Is Turnkey investing a good option?

15 Replies

Hi,

I am a newbie into real estate investing. Still learning the nuances by listening to BP Podcasts and webinars. I came across Turnkey investing with Memphis Invest.

Just wanted to know if this is a good option for out of state investors?

Thanks,

Johnson

@Johnson Michael yes if you are starting out AND out of state it’s a great option. You’ll realize the positive cash flow benefits of rental real estate and on your next venture you can dip your feet further in buying yourself.
Originally posted by @Johnson Michael :

Hi,

I am a newbie into real estate investing. Still learning the nuances by listening to BP Podcasts and webinars. I came across Turnkey investing with Memphis Invest.

Just wanted to know if this is a good option for out of state investors?

Thanks,

Johnson

Depends on what your goal is. I did a spreadsheet for an investor I did a turn key for that has actual numbers. You need to know the numbers before you make a decision. Use this to compare and build you set of questions to ask any turn key provider. Yes, I still do turn keys for people.

https://www.biggerpockets.com/forums/600/topics/58...

Originally posted by @Johnson Michael :

Hi,

I am a newbie into real estate investing. Still learning the nuances by listening to BP Podcasts and webinars. I came across Turnkey investing with Memphis Invest.

Just wanted to know if this is a good option for out of state investors?

Thanks,

Johnson

 Investing with a Turnkey company when looking OOS can be a great option. Markets in the Midwest right now are great for buy and holds.

Good luck! 

Yes, I agree with @Tom Ott .  It's a great option, especially if you are new to investing.  You can leverage off the expertise of the TK company to get a great cash-flowing asset.  Memphis Invest has an excellent reputation.  There are 7-8 really good ones in the country.  You just simply need to find the markets you want to work in, and find the provider that best suits your needs.

Originally posted by @Johnson Michael :

Hi,

I am a newbie into real estate investing. Still learning the nuances by listening to BP Podcasts and webinars. I came across Turnkey investing with Memphis Invest.

Just wanted to know if this is a good option for out of state investors?

Thanks,

Johnson

Welcome to the world of investing Johnson.

Absolutely, good idea!  Perform your due diligence.

Best of luck,

Renee

Hi Johnson. I think whether turnkeys are good for out-of-state investors completely depends on:

  • the investor's goals and interest levels in what kind of investing they want to do
  • what turnkey company they work with and what they buy
  • whether or not the investor is prepared to do their own due diligence and maintain an eyeball on what is going on with the property, even when other people are primarily managing it

I've almost always bought turnkeys out-of-state and I've loved them. They aren't always perfect and I've learned a lot of lessons along the way, but I definitely think they can be worth their salt.

For newbies and turnkeys in particular, here's why I think they can be good-

https://www.biggerpockets.com/renewsblog/turnkeys-...

Hope that helps!

Originally posted by @Account Closed :

Turnkey out of state are a great option if you dont care about making money.

Just go over their pro forma-its like they never heard of the word EXPENSES.

Ask yourself why in staters arent their target market.

What's your basis for these?

I've primarily bought turnkeys and they've all been profitable. If any turnkey provider doesn't put expenses in their pro forma, that's definitely inaccurate. But the good ones do include them. In-staters....that's easy- a lot of people don't live in markets where buying locally makes any sense.

@Account Closed You've obviously had bad experiences dealing with some TK's, but I don't think it's really fair to make blanket statements about all of them...there are good and bad in every industry.  As an example...

1.  We have in-state investors

2.  We put ALL expenses on our pro-formas.

Originally posted by @Johnson Michael :

Hi,

I am a newbie into real estate investing. Still learning the nuances by listening to BP Podcasts and webinars. I came across Turnkey investing with Memphis Invest.

Just wanted to know if this is a good option for out of state investors?

Thanks,

Johnson

 Whichever market and or company you choose to work with when investing out of state make sure you do the following to ensure a high probability of success.

  • Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
  • Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
  • Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
  • Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
  • Make sure your property manager is a licensed real estate brokerage.
  • Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.
@James Wise , Thanks for the tips. Appreciate it.

Johnson

Originally posted by @James Wise:
Originally posted by @Johnson Michael:

Hi,

I am a newbie into real estate investing. Still learning the nuances by listening to BP Podcasts and webinars. I came across Turnkey investing with Memphis Invest.

Just wanted to know if this is a good option for out of state investors?

Thanks,

Johnson

 Whichever market and or company you choose to work with when investing out of state make sure you do the following to ensure a high probability of success.

  • Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
  • Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
  • Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
  • Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
  • Make sure your property manager is a licensed real estate brokerage.
  • Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.

Be forewarned, the following is my two cents -- I have no turn-key investing experience (have done research into the space) and live in an expensive coastal city.

- It totally depends on your goals. Many TK's will have a nice cash flow but very little appreciation potential. Of course in any market appreciation is a gamble.

- Be aware of management costs. What are the costs for instance on re-upping a current tenant or finding a new tenant? In the Boston area it's customary for tenants to pay the realtor fees, but of course that's different in other markets.

- In no way am I calling into question the business model of TK companies, but have all of the major systems been upgraded? If you are cash flowing a few hundred dollars a month and need to replace a water heater is that going to kill your numbers for 6 months? Even new systems need repairs.

- If you are looking at C neighborhoods and below, what are the eviction processes and what does management charge? You may have to pay the PM hourly to sit and wait for a case to be heard.


Bottomline: What is your goal and what will the first turnkey investment do for you? If it's going to help you figure out real estate investing and all of the surprises, great. If it's going to help you gain the confidence of friends and family so that you can scale, great. If it's going to put otherwise dormant capital to work, great. 

I personally think it's probably difficult to see dramatic changes in your financial portfolio due to TK investments unless you get lucky with appreciation.

Finally: If you are looking for an extremely passive investment, you can consider crowdfunded REIs and joint ventures. These vehicles aren't going to tie your assets to a single family property.

In no way do I think TKs are a bad thing, I think they are great options for some people and a win-win for investors and TK operators.