Should I pay asking price for Turnkey property?

33 Replies

Is there room to negotiate when buying turnkey properties?  

Do the numbers make sense if you pay asking price?

Not hitting 1% rule. Its more like .08-.09%

i've been askig the samething.  I've analyzed a ton of properties on roofstock, and they are mostly coming in .7 - .9%.  0.9% mostly in the C areas accroding to what my research is saying out side of the roofstock info.  THe problem with that site is that a lot of the "better" deals are non negotiable or better yet they don't allow you to make offer from what i've seen.  There are other companies, but for ease of use and access to anaylze i have been using them.  I grew up in Jercey City and go back evey once and a while.  I am always surprised how downton has changed so drastically.  Let me kow if you have any info about oher turnkey providers out there and i'll do the same.  Maybe we can share some data to see if we are both getting it right?

@Tracey F. In any real estate dealings, there is (or should) be always room for negotiation. 

That said, you should run your numbers in order to justify your offer. 

Hope this helps. Goodluck. Thanks! - Ola 

Originally posted by @Joseph Santos :

i've been askig the samething.  I've analyzed a ton of properties on roofstock, and they are mostly coming in .7 - .9%.  0.9% mostly in the C areas accroding to what my research is saying out side of the roofstock info.  THe problem with that site is that a lot of the "better" deals are non negotiable or better yet they don't allow you to make offer from what i've seen.  There are other companies, but for ease of use and access to anaylze i have been using them.  I grew up in Jercey City and go back evey once and a while.  I am always surprised how downton has changed so drastically.  Let me kow if you have any info about oher turnkey providers out there and i'll do the same.  Maybe we can share some data to see if we are both getting it right?

would you pay full price on a used car?

Everything is negotiable. They might say no, but why wouldn't you try?

@Ola Dantis i used BP rental calculator and cash flow very lean.  I can share my analysis with you and you can tell me what you think.   Will PM you later. 

I hear you @Corby Goade @Dave Carella I DO NOT like paying asking $ for anything. I wasnt sure how it really works with TK companies. If anyone out there has successfully negotiated a deal with a TK provider I would love to hear how your story. 

I'm not saying to not negotiate.  I was mistaken when i posted about roofstock deals being nonegotiable. The actual way they do it is you can make a bid below asking and wait for a counter or acceptance.  But  the property will still be open to others.  If you make a full price offer and complete their "checkout" then they take it off the market.  For some reason i thought i read something about not being able to bid on certain deals, i must be mistaken or they might have changed thier format (but more likely I was the one to make the mistake.)  

I would defienlty negotiate with any deal be it wholesale, turnkey, ro traditional purchase.  off the bat Roofstock charges certain fees to use there services, so that alone ups the inital numbers as well as PM and any fixes that the property might need.  

The reason i like to browse through them is becasue they are a turnkey provider.  They have a lot of data that is neatly packaged up for people to look at.  But as you know when you start to run your own numbers at a a more conservative rate, their numbers start to look a little inflated.  But it does give newbies and people not familiar with those areas a stepping stone to see if they are going in the right direction.  What i like to do is analyze a few from the TK provider, then go onto other sites to see the market for similarly sized homes in the same neighborhoods.  then compare the numbers and compare.  Hope this helps and clarifies a little.

Hi @Joseph Santos your feedback is helpful. I have analyzed a few TK properties and to your point I will look at similar properties in those neighborhoods to see how they compare. If i can find silimar ones at a better rate I will try to counter offer and see what they say. Thanks!

Originally posted by @Joseph Santos :

I'm not saying to not negotiate.  I was mistaken when i posted about roofstock deals being nonegotiable. The actual way they do it is you can make a bid below asking and wait for a counter or acceptance.  But  the property will still be open to others.  If you make a full price offer and complete their "checkout" then they take it off the market.  For some reason i thought i read something about not being able to bid on certain deals, i must be mistaken or they might have changed thier format (but more likely I was the one to make the mistake.)  

I would defienlty negotiate with any deal be it wholesale, turnkey, ro traditional purchase.  off the bat Roofstock charges certain fees to use there services, so that alone ups the inital numbers as well as PM and any fixes that the property might need.  

The reason i like to browse through them is becasue they are a turnkey provider.  They have a lot of data that is neatly packaged up for people to look at.  But as you know when you start to run your own numbers at a a more conservative rate, their numbers start to look a little inflated.  But it does give newbies and people not familiar with those areas a stepping stone to see if they are going in the right direction.  What i like to do is analyze a few from the TK provider, then go onto other sites to see the market for similarly sized homes in the same neighborhoods.  then compare the numbers and compare.  Hope this helps and clarifies a little.

Depending on the seller some properties do not allow bidding.  Other properties allow bidding after it has been on the site for several days.  I wouldn't classify Roofstock as a turnkey provider.  They do not own any of the properties and do not do any rehab on them.  They do have inspectors review properties and if those properties meet certain criteria they certify them.

@Jason Gines If the appraisal comes in low I think that gives opportunity to negotiate. This company has an excellent reputation and i’ve heard their estimates are on point. While I dont expect appraisal to come in low if it does I will counter offer. 

@Tracey F. You can certainly try to negotiate and I’d recommend that you do but if it’s a reputable turnkey provider, they have more demand than supply for their properties so likely they’d just say no.

A reputable turkey provider will have an appraisal contingency in the contract so if it comes in low that’s where the sale price is adjusted to. Or they’d refund your earnest money.

Originally posted by @Tracey F. :

@Jason Gines If the appraisal comes in low I think that gives opportunity to negotiate. This company has an excellent reputation and i’ve heard their estimates are on point. While I dont expect appraisal to come in low if it does I will counter offer. 

Generally speaking if an appraisal comes in low and there is a contingency in the PSA, then some of the options are walking away from the deal, seek to renegotiate to the appraisal price, or pay the difference.  But definitely have that discussion with the company you intend on working with and never assume anything.

My first two buildings were Turn-Key Properties .  They were more like 2% and not 1% though  so I didn't  negotiate on the price because the deal  made sense . The first building I actually had him make more improvements and I paid $10,000 over his ask because of the improvements .  In the end it worked out  and I was overall happy with the process but I wouldn't offer  unless it made sense for me to buy it at that price and I personally would want more than 1% .

Hello Tracey, Did you verify a few other things with the Seller? By doing the following things, it may lead them to realize they are asking too much. 1. Ask for a copy of the existing lease agreement. 2. Find out how long the tenants have been living there AND paying rent on time. In other words, are the tenants seasoned? 3. What is the term of the lease? 6 months? a year? 2 years? 4. Does the tenant have pets? If so what kind? And did they pay a pet deposit? 5. See if there is a rent increase clause in the lease agreement. Some leases go up after 6 months or after a year for longer term leases which could increase your ROI.

By asking the seller these questions, they start to realize that if their answers become a turn off to you, then they are already thinking they should lower the price b/c you are afterall a very sophisticated buyer.

Compile your list and see if there is value in paying less than 1% rent ratio.  And also make sure if after you still find this agreeable, then find out what the appreciation rate is for that actual neighborhood.  

If you have a rule of thumb for buying properties, it is probably wise to stick to it and not make an exception if your only reason is to put your money into something.  Move on to something else if it doesn't feel right.

I’m on my second TK property and have paid asking. As others have mentioned, there’s a waiting list if you don’t want to pay asking.

@Stacie Meeker all very good questions some I have not thought of.  I am keeping a list of questions and will add to it.  will request a copy of lease agreement.  @Mark S. Good for you!  Congratulations!  Hopefully, I'll be on my second soon.

Everyone:  i really appreciate your feedback every bit helps!  Thanks!

Depends on what you are getting and value. Everything is a public record.  Look at what the TK seller bought the home for. Then look at the Scope of Work. The myth is every TK seller is making huge margins which is not true. The good TK providers are making reasonable profits of 10k and below and that is because they are spending 25 to 30k per rehab. But there are some hucksters whose rehab consist of paint, carpet and repairs. Those are the ones you should negotiate because they are pushing back deferred maintenance on you while you are paying a retail price. If you are paying retail price, then you should have HVAC and roof on the front end of its lifespan and minimal carpet in the house. Curb appeal should be awesome, kitchen updated and bathrooms updated and you should be presented with professional pictures that the property manager can use for marketing for years to come.

Bottom line, the price you pay should be related to the value and product you get.

@Tracey F. Always come in lower than asking unless you know for sure that there are multiple offers coming in.

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