looked into Reno? Anyone know of good providers they would recommend there?
Real Estate Investor · Reno, NV · Member since 2012 · 240 posts · 45 votes
8y
I'm very active in the Reno community and this area is experiencing tremendous growth due to Reno/Tahoe Industrial Park. Which by the way is the largest Industrial Park in the country. Tesla is the biggest so far but there are a lot of high tech companies that have also moved into the area. Just what you are experience there is a shortage of housing and although rents have been rising it is very difficult to find a property that will generate the 1% rent vs. Purchase price ratio.
Investor · Roseville, CA · Member since 2009 · 1k+ posts · 584 votes
8y
@Tandi H.if you go to Zillow , you will see reno prices are the same or higher than your City . There is no secret city where the investors are making more money than other investors . If you want cash flow , you can pick any of the mid west cities to get better cash flow . Every person from each mid west city will say their city is the best. The key is to pick a City then find out where the ghetto is in that city , where the A , B , C areas are and decide where you want to invest in. Then find the best property manager in that area along with finding good real estate agents and good wholesalers in that area for your deals to choose from. Pick a property that is below value so that you can do a cash out refi and repeat.
Rental Property Investor · Culver City, CA · Member since 2012 · 403 posts · 246 votes
8y
All markets mentioned here can work. I'd narrow it down to a few and then focus on finding the market that has the best team for you. Start with the turnkey providers, look at their houses and how they renovate them. Have they been tenant proofed? Look at the neighborhoods. Look at their management. Make sure the market has backup management companies you like, you're probably going to need them. Talk to BP investors who have invested with them. Find the provider you like the most.
I can tell you from experience some of the big boys who claim they only sell in the best neighborhoods don't always follow that rule. Don't take their word. Turnkey should not mean the provider does the homework for you too. I thought it did back when I started and I got burned on one.
Turnkey properties (and non-turnkey properties for that matter) are rarely the total passive income dream we're sold. You have to do your homework before you buy and stay on top of them while you own them. Maintain regular communication with your management company. Read the BP forums as much as you can. It's not hard, and it can be quite profitable, but it's not 100% passive.
Rental Property Investor · Culver City, CA · Member since 2012 · 403 posts · 246 votes
8y
I should add, @Alex Craig helped me get out of my turnkey debacle and I found him and his company to be very helpful, transparent and informative. He has much more experience with the turnkey business and can provide more insight than me.
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
I’ll give a shout out to Alex Craig As well as that’s who I’ve used. Very transparent and very helpful team.
I guess not everything is 100 percent passive but when you spend around 1-2 hours a month on it, I think that’s pretty close
Developer · Nashville, TN · Member since 2016 · 484 posts · 406 votes
8y
Full disclosure: I'm a partner in a TK company in Indy, so I'm a little biased on Indy. However, a couple of years ago, when we got started, we CHOSE Indy over a lot of other metro areas, not just based on numbers, but on availability of deals. So, it depends on how big you want to grow your portfolio. If you just want 2-3 properties, it may not matter as much. Otherwise, look for cities and processes where you can REPLICATE similar deals many times over, and thereby build a bigger portfolio.
Turnkey Investment Provider · Kansas City, MO · Member since 2015 · 1k+ posts · 116 votes
8y
I’ve been in the Kansas City market for some time. It is a great market for cash flow and appreciation. The population is steadily rising as new employers move into the area. We are a centrally located, eclectic community. There’s a high rental demand at all times. Most of our rehabbed properties are rented out before they are done with the rehab.
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
8y
@Tandi H. Unless you have a time machine that will transport you back to 2012, Arizona and Nevada prices have gotten to high to cash flow well. I don't think Memphis is played out, however, I think Kansas City is much stronger. The cash on cash returns are similar to Memphis but Kansas City has much stronger economic and demographic fundamentals. KC has a vibrant economy with strong job and population growth whereas Memphis has a pretty stagnant population and jobs.
Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes
8y
As @Mike D'Arrigo stated, AZ gets a lot of mention for being a great place to buy rentals, but there are barely any rental properties that even meet the 1% rule. Homes that cost $250,000 will rent for $1000-$1500 tops in most parts of the city and will more than likely leave you with negative cash flow unless you're using a lot of cash to acquire the property. Indy and KC have very strong economies and are growing markets with much lower entry prices than anything out here.
I'm enjoying this thread because I'm frustrated with the FL market right now, unfortunately I didn't get in when it bottomed & its a hot sellers market. By the time I start negotiating someone else is in line with a full price offer or I find out its on a sink hole. It's possible I just don't know the right people also. I'm starting to look elsewhere. I like to target the 120k and less SFH 3/2/2, looking in GA & SC, will start checking these other areas out. Ideally I'd want the property in my back yard to keep an eye on it but maybe the FL market will pull back and I'll get another shot. You guys investing in Detroit, I don't want to sound bad but aren't those sketchy areas? I guess in the end it comes down to numbers and not worrying about the property. I tend to go for the class A-B kind of in the middle properties, near turn key. Scared for surprises on a C
I contacted Mid South Home Buyers last week and got on their list - they said they were about 6-8 months out. I did have a good conversation with them and feel that they are a solid company. Their cash flow estimates on the website seem reasonable, however they don't deduct R&M or CapEx in those numbers, so reduce them a bit further.
The concern I have with turnkey SFR is that unless you are buying all cash, you are getting a mortgage and the limit is 10 for standard conventional. At $300/door, 10 gets you cash flow of $3000/mo. If you are trying to create more than that, it seems like you'd need MF properties to stay within the 10 limit. Mid South said they occasionally have duplexes, but that those go to cash buyers first for the most part.
I'm interested to hear how much cash flow other turnkey buyers are looking for per month? My goal is $5000-6000 total, including rental properties I manage in my home town.
I contacted Mid South Home Buyers last week and got on their list - they said they were about 6-8 months out. I did have a good conversation with them and feel that they are a solid company. Their cash flow estimates on the website seem reasonable, however they don't deduct R&M or CapEx in those numbers, so reduce them a bit further.
The concern I have with turnkey SFR is that unless you are buying all cash, you are getting a mortgage and the limit is 10 for standard conventional. At $300/door, 10 gets you cash flow of $3000/mo. If you are trying to create more than that, it seems like you'd need MF properties to stay within the 10 limit. Mid South said they occasionally have duplexes, but that those go to cash buyers first for the most part.
I'm interested to hear how much cash flow other turnkey buyers are looking for per month? My goal is $5000-6000 total, including rental properties I manage in my home town.
I found an area that could operate a turn key for 400-500 built 2000 and newer. The only downside is growth, the rental demand appears to be there, the market has been flat lined for awhile in this area. But cash flow is cash flow, just would be nice to see growth over time but how picky can one be wanting the best of all worlds. I'd probably prefer a more stable market anyhow, I'm comparing Florida to this because thats the market I've been looking at for awhile, it was up then way down now its coming back up, roller coaster. Negative equity is something I would never want.
Investor · Albuquerque, NM · Member since 2017 · 133 posts · 83 votes
8y
@Sean Gallagher Hi Sean, which area are you mentioning? Does the 400-500 cash flow per month include property management, taxes, insurance, R&M, and CapEx? What price range houses are these (under 100k, 100-200k,)?
I use the following metrics for reserves/expense estimates:
Vacancy: 8%. Basically one month/year. Their leases are one year and they charge 1/2 month’s rent for placing a new tenant (first one is “free” when you buy the property). Lease renewal fee is $200 per 12-month renewal. So you know you’ll have at least SOME expense here.
Cap-Ex: 5%. I used to use 10% in my calculations, but since the homes are completely rehabbed with no deferred maintenance, I feel this is okay.
Repairs: 5%. Again, I used to use 10%, but that may be a little high.
Property Management: 10%. This is what they charge.
I know insurance and taxes are technically other expenses, but since they're escrowed and for the purposes of this analysis, I'll include them in PITI.
Okay, so let’s look at my numbers with them:
Purchase Price: $84,000
Monthly Rent: $885
PM 10%: -$89
PITI: -$442
Vacancy 8%: -$71
Cap-Ex 5%: -$45
Maintenance 5%: -$45
Monthly Cash Flow: +$193
I was expecting somewhere around +$150 - $200/month, so this is right inline with that.
I was reading as part of their lease that a tenant must be in a particular home w MSHB for at least 3 years before moving to another one of their homes. Sounds like this will prevent a ton of movement within the overall MSHB portfolio. Unless the tenant goes to a property not managed by MSHB, or moves altogether, chances are their tenancy will be pretty strong.
Tandi, as far as your monthly goals versus being capped out at 10 properties, I was thinking the same thing initially, however, I've also started to look into other REI areas like syndications and such where that won't be an issue.
Who knows what can change between now and the time 10 mortgages are acquired in terms of rules changing, but for now, I'm focusing on getting to 10. I'd like to buy at least 2 rentals / year along with other REI investments. There's always the possibility to reposition equity, kill off smaller mortgages, etc., down the road.