Recommended Locations/Regions for Turnkey Investing
Boulder, CO · Member since 2016 · 22 posts · 4 votes
Recommended Locations/Regions for Turnkey Investing
Most Popular Reply
I used a turnkey provider and was offered a 9% return on my note purchase. I am in CA and the property was in PA. I got steady payments for 18 months and then it started to go downhill. I had to constantly follow up about interest payments and eventually found out the turnkey provider was going under. The property was given back to me via deed in lieu of foreclosure. I obtained a property that was in bad shape. It had back taxes, utilities, interior beat up, and the roof was shot. During this time of transition, PA was in a winter storm and the pipes burst in the house. The property manager and contractor repaired the damage. After 4-6 months the property finally was in a condition to put on the market to try and get my money back, but it took all the interest payments plus extra funds to get it to this point. We priced the property equivalent to the amount a down payment would require on a house in CA. I didn't realize the challenges in investing in such depressed areas. As Charles Roberts stated, it is not worth it for me to trust a 3rd party that I am not familiar with. I was referred to this company by my 401k provider and assumed they did their due diligence.
Everything could go smoothly for 1 to 2 years and then once things go downhill, then it can get bad quickly. I have the best luck and income from investing in properties that I can drive by everyday and vet the tenants myself. If you feel like flying out and visiting the property yourself and seeing the condition it is in before you buy and during the rental period, then go for it. I just can't justify the hassle for $200-$300 profit per month. The back taxes I had to pay to make the property current was $4k, new roof $7k, rehab interior $10k. It was the largest headache for the least amount I've ever invested in real estate. Hopefully I can recoup some of the money invested and not take too much of a loss. Also hope the property management company is honest about repairs and the mechanicals of the home can stay together by the time I get an offer. It is currently rented and the renter stated bed bugs were in the house. It has been vacant for 6-8 months. I got a quote from them that the exterminator wanted $1400 to rid the house and I had them get additional quotes. It cost $750 to get rid of the problem. Good luck on whatever you decide to do.
34 Replies
- Wilmington, DE · Member since 2017 · 19 posts · 7 votes9y
That is a good problem to have. Not knowing your experience level with investment real estate. I would suggest you look for partners in specific areas of the country that you are targeting. Read the BP forums and start by signing up for alerts to areas you are interested in to be automatically updated to activity in your preferred areas.
No matter how turnkey these properties are it is nice to have boots on the ground in the local market. Neighborhoods change so quickly in just a few blocks.
Good luck!
What's your familiarity with those areas? There are opportunities here in the front range especially for cash buyers.
What is the return like after fees, etc for turnkey? I personally prefer to invest in areas I know and can drive by to check.
- Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes9y
Originally posted by @Joshua Zapin:
I have more money than I have time and live in a market (Boulder, CO) that doesn't lend itself well now for investing.
Turnkey real estate investing seems like the right entrance into REI for me.
Question: What are some recommended locations? Some of the ones that I have intrigued me based on the reputations of turnkey investment companies that focus on them include:
- Memphis (Memphis Invest)
- Houston (Memphis Invest)
- Indianapolis (Morris Invest)
- St. Louis (St. Louis Property Direct)
Any other thoughts/recommendations?
Any thoughts would be greatly appreciated.
Thanks.
JZ
That is a great question. It really depends on which market can get you the best ROI and has a positive future. I would say to avoid any markets that might be over saturated with investors.
Feel free to look at:
The Best Types of Markets for Profitable Turnkey Properties
and
What to Ask When Working With a Turnkey Provider
Good luck!
- Boulder, CO · Member since 2016 · 22 posts · 4 votes9y
Originally posted by @Matt M.:
What's your familiarity with those areas? There are opportunities here in the front range especially for cash buyers.
What is the return like after fees, etc for turnkey? I personally prefer to invest in areas I know and can drive by to check.
I don't have much familiarity. That's why I'm thinking of trying turnkey to help learn. I also would prefer to invest in areas that I can check and plan to do so once I hone in on a region.
Does that make sense?
- Investor · Greenville, SC · Member since 2016 · 19 posts · 8 votes9yI highly recommend Greenville, SC. I moved here from Atlanta and economically and employment wise, this place is booming. We have 15 major corporations here, right now there's more than 18K jobs open, education is fantastic and crime is extremely low. Lots of new homes being built from $200K and up. Super city, lots of great community, 2 hour drive to the Atlantic Ocean. What more could you possibly want!
- Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes9y
Originally posted by @Joshua Zapin:
Originally posted by @Matt M.:
What's your familiarity with those areas? There are opportunities here in the front range especially for cash buyers.
What is the return like after fees, etc for turnkey? I personally prefer to invest in areas I know and can drive by to check.
I don't have much familiarity. That's why I'm thinking of trying turnkey to help learn. I also would prefer to invest in areas that I can check and plan to do so once I hone in on a region.
Does that make sense?
It is a good idea to get with a Turnkey provider that really know the markets and has actual turnkeys. Make sure they own, renovate, and manage the properties.
The small boutiques companies are sometimes a better fit. When these big ones overextend themselves it is hard for them to really know a market. The smaller companies that are localized really know their stuff. Just make sure the properties are good!!!
- 9yChris LopezPro MemberReal Estate Agent · Denver, CO · Member since 2015 · 1k+ posts · 858 votes
@Joshua Zapin Do you have a specific number in mind for your return?
I have never invested with turnkey companies. I did look last year since I live in Los Angeles. I never saw anything that made me want to move forward. Main reasons:- I like to be in control - that's just my personality.
- It's very easy for things to be going great when the markets are on the rise, but what happens when there is a hiccup or downturn? Putting 100% trust in a company for buying, fixing, managing, etc seemed risky to me and outside my comfort zone (see control issue above!!)
- I plan on holding on to properties until I die. I'm in my 30's now. I want to make sure I can buy properties for the long run. Buying closer to home in an area I know and understand makes more sense.
Consider looking at places in Denver before totally ruling int out.
- How many properties have you actually looked at (outside of Boulder county?)
- How many deals have you analyzed in Denver area?
I've been working with @Charles Roberts for the last few months and he's been finding good deals (7x cap rates) around Denver. Not grandslams, but good deals.
He's also picked up quite a few properties himself.
I'll email you over a couple of examples.
I agree with you about learning, but how much are you really going to learn investing turnkey and long distance? Isn't part of the allure to turnkey investing that it's all done for you?
- Investor · Arvada, CO · Member since 2015 · 18 posts · 35 votes9y
Great question , it's something we talk about in the real estate biz a lot. It all comes down to what you want to do with your time and money, and what your risk tolerance is working with companies you don't have a history with. Personally, I only invest in metro Denver where I live and work, that's best for me. I don't trust a 3rd party turnkey organization out of state with my money. Paranoid? Maybe. But I've seen too many folks lose all their money during downturns when they invest in areas they aren't familiar with, with groups they don't know, in properties they know nothing about. It's not that there aren't honest turnkey groups out there, I'm absolutely certain there are. It's just that when the inevitable downturn comes to any market you're in, you're going to be the last one to see the money. Everyone who is closer to the source of money will get paid first, the property manager, the contractors, everyone. No doubt there are positives as well to having a 3rd party manage everything for you and do all the work, just proceed with caution.
- Real Estate Investor · Memphis, TN · Member since 2016 · 940 posts · 695 votes9y
@Joshua Zapin - ask them each to start sending you deals and evaluate accordingly. Also ask about tax rates and tenant laws in each city.
Also which city would you prefer to visit? Are there cities that are easier for you to get to?
If you have Memphis specific questions, feel free to message me!
Best of luck on your journey!
I used a turnkey provider and was offered a 9% return on my note purchase. I am in CA and the property was in PA. I got steady payments for 18 months and then it started to go downhill. I had to constantly follow up about interest payments and eventually found out the turnkey provider was going under. The property was given back to me via deed in lieu of foreclosure. I obtained a property that was in bad shape. It had back taxes, utilities, interior beat up, and the roof was shot. During this time of transition, PA was in a winter storm and the pipes burst in the house. The property manager and contractor repaired the damage. After 4-6 months the property finally was in a condition to put on the market to try and get my money back, but it took all the interest payments plus extra funds to get it to this point. We priced the property equivalent to the amount a down payment would require on a house in CA. I didn't realize the challenges in investing in such depressed areas. As Charles Roberts stated, it is not worth it for me to trust a 3rd party that I am not familiar with. I was referred to this company by my 401k provider and assumed they did their due diligence.
Everything could go smoothly for 1 to 2 years and then once things go downhill, then it can get bad quickly. I have the best luck and income from investing in properties that I can drive by everyday and vet the tenants myself. If you feel like flying out and visiting the property yourself and seeing the condition it is in before you buy and during the rental period, then go for it. I just can't justify the hassle for $200-$300 profit per month. The back taxes I had to pay to make the property current was $4k, new roof $7k, rehab interior $10k. It was the largest headache for the least amount I've ever invested in real estate. Hopefully I can recoup some of the money invested and not take too much of a loss. Also hope the property management company is honest about repairs and the mechanicals of the home can stay together by the time I get an offer. It is currently rented and the renter stated bed bugs were in the house. It has been vacant for 6-8 months. I got a quote from them that the exterminator wanted $1400 to rid the house and I had them get additional quotes. It cost $750 to get rid of the problem. Good luck on whatever you decide to do.
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes9y
Having more money than time is a fixable problem. It is having more money than knowledge or control that is your real danger and where your proposed business model runs short IMO.
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes9y
Originally posted by @Joshua Zapin:
Originally posted by @Matt M.:
What's your familiarity with those areas? There are opportunities here in the front range especially for cash buyers.
What is the return like after fees, etc for turnkey? I personally prefer to invest in areas I know and can drive by to check.
I don't have much familiarity. That's why I'm thinking of trying turnkey to help learn. I also would prefer to invest in areas that I can check and plan to do so once I hone in on a region.
Does that make sense?
It is possible for a skilled local investor to consistently make good returns in REI in any real estate market in the country. The problem is not the market, the problem is the knowledge and control. Where do you have the ability to best learn hands on to gain the knowledge and experience? Where do you have the ability to best check and plan to maintain control? Same market for you: Boulder, Colorado or short driving distance from there. The grass is no greener on the other side of the fence, it is just a different shade of green and you need to climb one heck of a big fence in order to get there, and then once you are far away from home invite the wolves hiding in the tall grass on the other side to come out and show you what shade it is.
- 9yAlex CraigBusiness MemberReal Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
Mgmt is most important assuming you are buying a property that cash flows and not paying over market value. I will share a post I just put in another forum of what to look for in an manager.
"I own a PM company and can say this is a very easy business to grow, mostly because most PM's are not customer serviced (tenants and owners) and are not good business owners. If you manage for out of state, follow these 3 rules and you will not lose clients and will pick up a bunch if you are good at marketing.
1) Over Communicate -- do not leave your office until you answer your investors emails and return their calls
2) Transparency in everything you do, especially maintenance. If there is an maintenance issue, take before and after pictures. Be transparent on your billing and let your investors know immediately when an maintenance issues is submitted. On your billing, break out materials and labor. Most PM's get greedy here and over charge. PM profits are volume in #'s under mgmt. Not over charging and gouging.
3) Treat every property as if it was your own."
Hope this helps!
- Investor · Farmington, MN · Member since 2017 · 57 posts · 26 votes9y
I am an investor much like you...and spent months researching places. First I figured out where--for me it came down to Cleveland, Indy, and KC. I ultimately chose KC because it is closer to where I live in MN and I could easily travel down for inspections and closings if I wanted too. I also think the weather, jobs, and accessibility of KC is convenient for people relocating.
But I spent a lot of time on email and phone with investors, TK providers and networking so I could learn as much as I could about a particular place...and how different TK companies run their business.
One red flag for me was the Pro Forma's I received from a few of the TK companies. CapEx is obviously important and for a company to purposely leave that off is in my opinion a way for them to inflate their cash flow.
I ended up going with Bridge Equity in KC. If you listen to Podcasts on here at all check out @Nathan Brooks, he is on a few and owns Bridge.
If you have any specific questions please feel free to send me a message...
Adam
- Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes9y
Originally posted by @Adam Widdicombe:
I am an investor much like you...and spent months researching places. First I figured out where--for me it came down to Cleveland, Indy, and KC. I ultimately chose KC because it is closer to where I live in MN and I could easily travel down for inspections and closings if I wanted too. I also think the weather, jobs, and accessibility of KC is convenient for people relocating.
But I spent a lot of time on email and phone with investors, TK providers and networking so I could learn as much as I could about a particular place...and how different TK companies run their business.
One red flag for me was the Pro Forma's I received from a few of the TK companies. CapEx is obviously important and for a company to purposely leave that off is in my opinion a way for them to inflate their cash flow.
I ended up going with Bridge Equity in KC. If you listen to Podcasts on here at all check out @Nathan Brooks, he is on a few and owns Bridge.
If you have any specific questions please feel free to send me a message...
Adam
Excellent points.
- Boulder, CO · Member since 2016 · 22 posts · 4 votes9y
Thanks for all the great insights/replies. Does anyone know a good resource to evaluate TK providers?
JZ
- CEO · Englewood, CO · Member since 2017 · 35 posts · 16 votes9y
Hi Joshua-
We have run a fix and flip business in Denver for five years and we are seeing more quality deal flow come our way now than in quite a while. Boulder is a tough market with a median price over $1,000,000 and the anti-growth rules in place. For your turnkey investing are you looking to participate in flips or are you trying to start a buy and hold portfolio?
- Property Manager · Denver, CO · Member since 2014 · 104 posts · 81 votes9y
I am a property manager and real estate investor in Colorado. As a strict investor and number guy I could get a better ROI in other markets, but as a 3rd party property manager I know that at some point there WILL be a property management or property related problem - that is a reality of real estate investing. When that happens I don't want to be on the other side of the USA to deal with it. I have owned properties in other states, but now only invest in Colorado because in the long run, what I give up in control will cost me the same amount of money I will probably make in higher market return. I would stay local, you may get a little lower return in the short term, but this is a long term game.
I had a few people tip me off to how TK providers make their money. Most of the properties are 10-20% overpriced to begin with. Then they charge you exorbitant fees for every repair, etc. I actually had a few people here PM me and tip me off to all the ways they make money. In reality you usually overpay for TK properties and management.
I subscribe to the buy where you can drive by often plan. No one will ever care about your properties as much as you. As interesting as the cash flow for those properties sounds, I make way more off equity where I live than I could if I bought 10 turn key rentals in cash, and that's just off of ONE property I own.
Eventually the plan is to relocate to one of these lower cost of living markets like Las Vegas to take advantage of the low housing prices, but that's for retirement. Right now I'm in equity build phase...
Hi Joshua! I live in LA and have always bought turnkeys.
Memphis & Houston- I love MemphisInvest but hate Memphis as a market (personal opinion) and Houston tapped out pretty hard a few years ago. I've never wanted to buy in Memphis, so never bought through MemphisInvest, and I would have bought in Houston ~4-5 years ago, but not now. There's just higher returns elsewhere.
Indy- Great market, haven't bought through Morris Invest. Have always worked with a different turnkey provider there.
St. Louis- no experience there (but if you do buy through them and have a great experience, let me know and I'd like to check them out).
Other big turnkey markets right now are Kansas City, Chicago has been big for a few years, and Philly and Baltimore have some insane options right now depending on your capital. If you have a good bit of capital, Baltimore has some stuff that could blow you away as far as turnkeys go.
More generally, recommendations will depend a lot on your own preferences. Budget, price range desire, property type (SFR vs MFR, urban vs suburban, etc.), returns desire, etc.
Happy to chat more and about markets anytime!
- Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes9yI bought my turn key in Indianapolis, Atlanta, Birmingham. I did not use those companies so I don't know.
- 9yNathan BrooksBusiness MemberLender · Kansas City, MO · Member since 2012 · 403 posts · 188 votes
Thanks @Adam Widdicombe!
Ridgeline Capital Group527 Reviews - 9yNam NguyenPro MemberInvestor · Chantilly, VA · Member since 2017 · 71 posts · 19 votes
I really like the information in this thread. Thank you @Nathan Brooks for being on a recent BP podcast and opening my eyes and ears to turnkey properties. That sounds like the best way for a newbie lie myself to start.
@Ali Boone is Houston really out of the question these days? I'm sad because I'm from there, and I always wanted to invest there. I do like your website and I'm hoping to get help from you very soon!
@Joshua Zapin Thanks for asking the question!
- Chula Vista, CA · Member since 2017 · 195 posts · 104 votes9y
I had this same question and another investor pointed me to a very helpful site: http://www.cashflowdiaries.com/31-questions-to-ask-a-turnkey-seller-before-buying/
@Nam Nguyen No, it's definitely not out of the question. There are still some operations going on there I believe (I think MemphisInvest is doing properties down there?). I used to work with a lot down there but got out of it because other markets started offering significantly higher returns and that were less further along in their appreciation booms (further along in an appreciation boom, less upside for an investor). Inventory shrank there a few years ago while all the rest of it was happening, so we all just departed for brighter skies. But you can surely find properties there still (just more minimal on cash flow than a lot).
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