Updated almost 5 years ago on . Most recent reply
Getting started with a turnkey
Hey there! I'm in the market to buy a turnkey. I'm curious what some of the best options are currently?
Would love to know what kind of CoC to look for - is 10% reasonable in good markets? Is 15% possible? Looking for something truly passive with solid PM, great tenants, etc. Want to be more on the conservative side as far as that goes, because I have my own non-real estate business to run day to day.
Btw, I have searched the forums for this and found a number of great threads - I have noticed that a lot of them tend to be 2/3 years old.
Also I've seen people reference turnkey-reviews dot com - but I noticed the most highly rated turnkey on their site has a homepage that is a coming soon site, so I'm not sure if that site is a good, up to date reference?
Most Popular Reply
@Kalen Jordan - Yes, 10%+ cash on cash returns are achievable, and even on average. This 'on average' part is important because every year their are properties that perform very well (same resident, no repairs) and some that have a tough time (costly tenant turn). I believe that most turnkey markets will have the better properties/years above 15% CoC. This is probably true with our without financing.
- Some properties/markets are eligible for 80% LTV loans which dramatically leverage up CoC returns, though not without risk. The 80% leverage roughly doubles the CoC returns on the properties I'm experienced with.
- We look at CoC return as 1 factor to consider at the initial purchase. Remember that as the loan is paid down and/or your home experiences appreciation, your equity goes up. We find it valuable to review return on equity to make sure the portfolio is performing at top-notch over time (e.g. should we refi, sell, pay off and take a LOC)
- Focus on CoC will tend to drive decisions more towards cash flow, less towards appreciation. That's not good or bad, just something to be aware of.
- I've not seen a nice review/summary location for turnkey providers. If anyone finds one, it would be great to hear about.