Advice regarding turnkey or BRRR for a foreign investor

13 Replies

Hi all!

As the topic title suggests, I'm a prospective foreign investor, meaning I don't own any properties yet, but I'm eager to change that! I'm a UK citizen, but live in Japan, so either way it will be long distance REI.

I don't want this to be a turnkey vs BRRRR thread, but I have questions about the pros and cons of both... thanks in advance.

— Turnkey —

I have a decent (for me at least) amount of cash saved up, and looking at turnkey investment opportunities in Memphis (thanks to a recommendation from a friend). I will be able to afford a 40% down payment on a reasonably priced house (<100k). But it’s going to be difficult to do that once a year...

— Question —

Would it be wise to partner up with a US citizen from the get go?

That way I'd be paying loan tax and would need less of a down payment. I realise this means I'd have to use an LLC who would surely take a cut though...

BRRRR

I know less about how this would work as a foreign investor. I presume I’d be working with agents, renovators and the rest all whilst not being in the country myself. Seems like a lot of hassle, but perhaps more profitable? (Long Distance Real Estate Investing is on my read list!). I’ve been recommended a view areas, one being Alabama.

— Questions —

Has anyone done BRRRR whilst not being in the country? How did it go? What kind of companies exist for helping with this?

You have a few questions going here, so I'll just respond to them and add my own thoughts in no particular order:

  • If you BRRRR from that far away, you would need to SERIOUSLY have a team you trust. You'd have next to no way of monitoring what was going on (or not going on) and all of your money would be at risk. If you have someone that trustworthy, cool, but doesn't sound like you do.
  • Turnkey is fine if you work with a good provider. That's pretty straightforward.
  • Not sure partnering would do you a lot of good, and it would cost you a lot of your returns. Are you meaning to potentially partner so you can get a traditional US mortgage? Or for some other reason?
  • If you're international, you need to first get the property US entity in place and then a US bank account. Those both need to be there prior to purchasing anything or you could end up in some tax messes.
  • Have you heard of the BRRRR+turnkey model? The turnkey provider does all the same work they normally do but they use your money instead of their's, so you get the added benefits that BRRRR offer. You'd want to make sure you only work, again, with a seriously trustworthy group. Since it's your money on the line and not theirs.
  • You said you have 40% of less than a $100k house. How much do you have exactly? BRRRRing can cost more upfront with the rehab being paid cash, etc.

Hi @James York -- Welcome to BiggerPockets.

You're asking a good question, but "mixing" two different strategies.  One is an active approach and the other far more passive. Something I talk about a lot on my podcast.  You need to decide early on what it is you want to do, and define your overall strategy.  It's fine to do both, just be clear.

BRRRR relies critically on the team you've assembled and has many more moving 'parts'.

With the right company and advisors, the turn key approach can be a better way to invest, especially from Japan.

BTW, are you an American citizen?  Why do you think you need a partner?

You beg a lot of followup questions in your post.  ;-)

Continued success!

Marco.

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@Marco Santarelli

@Marco Santarelli thanks so much for the feedback and sorry for my late reply.

I see that working with a good team is going to be essential in BRRRR for a foreign investor. At this point I'm just trying to understand my options, and hearing this makes me wonder if BRRRR is a good option for a newbie like me.

Regarding my citizenship, yes, that’s definitely going to be a big issue. I’m British. Eek.

@Ali Boone

Thanks Ali!

Taking your points one by one:

I don't have a team I can trust or anything else yet. But am sure keen to start looking for one :). I have some friends involved in US REI, but not having any boots on the ground is going to be a real issue for me this early on in my investment ‘career.'

It’s good to hear about turnkey being a good prospect if the provider is reliable. I assume the area that units are bought in also is quite essential. Time to do some market research!

> Are you meaning to potentially partner so you can get a traditional US mortgage? Or for some other reason?

Yes, thats right, I think. I was looking for a partner to lower the loan rates and down payments required of me as a foreign investor.

• If you're international, you need to first get the property US entity in place and then a US bank account. Those both need to be there prior to purchasing anything or you could end up in some tax messes.

Hmm, that sounds like a lot of trouble, but was totally expected. Time to start researching it more. I have been looking at HSBC as a possible way to get qualified for US loans.

https://www.us.hsbc.com/home-loans/products/international-borrowers/

• Have you heard of the BRRRR+turnkey model? The turnkey provider does all the same work they normally do but they use your money instead of their's, so you get the added benefits that BRRRR offer. You'd want to make sure you only work, again, with a seriously trustworthy group. Since it's your money on the line and not theirs.

I had not heard of this method this early on in my research. Thanks for the suggestion. Another concept to add to my list!

• You said you have 40% of less than a $100k house. How much do you have exactly? BRRRRing can cost more upfront with the rehab being paid cash, etc.

Exactly, is a disclosed figure 😉 but I take your implied meaning.

Thanks again for your warm welcome and response. Really appreciate it!

I think both options are definitely doable for a foreign investor. It really comes down to time. With turnkey you are essentially getting an all-in-one solution. All of the groundwork is done for you, saving you an indefinite amount of time. All that is left is to collect a check every month. It's up to the investor to determine the value of the services being provided. A solid TK solution should be able to provide a warranty on all work performed. They should also be able to provide a cash-flowing asset after all cost. Additionally, any reputable turnkey provider should have property management in-house.

I'd be happy to share my insights if you would like to know more. Feel free to reach out to me with any questions. 

before you launch into any of this make sure you talk to lenders and see if you can get financing. Unless your just paying cash and not planning on financing.. 

can be tough for foreigners and rates are higher which means returns are lower.

you may want to consider NOTES instead of the asset safer and more consistent income..

Originally posted by @James York:

@Ali Boone

Thanks Ali!

Taking your points one by one:

I don't have a team I can trust or anything else yet. But am sure keen to start looking for one :). I have some friends involved in US REI, but not having any boots on the ground is going to be a real issue for me this early on in my investment ‘career.'

It’s good to hear about turnkey being a good prospect if the provider is reliable. I assume the area that units are bought in also is quite essential. Time to do some market research!

> Are you meaning to potentially partner so you can get a traditional US mortgage? Or for some other reason?

Yes, thats right, I think. I was looking for a partner to lower the loan rates and down payments required of me as a foreign investor.

• If you're international, you need to first get the property US entity in place and then a US bank account. Those both need to be there prior to purchasing anything or you could end up in some tax messes.

Hmm, that sounds like a lot of trouble, but was totally expected. Time to start researching it more. I have been looking at HSBC as a possible way to get qualified for US loans.

https://www.us.hsbc.com/home-loans/products/intern...

• Have you heard of the BRRRR+turnkey model? The turnkey provider does all the same work they normally do but they use your money instead of their's, so you get the added benefits that BRRRR offer. You'd want to make sure you only work, again, with a seriously trustworthy group. Since it's your money on the line and not theirs.

I had not heard of this method this early on in my research. Thanks for the suggestion. Another concept to add to my list!

• You said you have 40% of less than a $100k house. How much do you have exactly? BRRRRing can cost more upfront with the rehab being paid cash, etc.

Exactly, is a disclosed figure 😉 but I take your implied meaning.

Thanks again for your warm welcome and response. Really appreciate it!

You bet! Yeah, you have a lot of considerations going on at once. All required considerations, but try to take them on one by one. Might be less confusing. Most of them don't depend on your decision for another, except maybe whether to partner or not depending on the loan options. I do know of private lenders who will loan to internationals, depending on the property type you're buying. A partner may cost you more than one of the available loan options, and that's just one more person you have to trust in the equation. Turnkeys- yes, provider and market are important. (turnkeys are most of all I've bought for myself, and all from afar). BRRRR, yep, teams.

:)

Originally posted by @James York:

@Marco Santarelli

@Marco Santarelli thanks so much for the feedback and sorry for my late reply.

I see that working with a good team is going to be essential in BRRRR for a foreign investor. At this point I'm just trying to understand my options, and hearing this makes me wonder if BRRRR is a good option for a newbie like me.

Regarding my citizenship, yes, that’s definitely going to be a big issue. I’m British. Eek.

Hi @James York -- There are financing options availbale to foreign investors, like yourself. The rates are a little higher and the down payment is a little higher than our conventional financing, but because of the two together you still have the cashflow with a lower COC return. Great for rental properties if that's your strategy or goal.

Continued success!

Hi James, 

I don't know if any companies assist you with BRRRR, but it's just a matter of making connections. Next thing, you have boots on the ground and you can partner on deals.

Some may say that's easier said than done, but I suggest talking to investors who have been in the same boat and go from there.

Good luck!

Originally posted by @James York:

OK @Jordan Sinclair, I'll ask you as you have experience as an international investor -- is it hard to make connections? :D

Not at all. We are on BP afterall. This is the place to make  connections.

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Originally posted by @James York :

@Jordan Sinclair, did you start by setting up an LLC to make your purchases? Also, I am looking at financing from HSBC, do you know much about these (or other money lenders that is??) 

Yes I set up an LLC. No I used cash and private money lending. Traditional finance is very difficult to obtain for foreigners.