I just read pages 181 - 185 in The book of Long Distance Real Estate which basically says that buying a long distance turnkey is not that great of an idea, and might be riskier to do than just doing the rehab yourself. This part thoroughly shook me...I am currently thinking about buying a long distance turnkey property as a first investment (I live in Cali, so properties are too expensive for me...). My thought process is that I need to have the first dip in the water and get to know the home buying process first before I go into the rehab process. If I was to be buying a fixer-upper and managing contractors and the rehab process as well as learning how to buy a home. Am I crazy? I would assume that buying a turnkey property is a good start and I would be able to use the capital after that to go deeper and work on the rehab process…
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
7y
I agree with you. I think it's insane to take on a long-distance rehab job as a new investor. New investors barely have any investing fundamentals under their belts, and then they want to add in the highest risk factors? Rehabbing and all those things are not easy tasks. They are totally doable, but they bring an insane amount of risk on.
I'm in CA (Venice, just down from you) and I've almost primarily bought out-of-state turnkeys. I think they are very much a 'to each their own' type of thing. There's absolutely nothing wrong with them and I think they do exactly as you say--teach newbies the fundamentals, take away a lot of the risk, etc. Sure, the cash flow on them and ultimate returns may not be as high because you're paying more for them, but it's all a trade-off.
I think they're great for newbies, so much so I wrote an article about it-
Developer · Nashville, TN · Member since 2016 · 484 posts · 406 votes
7y
There are risks in any type of REI. Like in any other niche, there are good and bad. Some TK's are great....they'll show you everything...the scope of repairs, the 3rd party inspection, the good mgmt, offer a warranty, etc. Others, not so much. There is a MUCH higher risk in doing a rehab from a distance... getting good contractors is tough in ANY market, finding deals, getting tenants, finding a good PM.... the eBooks make it seem so easy, but it's a LOT of heartache. There's a reason why the TK industry is growing so fast.
@Ali, thanks, I read ou article, plus a few others I thought would be helpful, and they were (I'll probably be reading them over again). I was hoping to dig into the process of the BRRRR strategy as I get more homes, so maybe after some amount of houses, I could be doing rehab and other things myself. Thank you again for the verification!