My TurnKey Investing Strategy. Feedback please.

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My TurnKey Investing Strategy. Feedback please.

Andrew M.
Atlanta, GA · Member since 2017 · 54 posts · 30 votes

So, I know this has been discussed a million times on this site. I just wanted some feedback on my strategy over the next 5-10 years or so. 

Here's a little background about me. My wife and I are both employed (W2) and make about $60,000 a year in household income. We have about $30,000 cash currently and no debt. Our monthly expenses are under $2,000.

My plan is to invest in turnkey SFR in the Memphis market. I would like to buy between 15 and 20 gradually over the next 5-10 years. I expect the houses to all be between $100K-140K. I expect these to each rent for $800 - $1,200 per month. My cash flow goal after ALL expenses (including PITI, management fees, all maintenance and a reasonable allowance for vacancy) is an average of $200 per month per property. My plan is to finance these with traditional mortgages, 10%-20% down.

Here's what I'd like to know: 

Are my cash flow goals reasonable and achievable? 

Is there another market that you think would work better for my strategy?

Is securing that many traditional mortgages possible?

What are some difficulties I may encounter? What suggestions do you have for me?

If some experience property investors wouldn't mind sharing some wisdom I would greatly appreciate it. Thanks for your time.
 

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Chris ClothierBusiness Member
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
6y
Originally posted by @Andrew M.:

So, I know this has been discussed a million times on this site. I just wanted some feedback on my strategy over the next 5-10 years or so. 

Here's a little background about me. My wife and I are both employed (W2) and make about $60,000 a year in household income. We have about $30,000 cash currently and no debt. Our monthly expenses are under $2,000.

My plan is to invest in turnkey SFR in the Memphis market. I would like to buy between 15 and 20 gradually over the next 5-10 years. I expect the houses to all be between $100K-140K. I expect these to each rent for $800 - $1,200 per month. My cash flow goal after ALL expenses (including PITI, management fees, all maintenance and a reasonable allowance for vacancy) is an average of $200 per month per property. My plan is to finance these with traditional mortgages, 10%-20% down.

Here's what I'd like to know: 

Are my cash flow goals reasonable and achievable? 

Is there another market that you think would work better for my strategy?

Is securing that many traditional mortgages possible?

What are some difficulties I may encounter? What suggestions do you have for me?

If some experience property investors wouldn't mind sharing some wisdom I would greatly appreciate it. Thanks for your time.
 

Andrew,

Nice job introducing yourself and laying out a bit of your strategy.  It is kind of "30,000 foot-ish" so hard to give in depth feedback, but enough to start with.  And with the responses you've already received, hopefully I can give you some things to think about as you move forward.

First, you have to know that on a site like BiggerPockets the responses are going to run the gamut.  Unfortunately, you often have no idea what the experience or expertise is of the poster.  Here is my advice on what you posted and my advice on some of the comments from others.

Based on what you wrote, I would suggest trying to find an experienced real estate investor who can answer some of your questions about why you are investing.  Your goals.  Not that crap about "know your why" or "how to calculate your freedom number", but why you are actually investing in real estate.  I had this grand plan when I first started in 2003 to own 50 inexpensive properties in Memphis (I think at the time I described them as cheap) and I want to make $200 a month.  I was a passive investor at the time living in Denver with a full time job running my first start-up.  I also flipped houses in Denver because everyone told me I was supposed to learn to do it myself and invest close to home.  Problem was, I had no idea how these actions were going to lead to my goals of building long-term wealth and having a portfolio I could pass on to each of my kids.  That was goal, I was just doing a bunch of stuff blindly.  Fast forward, I almost drowned in all the paperwork of owning that many properties and the cheap, crap properties that were easy and cheap to buy became the bane of my existence.  I'm not sure I ever saw $200 monthly per property across my portfolio and I owned 57 properties at one point.  It was a disaster because I was just doing stuff with no real understanding.  And by the way, I flipped two properties in Denver and made a killing.  I thought I had it figured out and lost every $ of profit from those on the third.  I realized I am a much better business man than I am full time real estate developer.  I became a passive investor right then and there.

You need to connect with a local investor in Atlanta if possible.  If not, start listening to the BP podcast and find persons whom you feel you can connect with and reach out.  You need to surround yourself with people who are successfully doing what you want to do.  You will become the 6 people you surround yourself with so be careful who you listen to.  The naysayers and posters constantly posting all the reasons other investors can't do something are the ones who are not where you want to be.  Choose carefully!

I agree with many posters on here about the number of properties and the cash flow. Both are arbitrary. It doesn't have to be a set number of properties and it does not have to be a set cash flow number. My personal advice is that I would rather use leverage to acquire properties than hold them. I want to buy properties where I can fashion the calculations to reduce principle and own the asset free and clear in the shortest time possible. I often am cash flow neutral but pay off assets in 8-12 years. I don't need cash flow and I have a solid, steady income so I don't put money off to the side as a "no-big-deal" fund. I know that move-outs, maintenance and Capex will occur, but I take precautions to limit those exposures as much as possible. In your case, over a 15-20 year period, if you are able to purchase 1-2 properties every 3-5 years, you could own 8-10 properties inside that time frame and if you purchase properties that are a better long-term value investment, you may see rents from $1100 to $1400. If your average rent is $1250 and you own 8 properties, your monthly gross income would be roughly $9000 monthly. Ten properties would be $12,500 monthly. Rather than trying to figure out how many $200 rentals you can acquire, think what your real long-term goal is and ask mentors or investors who have achieved that goal to assist in the best strategy. That is my first advice. I just think you may be a bit premature in laying out a plan and I just hope you exercise patience before moving forward. Hopefully every poster on here would agree that there is no need to rush.

Now, my other advice is to understand that the word turnkey means absolutely nothing today on this site. It has been hijacked so many times that you need to forget it and understand it is simply a marketing term. On some level it means that there are some passive elements to the investment. Someone bought something and they are selling it. That pretty much sums up what every turnkey property has in common! From there, you really have to understand that it is up to you to dig in and get to know if the person or company you are doing business with is going to help you reach the goal you have set for yourself and the strategy you are using. I mentioned taking steps to reduce my exposure to maintenance, vacancy and Capex. You absolutely can reduce those variables, especially in the relatively short period of the first 7-10 years. Not every investor and certainly not every company that markets "turnkey" real estate believes in or understands how to do that. There are definitely differences in companies and the actual value they bring you as an investor. Figuring out how to align your needs and expectations with that value is your challenge.

Any poster on here who tells you definitely will or that you will not make money with a certain strategy or investment has no idea what they are talking about and probably not worth taking seriously.  Each person has there own experiences, but none are in your situation and none can tell you exactly what outcome you will achieve.  There is a possibility to achieve what you outlined in your post by purchasing turnkey properties in Memphis.  Yes, you can hit those goals.  You can also lose a lot of money and miss your goals.  Your job is to do your homework on the front end and align your expectations with the best decisions based on knowledge, facts and doing your own homework.

I would read what Rob Hakes has to say and definitely pay attention to his story. He has documented his experience so far.  But remember, he made decisions and had expectations and he can share with you what he did and how it has turned out...with that particular investment and company.  He has taken the time to document it.  He has not taken the time to go on every thread about Turnkey and simply tell the poster that they were definitely going to lose money.  If you are going to learn lessons from investors, learn them from those that are giving details and sharing the good, the bad and the ugly.  And remember, your job is to make an educated investment decision.  All of the horror stories plus all of the homerun stories only amount to data and education.  

Two last things in my ridiculously long post!  @Matt R. is one of those guys that I love reading and for years have told myself and probably him as well that I want to meet up out in Cali for a beer and a surf lesson next time I'm there.  I admire and respect his posts and think he gives great level headed advice.  However, lol.  If we're going to use sports analogies, if my math is correct, a batter laying down 10 bunts is batting 1.000, has 3 runners on base and 7 across the plate.  Those bunts may not be sexy, but over time and adding up, they amount to a lot of wins.  I work with a lot of investors who have no need nor desire to go any public forum, they just love the consistent and reliable realization of hitting their goals and expectations.  Many with well over 10 bunts!

Lastly, investing does not have to be an "or" strategy.  You can have "and" strategies.  In other words, you can invest in passive, turnkey real estate and be an active investor.  You can invest in passive, turnkey real estate and invest in index funds or syndications.  You don't have to choose just one.  It's not invest in one or the other.  I have invested in syndications and while they have been good, I didn't "own" the asset and I could not borrow against the asset.  I have lent money in real estate deals and earned great returns, yet I didn't own the asset when it paid off.  I buy the same dollar amount of an index fund on the same day of every month, and even with the recent corrections, I am still in the black on my investments in the market.  And you know what, the whole time I am making those investments, I have a resident paying off my mortgage where I leveraged a high-quality property passively.

Hopefully this long post sheds some light on your next steps. I'm sure in a city like Atlanta you and find investors who have traveled the path you are discussing and can help shed some light for you. If you have any trouble finding one, reach out and I'll help connect you. I know two investors over there with REI clubs and several on here that are active. Best of luck to you ~

Podcast Guest on Show #224
REI Nation4.577 Reviews
WebsiteView Page
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  • Kelsey Folger
    Rental Property Investor · MI · Member since 2018 · 51 posts · 64 votes
    6y

    Our stories sound very similar. My husband makes about 50k at his job, we had about 30k saved up to invest. We decided to start with small multi-family last year, so we've purchased 1 triplex at 139k (nets $500 mo) and 1 quadplex for 145k that nets maybe $900 per month. We live in Michigan.  

    We have found that our least favorite part of the process is dealing with closing the mortgages and getting a system in place for utilities, etc. So, I wouldn't want to close 7 deals in order to accomplish what we have in 2. But maybe you don't mind paperwork, document prep,etc. that is required to close each deal. 


    Best of luck with no matter what you decide.  

    3Reply
  • Jessica-Nicole Ulloa
    Member since 2020 · 7 posts · 7 votes
    6y

    @Jonathan Greene awesome insight!

    1Reply
  • Akeem Moreno
    Real Estate Agent · Brooklyn, NY · Member since 2019 · 100 posts · 25 votes
    6y

    @Jonathan Greene great insight!!! It’s pays to listen. I’m still in search of my first house first brrrr first anything Realestate. I’m still-researching anything I can get my hands on. It all has to make number sense so many metrics and methods one must choose wisely!

    1Reply
  • Michael Chiafulio
    Investor · Las Vegas · Member since 2019 · 15 posts · 9 votes
    6y

    I have rental property in my local market and out-of-state as well.  I would recommend that you start locally, as long as your market is good for rentals.  As far as I know, there can be deals found in the greater Atlanta area.  You will want to be involved in the first deal or two, maybe more.  This will give you experience.  Get referrals for an investor-friendly Realtor and contractor/handyman.  A property manager too if you don't want to manage it yourself.

    Do you own the home you live in now?  If so, one possibility would be to buy or rent yourself a new place if the situation warrants it, and make your current home your first rental.  

    Once you have experience and if you still want to venture out-of-state, I would not recommend a turnkey provider.  At first, I thought that was the way to go, but then I realized these homes were usually in sub-par areas.  Mostly D class and maybe some low C class.  You would be better off building a team in the out-of-state market, starting off again with an investor-friendly Realtor.  It is more effort, but will be worth it for you.

    For example, you may find a $110K house from a TK provider.  You could probably find the same house through your Realtor, possibly even a pocket listing, for $90K and do $10K in rehab.  You just saved $10k right off the bat.  This is a simple example, but I see it many times.  And you have equity right away.

    Good luck!

    2Reply
  • Paul Shannon
    Rental Property Investor · Fishers, IN · Member since 2016 · 337 posts · 470 votes
    6y

    I'd recommend putting your money in an index fund to beat the returns of a turnkey property....it'll save you the headaches too. 

    In real estate, I'd recommend the BRRRR method starting out. Primary reason is it teaches you a lot about different lessons and aspects of real estate in one deal:

    1.  How to find value-add deals off market and learn your target market (how to buy right)

    2.  How to budget for and execute a rehab

    3.  How to work with contracts, contractors, and insurance

    4.  How to handle setbacks

    5. How to work with banks and understanding terms

    6. Property management.  Until you grow past a few properties it helps to know what kind of maintenance issues you can run into, so you then know how to manage your property manager.  

    2Reply
  • Brian Mackey
    Real Estate Agent · Baton Rouge, LA · Member since 2019 · 84 posts · 33 votes
    6y

    @Andrew M.

    Dude. House Hack. It’s the best thing I’ve ever done to learn about landlording while building wealth at such a great rate.

    Run the numbers on a house hack. Trust me it’ll get you rolling very quickly.

    5Reply
  • Akeem Moreno
    Real Estate Agent · Brooklyn, NY · Member since 2019 · 100 posts · 25 votes
    6y

    @Michael Chiafulio to your point then by doing the work yourself who knows the house might be worth more than you paid now you can find your own tenants or hire a realtor to do that for you refinance get your money back and do it all again, I think. Feel free chime in.

    0Reply
  • Account Closed
    Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
    6y

    YOU LIVE IN ATLANTA!!

    2Reply
  • Daniel Z Fang
    Rental Property Investor · San Diego · Member since 2019 · 73 posts · 34 votes
    6y

    @Andrew M.

    I own a couple turnkey properties and have been pleasantly surprised over the past couple years with returns. Buying turnkey doesn’t absolve you from doing your own due diligence. The TK group is done the moment they sell you a property but you’ll need to figure out how to hold it long term.

    It’s true you can find better returns elsewhere and like you, I use real estate to diversify my overall portfolio. You will spend less time with TK and get worse returns than if you took the time to find your own deals. Of course, your time is also worth money so you’ll have to figure out how best to use it.

    1Reply
  • Adam Cade
    Investor · Blacksburg, VA · Member since 2020 · 65 posts · 33 votes
    6y

    I am very intrigued by this thread. My wife and I are in the same boat as the original poster in the fact that we are both full time, and would like to diversify our current investing strategy, which is currently only mutual funds, IRAs, and my wife's 401k. The idea of investing in a turnkey property for long term (20+ years) for our first couple of investments seems like a good option due to our current full time job constraints.

    I am active duty military, and plan to be for the next 10 years until I can retire. We feel that a good option is to invest in some turnkey property initially while we are still full time, then after getting out of the military, we can devote more time to being active real estate investors. We understand that the TK property investing strategy yields less return; however, it seems to be more hands off, and while we are still working full time, those propertys can build equity for later investments. Is this a bad initial strategy??

    1Reply
  • Chris ClothierBusiness Member
    Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
    6y
    Originally posted by @Andrew M.:

    So, I know this has been discussed a million times on this site. I just wanted some feedback on my strategy over the next 5-10 years or so. 

    Here's a little background about me. My wife and I are both employed (W2) and make about $60,000 a year in household income. We have about $30,000 cash currently and no debt. Our monthly expenses are under $2,000.

    My plan is to invest in turnkey SFR in the Memphis market. I would like to buy between 15 and 20 gradually over the next 5-10 years. I expect the houses to all be between $100K-140K. I expect these to each rent for $800 - $1,200 per month. My cash flow goal after ALL expenses (including PITI, management fees, all maintenance and a reasonable allowance for vacancy) is an average of $200 per month per property. My plan is to finance these with traditional mortgages, 10%-20% down.

    Here's what I'd like to know: 

    Are my cash flow goals reasonable and achievable? 

    Is there another market that you think would work better for my strategy?

    Is securing that many traditional mortgages possible?

    What are some difficulties I may encounter? What suggestions do you have for me?

    If some experience property investors wouldn't mind sharing some wisdom I would greatly appreciate it. Thanks for your time.
     

    Andrew,

    Nice job introducing yourself and laying out a bit of your strategy.  It is kind of "30,000 foot-ish" so hard to give in depth feedback, but enough to start with.  And with the responses you've already received, hopefully I can give you some things to think about as you move forward.

    First, you have to know that on a site like BiggerPockets the responses are going to run the gamut.  Unfortunately, you often have no idea what the experience or expertise is of the poster.  Here is my advice on what you posted and my advice on some of the comments from others.

    Based on what you wrote, I would suggest trying to find an experienced real estate investor who can answer some of your questions about why you are investing.  Your goals.  Not that crap about "know your why" or "how to calculate your freedom number", but why you are actually investing in real estate.  I had this grand plan when I first started in 2003 to own 50 inexpensive properties in Memphis (I think at the time I described them as cheap) and I want to make $200 a month.  I was a passive investor at the time living in Denver with a full time job running my first start-up.  I also flipped houses in Denver because everyone told me I was supposed to learn to do it myself and invest close to home.  Problem was, I had no idea how these actions were going to lead to my goals of building long-term wealth and having a portfolio I could pass on to each of my kids.  That was goal, I was just doing a bunch of stuff blindly.  Fast forward, I almost drowned in all the paperwork of owning that many properties and the cheap, crap properties that were easy and cheap to buy became the bane of my existence.  I'm not sure I ever saw $200 monthly per property across my portfolio and I owned 57 properties at one point.  It was a disaster because I was just doing stuff with no real understanding.  And by the way, I flipped two properties in Denver and made a killing.  I thought I had it figured out and lost every $ of profit from those on the third.  I realized I am a much better business man than I am full time real estate developer.  I became a passive investor right then and there.

    You need to connect with a local investor in Atlanta if possible.  If not, start listening to the BP podcast and find persons whom you feel you can connect with and reach out.  You need to surround yourself with people who are successfully doing what you want to do.  You will become the 6 people you surround yourself with so be careful who you listen to.  The naysayers and posters constantly posting all the reasons other investors can't do something are the ones who are not where you want to be.  Choose carefully!

    I agree with many posters on here about the number of properties and the cash flow. Both are arbitrary. It doesn't have to be a set number of properties and it does not have to be a set cash flow number. My personal advice is that I would rather use leverage to acquire properties than hold them. I want to buy properties where I can fashion the calculations to reduce principle and own the asset free and clear in the shortest time possible. I often am cash flow neutral but pay off assets in 8-12 years. I don't need cash flow and I have a solid, steady income so I don't put money off to the side as a "no-big-deal" fund. I know that move-outs, maintenance and Capex will occur, but I take precautions to limit those exposures as much as possible. In your case, over a 15-20 year period, if you are able to purchase 1-2 properties every 3-5 years, you could own 8-10 properties inside that time frame and if you purchase properties that are a better long-term value investment, you may see rents from $1100 to $1400. If your average rent is $1250 and you own 8 properties, your monthly gross income would be roughly $9000 monthly. Ten properties would be $12,500 monthly. Rather than trying to figure out how many $200 rentals you can acquire, think what your real long-term goal is and ask mentors or investors who have achieved that goal to assist in the best strategy. That is my first advice. I just think you may be a bit premature in laying out a plan and I just hope you exercise patience before moving forward. Hopefully every poster on here would agree that there is no need to rush.

    Now, my other advice is to understand that the word turnkey means absolutely nothing today on this site. It has been hijacked so many times that you need to forget it and understand it is simply a marketing term. On some level it means that there are some passive elements to the investment. Someone bought something and they are selling it. That pretty much sums up what every turnkey property has in common! From there, you really have to understand that it is up to you to dig in and get to know if the person or company you are doing business with is going to help you reach the goal you have set for yourself and the strategy you are using. I mentioned taking steps to reduce my exposure to maintenance, vacancy and Capex. You absolutely can reduce those variables, especially in the relatively short period of the first 7-10 years. Not every investor and certainly not every company that markets "turnkey" real estate believes in or understands how to do that. There are definitely differences in companies and the actual value they bring you as an investor. Figuring out how to align your needs and expectations with that value is your challenge.

    Any poster on here who tells you definitely will or that you will not make money with a certain strategy or investment has no idea what they are talking about and probably not worth taking seriously.  Each person has there own experiences, but none are in your situation and none can tell you exactly what outcome you will achieve.  There is a possibility to achieve what you outlined in your post by purchasing turnkey properties in Memphis.  Yes, you can hit those goals.  You can also lose a lot of money and miss your goals.  Your job is to do your homework on the front end and align your expectations with the best decisions based on knowledge, facts and doing your own homework.

    I would read what Rob Hakes has to say and definitely pay attention to his story. He has documented his experience so far.  But remember, he made decisions and had expectations and he can share with you what he did and how it has turned out...with that particular investment and company.  He has taken the time to document it.  He has not taken the time to go on every thread about Turnkey and simply tell the poster that they were definitely going to lose money.  If you are going to learn lessons from investors, learn them from those that are giving details and sharing the good, the bad and the ugly.  And remember, your job is to make an educated investment decision.  All of the horror stories plus all of the homerun stories only amount to data and education.  

    Two last things in my ridiculously long post!  @Matt R. is one of those guys that I love reading and for years have told myself and probably him as well that I want to meet up out in Cali for a beer and a surf lesson next time I'm there.  I admire and respect his posts and think he gives great level headed advice.  However, lol.  If we're going to use sports analogies, if my math is correct, a batter laying down 10 bunts is batting 1.000, has 3 runners on base and 7 across the plate.  Those bunts may not be sexy, but over time and adding up, they amount to a lot of wins.  I work with a lot of investors who have no need nor desire to go any public forum, they just love the consistent and reliable realization of hitting their goals and expectations.  Many with well over 10 bunts!

    Lastly, investing does not have to be an "or" strategy.  You can have "and" strategies.  In other words, you can invest in passive, turnkey real estate and be an active investor.  You can invest in passive, turnkey real estate and invest in index funds or syndications.  You don't have to choose just one.  It's not invest in one or the other.  I have invested in syndications and while they have been good, I didn't "own" the asset and I could not borrow against the asset.  I have lent money in real estate deals and earned great returns, yet I didn't own the asset when it paid off.  I buy the same dollar amount of an index fund on the same day of every month, and even with the recent corrections, I am still in the black on my investments in the market.  And you know what, the whole time I am making those investments, I have a resident paying off my mortgage where I leveraged a high-quality property passively.

    Hopefully this long post sheds some light on your next steps. I'm sure in a city like Atlanta you and find investors who have traveled the path you are discussing and can help shed some light for you. If you have any trouble finding one, reach out and I'll help connect you. I know two investors over there with REI clubs and several on here that are active. Best of luck to you ~

    Podcast Guest on Show #224
    REI Nation4.577 Reviews
    WebsiteView Page
    14Reply
  • Joe Cassandra
    Rental Property Investor · Woodstock, GA · Member since 2017 · 517 posts · 772 votes
    6y

    I know people who do turnkey (I don't). They echo your hopes and dreams @Andrew M., they want to invest in RE, they know it's great, but they don't want the headaches. 

    Problems you'll have:

    1) Management fees will eat up profit

    2) You're in Memphis which could take a long time to before you appreciating values at a rapid clip (as say Atlanta where you and I are). How long do you want money tied up there? 

    3) Having 20 mortgages in your name could hurt your credit...bar you from other loans...and leave you overleveraged if we hit a recession...(poorer areas get much more poorer in a recession)

    -----

    If you really want to invest in Memphis, you could pick up houses for $40-$50k and get the same rents. 

    Forget 25% on a TK, and just drop some money into sending some letters. There are also a ton of foreclosures you could probably pick through. 

    Buy the houses for cheaper THAN pay the premiums for PM. 

    Don't pay a premium for a house, than a premium for PM.

    2Reply
  • Account Closed
    Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
    6y

    @Andrew M. I dont think remote turnkey investing is right for you. I say this having invested and gone through the cycle of buy rent and sell a number of properties. There is nothing wrong with turnkey for people with high incomes in coastal markets who.out a small percent of their net worth into this. I made an excellent return im the end. But I would not put the bulk of my savings into an asset that is.so illiquid and risky and not in my control to manage daily. If you want to buy a rental do it locally and manage it yourself. You will buy a better deal and manage it more efficiently and make more money in the end.

    2Reply
  • Mark S.Pro Member
    Rental Property Investor · KY · Member since 2013 · 1k+ posts · 537 votes
    6y

    @Andrew M., thanks for posting.  I’ll share my personal experience thus far and am happy to chat offline if it helps you.  

    I currently own 5 turnkey SFRs in Memphis, TN.  

    Here’s a brief general overview of my situation:

    High income W-2 earner.  Not handy at all and no interest in buying a job (i.e., managing my own property, doing my own rehabs, etc.).  On the path to (somewhat) early financial freedom.  Heavily invested in the stock market and fully understand what that entails (discipline, long-term focus, ability to tune out the noise, etc.).  Interested in using leverage to create passive income that is durable and sustainable.  Realize bunting may be different than hitting a grandslam, but bunting beats bystanding.  

    What I’ve learned so far:

    Turnkey providers can be EXTREMELY different in both the product they provide and the service they deliver.  Always run your own numbers (which you seem to be doing and that’s good).  As already mentioned, property taxes can jump on you so always assume the property will be assessed at your purchase price to avoid surprises later.  In the meantime, you may enjoy a short period of time of (seemingly) higher cash flow.  My cash flow numbers aren’t the sexiest, but my total returns are difficult to beat (consistently) so far - and I assume 0% appreciation in those calculations.  Generally speaking, if you play in a slightly higher rental rate sandbox, you will probably have a better overall experience - I don’t buy properties that rent for $600/month (I’m sure some people do great in lower rent ranges, but I feel that the rental amount can sometimes be reflective of the type of tenant you may be able to attract).  Reserves are definitely important; I’m going through my second turnover right now and I’m glad I consistently set aside reserves each month that were more than adequate to cover these expenses.  In order to get any SIGNIFICANT monthly cash flow, I will need many more of these or to pay off the mortgages (arguments for/against this and that’s for another day).  

    Final Comment:

    I think as long as you buy solidly rehabbed properties (not the lipstick on a pig stuff), have a solid property management team (that you will absolutely pay for but that make your investment possible and your life easier), who is able to attract and retain high quality tenants, this can be a great addition to your overall financial portfolio (and doesn’t have to be the end all be all); it’s just one component.

    Feel free to PM me if you’d like to chat.  I have nothing to sell you.

    6Reply
  • Jacoby Atako
    Insurance Agent · Las Vegas, NV · Member since 2019 · 158 posts · 80 votes
    6y

    @Juanita Lopez

    I get being cautious, but if you guys your potential success by how many others are doing it, he probably wouldn't be looking into real estate in the first place. Should really be focused on the numbers.

    1Reply
  • Bill Goodland
    Rental Property Investor · Allentown PA, United States · Member since 2016 · 567 posts · 442 votes
    6y

    @Andrew M. I understand having a full time job makes it tough to do REI full time, but rather than buying turnkey, why not just focus on buying one great deal per year? The better ROI would probably be worth your time.

    0Reply
  • Jingru Sui
    Real Estate Agent · Atlanta, GA · Member since 2014 · 683 posts · 317 votes
    6y

    @Andrew Akins hi where in Memphis you are focus on? I’m interested to invest in Memphis as well. I’m in Atlanta. I heard both great and horror stories there.

    0Reply
  • Jingru Sui
    Real Estate Agent · Atlanta, GA · Member since 2014 · 683 posts · 317 votes
    6y

    Why not buy in Atlanta where you are located and learn from self management and repairs before you go out of state? You can still find properties here that both appreciate and cash flow. You might be able to do light rehab yourself as well. It’s so much fun!

    1Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    6y
    Originally posted by @Chris Clothier:
    Originally posted by @Andrew M.:

    So, I know this has been discussed a million times on this site. I just wanted some feedback on my strategy over the next 5-10 years or so. 

    Here's a little background about me. My wife and I are both employed (W2) and make about $60,000 a year in household income. We have about $30,000 cash currently and no debt. Our monthly expenses are under $2,000.

    My plan is to invest in turnkey SFR in the Memphis market. I would like to buy between 15 and 20 gradually over the next 5-10 years. I expect the houses to all be between $100K-140K. I expect these to each rent for $800 - $1,200 per month. My cash flow goal after ALL expenses (including PITI, management fees, all maintenance and a reasonable allowance for vacancy) is an average of $200 per month per property. My plan is to finance these with traditional mortgages, 10%-20% down.

    Here's what I'd like to know: 

    Are my cash flow goals reasonable and achievable? 

    Is there another market that you think would work better for my strategy?

    Is securing that many traditional mortgages possible?

    What are some difficulties I may encounter? What suggestions do you have for me?

    If some experience property investors wouldn't mind sharing some wisdom I would greatly appreciate it. Thanks for your time.
     

    Andrew,

    Nice job introducing yourself and laying out a bit of your strategy.  It is kind of "30,000 foot-ish" so hard to give in depth feedback, but enough to start with.  And with the responses you've already received, hopefully I can give you some things to think about as you move forward.

    First, you have to know that on a site like BiggerPockets the responses are going to run the gamut.  Unfortunately, you often have no idea what the experience or expertise is of the poster.  Here is my advice on what you posted and my advice on some of the comments from others.

    Based on what you wrote, I would suggest trying to find an experienced real estate investor who can answer some of your questions about why you are investing.  Your goals.  Not that crap about "know your why" or "how to calculate your freedom number", but why you are actually investing in real estate.  I had this grand plan when I first started in 2003 to own 50 inexpensive properties in Memphis (I think at the time I described them as cheap) and I want to make $200 a month.  I was a passive investor at the time living in Denver with a full time job running my first start-up.  I also flipped houses in Denver because everyone told me I was supposed to learn to do it myself and invest close to home.  Problem was, I had no idea how these actions were going to lead to my goals of building long-term wealth and having a portfolio I could pass on to each of my kids.  That was goal, I was just doing a bunch of stuff blindly.  Fast forward, I almost drowned in all the paperwork of owning that many properties and the cheap, crap properties that were easy and cheap to buy became the bane of my existence.  I'm not sure I ever saw $200 monthly per property across my portfolio and I owned 57 properties at one point.  It was a disaster because I was just doing stuff with no real understanding.  And by the way, I flipped two properties in Denver and made a killing.  I thought I had it figured out and lost every $ of profit from those on the third.  I realized I am a much better business man than I am full time real estate developer.  I became a passive investor right then and there.

    You need to connect with a local investor in Atlanta if possible.  If not, start listening to the BP podcast and find persons whom you feel you can connect with and reach out.  You need to surround yourself with people who are successfully doing what you want to do.  You will become the 6 people you surround yourself with so be careful who you listen to.  The naysayers and posters constantly posting all the reasons other investors can't do something are the ones who are not where you want to be.  Choose carefully!

    I agree with many posters on here about the number of properties and the cash flow. Both are arbitrary. It doesn't have to be a set number of properties and it does not have to be a set cash flow number. My personal advice is that I would rather use leverage to acquire properties than hold them. I want to buy properties where I can fashion the calculations to reduce principle and own the asset free and clear in the shortest time possible. I often am cash flow neutral but pay off assets in 8-12 years. I don't need cash flow and I have a solid, steady income so I don't put money off to the side as a "no-big-deal" fund. I know that move-outs, maintenance and Capex will occur, but I take precautions to limit those exposures as much as possible. In your case, over a 15-20 year period, if you are able to purchase 1-2 properties every 3-5 years, you could own 8-10 properties inside that time frame and if you purchase properties that are a better long-term value investment, you may see rents from $1100 to $1400. If your average rent is $1250 and you own 8 properties, your monthly gross income would be roughly $9000 monthly. Ten properties would be $12,500 monthly. Rather than trying to figure out how many $200 rentals you can acquire, think what your real long-term goal is and ask mentors or investors who have achieved that goal to assist in the best strategy. That is my first advice. I just think you may be a bit premature in laying out a plan and I just hope you exercise patience before moving forward. Hopefully every poster on here would agree that there is no need to rush.

    Now, my other advice is to understand that the word turnkey means absolutely nothing today on this site. It has been hijacked so many times that you need to forget it and understand it is simply a marketing term. On some level it means that there are some passive elements to the investment. Someone bought something and they are selling it. That pretty much sums up what every turnkey property has in common! From there, you really have to understand that it is up to you to dig in and get to know if the person or company you are doing business with is going to help you reach the goal you have set for yourself and the strategy you are using. I mentioned taking steps to reduce my exposure to maintenance, vacancy and Capex. You absolutely can reduce those variables, especially in the relatively short period of the first 7-10 years. Not every investor and certainly not every company that markets "turnkey" real estate believes in or understands how to do that. There are definitely differences in companies and the actual value they bring you as an investor. Figuring out how to align your needs and expectations with that value is your challenge.

    Any poster on here who tells you definitely will or that you will not make money with a certain strategy or investment has no idea what they are talking about and probably not worth taking seriously.  Each person has there own experiences, but none are in your situation and none can tell you exactly what outcome you will achieve.  There is a possibility to achieve what you outlined in your post by purchasing turnkey properties in Memphis.  Yes, you can hit those goals.  You can also lose a lot of money and miss your goals.  Your job is to do your homework on the front end and align your expectations with the best decisions based on knowledge, facts and doing your own homework.

    I would read what Rob Hakes has to say and definitely pay attention to his story. He has documented his experience so far.  But remember, he made decisions and had expectations and he can share with you what he did and how it has turned out...with that particular investment and company.  He has taken the time to document it.  He has not taken the time to go on every thread about Turnkey and simply tell the poster that they were definitely going to lose money.  If you are going to learn lessons from investors, learn them from those that are giving details and sharing the good, the bad and the ugly.  And remember, your job is to make an educated investment decision.  All of the horror stories plus all of the homerun stories only amount to data and education.  

    Two last things in my ridiculously long post!  @Matt R. is one of those guys that I love reading and for years have told myself and probably him as well that I want to meet up out in Cali for a beer and a surf lesson next time I'm there.  I admire and respect his posts and think he gives great level headed advice.  However, lol.  If we're going to use sports analogies, if my math is correct, a batter laying down 10 bunts is batting 1.000, has 3 runners on base and 7 across the plate.  Those bunts may not be sexy, but over time and adding up, they amount to a lot of wins.  I work with a lot of investors who have no need nor desire to go any public forum, they just love the consistent and reliable realization of hitting their goals and expectations.  Many with well over 10 bunts!

    Lastly, investing does not have to be an "or" strategy.  You can have "and" strategies.  In other words, you can invest in passive, turnkey real estate and be an active investor.  You can invest in passive, turnkey real estate and invest in index funds or syndications.  You don't have to choose just one.  It's not invest in one or the other.  I have invested in syndications and while they have been good, I didn't "own" the asset and I could not borrow against the asset.  I have lent money in real estate deals and earned great returns, yet I didn't own the asset when it paid off.  I buy the same dollar amount of an index fund on the same day of every month, and even with the recent corrections, I am still in the black on my investments in the market.  And you know what, the whole time I am making those investments, I have a resident paying off my mortgage where I leveraged a high-quality property passively.

    Hopefully this long post sheds some light on your next steps. I'm sure in a city like Atlanta you and find investors who have traveled the path you are discussing and can help shed some light for you. If you have any trouble finding one, reach out and I'll help connect you. I know two investors over there with REI clubs and several on here that are active. Best of luck to you ~

    Good points. It's like deja vu all over again. Bunters still can strike out though. Good luck!

    1Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    6y

    If I were to purchase OOS, I would connect with an awesome buyers agent in that market and buy an owner-occupied normal b area home off the MLS at a fair price. Not someones flip or rehab. Jack and Judy have lived there for years.

    Might be long on market  and need updating or have a smell that can be remedied. Connect with a BP person local to that market and get their feedback, too.

    Independent 3rd party inspector, lender and appraiser. Professionals with No bias.

    Then  I'd find the best PM and let them run it.  Why all the all-in integrated TK model? Buy like you would in your market somewhere else.

    1Reply
  • Chris ClothierBusiness Member
    Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
    6y
    Originally posted by @Matt R.:
    Originally posted by @Chris Clothier:
    Originally posted by @Andrew M.:

    So, I know this has been discussed a million times on this site. I just wanted some feedback on my strategy over the next 5-10 years or so. 

    Here's a little background about me. My wife and I are both employed (W2) and make about $60,000 a year in household income. We have about $30,000 cash currently and no debt. Our monthly expenses are under $2,000.

    My plan is to invest in turnkey SFR in the Memphis market. I would like to buy between 15 and 20 gradually over the next 5-10 years. I expect the houses to all be between $100K-140K. I expect these to each rent for $800 - $1,200 per month. My cash flow goal after ALL expenses (including PITI, management fees, all maintenance and a reasonable allowance for vacancy) is an average of $200 per month per property. My plan is to finance these with traditional mortgages, 10%-20% down.

    Here's what I'd like to know: 

    Are my cash flow goals reasonable and achievable? 

    Is there another market that you think would work better for my strategy?

    Is securing that many traditional mortgages possible?

    What are some difficulties I may encounter? What suggestions do you have for me?

    If some experience property investors wouldn't mind sharing some wisdom I would greatly appreciate it. Thanks for your time.
     

    Andrew,

    Nice job introducing yourself and laying out a bit of your strategy.  It is kind of "30,000 foot-ish" so hard to give in depth feedback, but enough to start with.  And with the responses you've already received, hopefully I can give you some things to think about as you move forward.

    First, you have to know that on a site like BiggerPockets the responses are going to run the gamut.  Unfortunately, you often have no idea what the experience or expertise is of the poster.  Here is my advice on what you posted and my advice on some of the comments from others.

    Based on what you wrote, I would suggest trying to find an experienced real estate investor who can answer some of your questions about why you are investing.  Your goals.  Not that crap about "know your why" or "how to calculate your freedom number", but why you are actually investing in real estate.  I had this grand plan when I first started in 2003 to own 50 inexpensive properties in Memphis (I think at the time I described them as cheap) and I want to make $200 a month.  I was a passive investor at the time living in Denver with a full time job running my first start-up.  I also flipped houses in Denver because everyone told me I was supposed to learn to do it myself and invest close to home.  Problem was, I had no idea how these actions were going to lead to my goals of building long-term wealth and having a portfolio I could pass on to each of my kids.  That was goal, I was just doing a bunch of stuff blindly.  Fast forward, I almost drowned in all the paperwork of owning that many properties and the cheap, crap properties that were easy and cheap to buy became the bane of my existence.  I'm not sure I ever saw $200 monthly per property across my portfolio and I owned 57 properties at one point.  It was a disaster because I was just doing stuff with no real understanding.  And by the way, I flipped two properties in Denver and made a killing.  I thought I had it figured out and lost every $ of profit from those on the third.  I realized I am a much better business man than I am full time real estate developer.  I became a passive investor right then and there.

    You need to connect with a local investor in Atlanta if possible.  If not, start listening to the BP podcast and find persons whom you feel you can connect with and reach out.  You need to surround yourself with people who are successfully doing what you want to do.  You will become the 6 people you surround yourself with so be careful who you listen to.  The naysayers and posters constantly posting all the reasons other investors can't do something are the ones who are not where you want to be.  Choose carefully!

    I agree with many posters on here about the number of properties and the cash flow. Both are arbitrary. It doesn't have to be a set number of properties and it does not have to be a set cash flow number. My personal advice is that I would rather use leverage to acquire properties than hold them. I want to buy properties where I can fashion the calculations to reduce principle and own the asset free and clear in the shortest time possible. I often am cash flow neutral but pay off assets in 8-12 years. I don't need cash flow and I have a solid, steady income so I don't put money off to the side as a "no-big-deal" fund. I know that move-outs, maintenance and Capex will occur, but I take precautions to limit those exposures as much as possible. In your case, over a 15-20 year period, if you are able to purchase 1-2 properties every 3-5 years, you could own 8-10 properties inside that time frame and if you purchase properties that are a better long-term value investment, you may see rents from $1100 to $1400. If your average rent is $1250 and you own 8 properties, your monthly gross income would be roughly $9000 monthly. Ten properties would be $12,500 monthly. Rather than trying to figure out how many $200 rentals you can acquire, think what your real long-term goal is and ask mentors or investors who have achieved that goal to assist in the best strategy. That is my first advice. I just think you may be a bit premature in laying out a plan and I just hope you exercise patience before moving forward. Hopefully every poster on here would agree that there is no need to rush.

    Now, my other advice is to understand that the word turnkey means absolutely nothing today on this site. It has been hijacked so many times that you need to forget it and understand it is simply a marketing term. On some level it means that there are some passive elements to the investment. Someone bought something and they are selling it. That pretty much sums up what every turnkey property has in common! From there, you really have to understand that it is up to you to dig in and get to know if the person or company you are doing business with is going to help you reach the goal you have set for yourself and the strategy you are using. I mentioned taking steps to reduce my exposure to maintenance, vacancy and Capex. You absolutely can reduce those variables, especially in the relatively short period of the first 7-10 years. Not every investor and certainly not every company that markets "turnkey" real estate believes in or understands how to do that. There are definitely differences in companies and the actual value they bring you as an investor. Figuring out how to align your needs and expectations with that value is your challenge.

    Any poster on here who tells you definitely will or that you will not make money with a certain strategy or investment has no idea what they are talking about and probably not worth taking seriously.  Each person has there own experiences, but none are in your situation and none can tell you exactly what outcome you will achieve.  There is a possibility to achieve what you outlined in your post by purchasing turnkey properties in Memphis.  Yes, you can hit those goals.  You can also lose a lot of money and miss your goals.  Your job is to do your homework on the front end and align your expectations with the best decisions based on knowledge, facts and doing your own homework.

    I would read what Rob Hakes has to say and definitely pay attention to his story. He has documented his experience so far.  But remember, he made decisions and had expectations and he can share with you what he did and how it has turned out...with that particular investment and company.  He has taken the time to document it.  He has not taken the time to go on every thread about Turnkey and simply tell the poster that they were definitely going to lose money.  If you are going to learn lessons from investors, learn them from those that are giving details and sharing the good, the bad and the ugly.  And remember, your job is to make an educated investment decision.  All of the horror stories plus all of the homerun stories only amount to data and education.  

    Two last things in my ridiculously long post!  @Matt R. is one of those guys that I love reading and for years have told myself and probably him as well that I want to meet up out in Cali for a beer and a surf lesson next time I'm there.  I admire and respect his posts and think he gives great level headed advice.  However, lol.  If we're going to use sports analogies, if my math is correct, a batter laying down 10 bunts is batting 1.000, has 3 runners on base and 7 across the plate.  Those bunts may not be sexy, but over time and adding up, they amount to a lot of wins.  I work with a lot of investors who have no need nor desire to go any public forum, they just love the consistent and reliable realization of hitting their goals and expectations.  Many with well over 10 bunts!

    Lastly, investing does not have to be an "or" strategy.  You can have "and" strategies.  In other words, you can invest in passive, turnkey real estate and be an active investor.  You can invest in passive, turnkey real estate and invest in index funds or syndications.  You don't have to choose just one.  It's not invest in one or the other.  I have invested in syndications and while they have been good, I didn't "own" the asset and I could not borrow against the asset.  I have lent money in real estate deals and earned great returns, yet I didn't own the asset when it paid off.  I buy the same dollar amount of an index fund on the same day of every month, and even with the recent corrections, I am still in the black on my investments in the market.  And you know what, the whole time I am making those investments, I have a resident paying off my mortgage where I leveraged a high-quality property passively.

    Hopefully this long post sheds some light on your next steps. I'm sure in a city like Atlanta you and find investors who have traveled the path you are discussing and can help shed some light for you. If you have any trouble finding one, reach out and I'll help connect you. I know two investors over there with REI clubs and several on here that are active. Best of luck to you ~

    Good points. It's like deja vu all over again. Bunters still can strike out though. Good luck!

    Ok, so you are technically correct, lol.  You still good to connect for surf lessons next time i'm in the LA area?  I've been to Cali so many times the last 10 years and almost always near the water, yet I've never touched the ocean.  I'm not coming back out there again without lining up some time off for working on getting up on a board.

    Podcast Guest on Show #224
    REI Nation4.577 Reviews
    WebsiteView Page
    1Reply
  • Joe M.
    Erie, PA · Member since 2018 · 413 posts · 348 votes
    6y

    Good thread so far.  I have no real input other than some people are hilarious with their judgement or suggestions.  OP stated he had a full time job and wanted your opinions on his TK model as stated.  

    "Dude, what is wrong with you, why dont you do the full rehab, then self manage it all yourself?"

    "Might as well do stocks. Im up a gazillion % in Tesla"

    "If Turnkey was so great, why isnt everyone doing it?"

    Obviously a lot of different ways to make money, and make better returns-but my goodness the judgement from some of you that someone doesnt want optimize returns, be a rehabber, landlord, but still invest is rediculous. 

    6Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    6y
    Originally posted by @Chris Clothier:
    Originally posted by @Matt R.:
    Originally posted by @Chris Clothier:
    Originally posted by @Andrew M.:

    So, I know this has been discussed a million times on this site. I just wanted some feedback on my strategy over the next 5-10 years or so. 

    Here's a little background about me. My wife and I are both employed (W2) and make about $60,000 a year in household income. We have about $30,000 cash currently and no debt. Our monthly expenses are under $2,000.

    My plan is to invest in turnkey SFR in the Memphis market. I would like to buy between 15 and 20 gradually over the next 5-10 years. I expect the houses to all be between $100K-140K. I expect these to each rent for $800 - $1,200 per month. My cash flow goal after ALL expenses (including PITI, management fees, all maintenance and a reasonable allowance for vacancy) is an average of $200 per month per property. My plan is to finance these with traditional mortgages, 10%-20% down.

    Here's what I'd like to know: 

    Are my cash flow goals reasonable and achievable? 

    Is there another market that you think would work better for my strategy?

    Is securing that many traditional mortgages possible?

    What are some difficulties I may encounter? What suggestions do you have for me?

    If some experience property investors wouldn't mind sharing some wisdom I would greatly appreciate it. Thanks for your time.
     

    Andrew,

    Nice job introducing yourself and laying out a bit of your strategy.  It is kind of "30,000 foot-ish" so hard to give in depth feedback, but enough to start with.  And with the responses you've already received, hopefully I can give you some things to think about as you move forward.

    First, you have to know that on a site like BiggerPockets the responses are going to run the gamut.  Unfortunately, you often have no idea what the experience or expertise is of the poster.  Here is my advice on what you posted and my advice on some of the comments from others.

    Based on what you wrote, I would suggest trying to find an experienced real estate investor who can answer some of your questions about why you are investing.  Your goals.  Not that crap about "know your why" or "how to calculate your freedom number", but why you are actually investing in real estate.  I had this grand plan when I first started in 2003 to own 50 inexpensive properties in Memphis (I think at the time I described them as cheap) and I want to make $200 a month.  I was a passive investor at the time living in Denver with a full time job running my first start-up.  I also flipped houses in Denver because everyone told me I was supposed to learn to do it myself and invest close to home.  Problem was, I had no idea how these actions were going to lead to my goals of building long-term wealth and having a portfolio I could pass on to each of my kids.  That was goal, I was just doing a bunch of stuff blindly.  Fast forward, I almost drowned in all the paperwork of owning that many properties and the cheap, crap properties that were easy and cheap to buy became the bane of my existence.  I'm not sure I ever saw $200 monthly per property across my portfolio and I owned 57 properties at one point.  It was a disaster because I was just doing stuff with no real understanding.  And by the way, I flipped two properties in Denver and made a killing.  I thought I had it figured out and lost every $ of profit from those on the third.  I realized I am a much better business man than I am full time real estate developer.  I became a passive investor right then and there.

    You need to connect with a local investor in Atlanta if possible.  If not, start listening to the BP podcast and find persons whom you feel you can connect with and reach out.  You need to surround yourself with people who are successfully doing what you want to do.  You will become the 6 people you surround yourself with so be careful who you listen to.  The naysayers and posters constantly posting all the reasons other investors can't do something are the ones who are not where you want to be.  Choose carefully!

    I agree with many posters on here about the number of properties and the cash flow. Both are arbitrary. It doesn't have to be a set number of properties and it does not have to be a set cash flow number. My personal advice is that I would rather use leverage to acquire properties than hold them. I want to buy properties where I can fashion the calculations to reduce principle and own the asset free and clear in the shortest time possible. I often am cash flow neutral but pay off assets in 8-12 years. I don't need cash flow and I have a solid, steady income so I don't put money off to the side as a "no-big-deal" fund. I know that move-outs, maintenance and Capex will occur, but I take precautions to limit those exposures as much as possible. In your case, over a 15-20 year period, if you are able to purchase 1-2 properties every 3-5 years, you could own 8-10 properties inside that time frame and if you purchase properties that are a better long-term value investment, you may see rents from $1100 to $1400. If your average rent is $1250 and you own 8 properties, your monthly gross income would be roughly $9000 monthly. Ten properties would be $12,500 monthly. Rather than trying to figure out how many $200 rentals you can acquire, think what your real long-term goal is and ask mentors or investors who have achieved that goal to assist in the best strategy. That is my first advice. I just think you may be a bit premature in laying out a plan and I just hope you exercise patience before moving forward. Hopefully every poster on here would agree that there is no need to rush.

    Now, my other advice is to understand that the word turnkey means absolutely nothing today on this site. It has been hijacked so many times that you need to forget it and understand it is simply a marketing term. On some level it means that there are some passive elements to the investment. Someone bought something and they are selling it. That pretty much sums up what every turnkey property has in common! From there, you really have to understand that it is up to you to dig in and get to know if the person or company you are doing business with is going to help you reach the goal you have set for yourself and the strategy you are using. I mentioned taking steps to reduce my exposure to maintenance, vacancy and Capex. You absolutely can reduce those variables, especially in the relatively short period of the first 7-10 years. Not every investor and certainly not every company that markets "turnkey" real estate believes in or understands how to do that. There are definitely differences in companies and the actual value they bring you as an investor. Figuring out how to align your needs and expectations with that value is your challenge.

    Any poster on here who tells you definitely will or that you will not make money with a certain strategy or investment has no idea what they are talking about and probably not worth taking seriously.  Each person has there own experiences, but none are in your situation and none can tell you exactly what outcome you will achieve.  There is a possibility to achieve what you outlined in your post by purchasing turnkey properties in Memphis.  Yes, you can hit those goals.  You can also lose a lot of money and miss your goals.  Your job is to do your homework on the front end and align your expectations with the best decisions based on knowledge, facts and doing your own homework.

    I would read what Rob Hakes has to say and definitely pay attention to his story. He has documented his experience so far.  But remember, he made decisions and had expectations and he can share with you what he did and how it has turned out...with that particular investment and company.  He has taken the time to document it.  He has not taken the time to go on every thread about Turnkey and simply tell the poster that they were definitely going to lose money.  If you are going to learn lessons from investors, learn them from those that are giving details and sharing the good, the bad and the ugly.  And remember, your job is to make an educated investment decision.  All of the horror stories plus all of the homerun stories only amount to data and education.  

    Two last things in my ridiculously long post!  @Matt R. is one of those guys that I love reading and for years have told myself and probably him as well that I want to meet up out in Cali for a beer and a surf lesson next time I'm there.  I admire and respect his posts and think he gives great level headed advice.  However, lol.  If we're going to use sports analogies, if my math is correct, a batter laying down 10 bunts is batting 1.000, has 3 runners on base and 7 across the plate.  Those bunts may not be sexy, but over time and adding up, they amount to a lot of wins.  I work with a lot of investors who have no need nor desire to go any public forum, they just love the consistent and reliable realization of hitting their goals and expectations.  Many with well over 10 bunts!

    Lastly, investing does not have to be an "or" strategy.  You can have "and" strategies.  In other words, you can invest in passive, turnkey real estate and be an active investor.  You can invest in passive, turnkey real estate and invest in index funds or syndications.  You don't have to choose just one.  It's not invest in one or the other.  I have invested in syndications and while they have been good, I didn't "own" the asset and I could not borrow against the asset.  I have lent money in real estate deals and earned great returns, yet I didn't own the asset when it paid off.  I buy the same dollar amount of an index fund on the same day of every month, and even with the recent corrections, I am still in the black on my investments in the market.  And you know what, the whole time I am making those investments, I have a resident paying off my mortgage where I leveraged a high-quality property passively.

    Hopefully this long post sheds some light on your next steps. I'm sure in a city like Atlanta you and find investors who have traveled the path you are discussing and can help shed some light for you. If you have any trouble finding one, reach out and I'll help connect you. I know two investors over there with REI clubs and several on here that are active. Best of luck to you ~

    Good points. It's like deja vu all over again. Bunters still can strike out though. Good luck!

    Ok, so you are technically correct, lol.  You still good to connect for surf lessons next time i'm in the LA area?  I've been to Cali so many times the last 10 years and almost always near the water, yet I've never touched the ocean.  I'm not coming back out there again without lining up some time off for working on getting up on a board.

     For sure. And you are taking full swings! I like the updated name, just noticed. For those who don't know Chris and family operate one of the largest most succesful TK corps in the nation that also includes Dallas and Houston. He has been around this TK block 1000 times already with 1000s of sfrs under management. Good luck! 

    0Reply
  • Andrew M.
    OP
    Atlanta, GA · Member since 2017 · 54 posts · 30 votes
    6y
    Originally posted by @Chris Clothier:
    Originally posted by @Andrew M.:

    So, I know this has been discussed a million times on this site. I just wanted some feedback on my strategy over the next 5-10 years or so. 

    Here's a little background about me. My wife and I are both employed (W2) and make about $60,000 a year in household income. We have about $30,000 cash currently and no debt. Our monthly expenses are under $2,000.

    My plan is to invest in turnkey SFR in the Memphis market. I would like to buy between 15 and 20 gradually over the next 5-10 years. I expect the houses to all be between $100K-140K. I expect these to each rent for $800 - $1,200 per month. My cash flow goal after ALL expenses (including PITI, management fees, all maintenance and a reasonable allowance for vacancy) is an average of $200 per month per property. My plan is to finance these with traditional mortgages, 10%-20% down.

    Here's what I'd like to know: 

    Are my cash flow goals reasonable and achievable? 

    Is there another market that you think would work better for my strategy?

    Is securing that many traditional mortgages possible?

    What are some difficulties I may encounter? What suggestions do you have for me?

    If some experience property investors wouldn't mind sharing some wisdom I would greatly appreciate it. Thanks for your time.
     

    Andrew,

    Nice job introducing yourself and laying out a bit of your strategy.  It is kind of "30,000 foot-ish" so hard to give in depth feedback, but enough to start with.  And with the responses you've already received, hopefully I can give you some things to think about as you move forward.

    First, you have to know that on a site like BiggerPockets the responses are going to run the gamut.  Unfortunately, you often have no idea what the experience or expertise is of the poster.  Here is my advice on what you posted and my advice on some of the comments from others.

    Based on what you wrote, I would suggest trying to find an experienced real estate investor who can answer some of your questions about why you are investing.  Your goals.  Not that crap about "know your why" or "how to calculate your freedom number", but why you are actually investing in real estate.  I had this grand plan when I first started in 2003 to own 50 inexpensive properties in Memphis (I think at the time I described them as cheap) and I want to make $200 a month.  I was a passive investor at the time living in Denver with a full time job running my first start-up.  I also flipped houses in Denver because everyone told me I was supposed to learn to do it myself and invest close to home.  Problem was, I had no idea how these actions were going to lead to my goals of building long-term wealth and having a portfolio I could pass on to each of my kids.  That was goal, I was just doing a bunch of stuff blindly.  Fast forward, I almost drowned in all the paperwork of owning that many properties and the cheap, crap properties that were easy and cheap to buy became the bane of my existence.  I'm not sure I ever saw $200 monthly per property across my portfolio and I owned 57 properties at one point.  It was a disaster because I was just doing stuff with no real understanding.  And by the way, I flipped two properties in Denver and made a killing.  I thought I had it figured out and lost every $ of profit from those on the third.  I realized I am a much better business man than I am full time real estate developer.  I became a passive investor right then and there.

    You need to connect with a local investor in Atlanta if possible.  If not, start listening to the BP podcast and find persons whom you feel you can connect with and reach out.  You need to surround yourself with people who are successfully doing what you want to do.  You will become the 6 people you surround yourself with so be careful who you listen to.  The naysayers and posters constantly posting all the reasons other investors can't do something are the ones who are not where you want to be.  Choose carefully!

    I agree with many posters on here about the number of properties and the cash flow. Both are arbitrary. It doesn't have to be a set number of properties and it does not have to be a set cash flow number. My personal advice is that I would rather use leverage to acquire properties than hold them. I want to buy properties where I can fashion the calculations to reduce principle and own the asset free and clear in the shortest time possible. I often am cash flow neutral but pay off assets in 8-12 years. I don't need cash flow and I have a solid, steady income so I don't put money off to the side as a "no-big-deal" fund. I know that move-outs, maintenance and Capex will occur, but I take precautions to limit those exposures as much as possible. In your case, over a 15-20 year period, if you are able to purchase 1-2 properties every 3-5 years, you could own 8-10 properties inside that time frame and if you purchase properties that are a better long-term value investment, you may see rents from $1100 to $1400. If your average rent is $1250 and you own 8 properties, your monthly gross income would be roughly $9000 monthly. Ten properties would be $12,500 monthly. Rather than trying to figure out how many $200 rentals you can acquire, think what your real long-term goal is and ask mentors or investors who have achieved that goal to assist in the best strategy. That is my first advice. I just think you may be a bit premature in laying out a plan and I just hope you exercise patience before moving forward. Hopefully every poster on here would agree that there is no need to rush.

    Now, my other advice is to understand that the word turnkey means absolutely nothing today on this site. It has been hijacked so many times that you need to forget it and understand it is simply a marketing term. On some level it means that there are some passive elements to the investment. Someone bought something and they are selling it. That pretty much sums up what every turnkey property has in common! From there, you really have to understand that it is up to you to dig in and get to know if the person or company you are doing business with is going to help you reach the goal you have set for yourself and the strategy you are using. I mentioned taking steps to reduce my exposure to maintenance, vacancy and Capex. You absolutely can reduce those variables, especially in the relatively short period of the first 7-10 years. Not every investor and certainly not every company that markets "turnkey" real estate believes in or understands how to do that. There are definitely differences in companies and the actual value they bring you as an investor. Figuring out how to align your needs and expectations with that value is your challenge.

    Any poster on here who tells you definitely will or that you will not make money with a certain strategy or investment has no idea what they are talking about and probably not worth taking seriously.  Each person has there own experiences, but none are in your situation and none can tell you exactly what outcome you will achieve.  There is a possibility to achieve what you outlined in your post by purchasing turnkey properties in Memphis.  Yes, you can hit those goals.  You can also lose a lot of money and miss your goals.  Your job is to do your homework on the front end and align your expectations with the best decisions based on knowledge, facts and doing your own homework.

    I would read what Rob Hakes has to say and definitely pay attention to his story. He has documented his experience so far.  But remember, he made decisions and had expectations and he can share with you what he did and how it has turned out...with that particular investment and company.  He has taken the time to document it.  He has not taken the time to go on every thread about Turnkey and simply tell the poster that they were definitely going to lose money.  If you are going to learn lessons from investors, learn them from those that are giving details and sharing the good, the bad and the ugly.  And remember, your job is to make an educated investment decision.  All of the horror stories plus all of the homerun stories only amount to data and education.  

    Two last things in my ridiculously long post!  @Matt R. is one of those guys that I love reading and for years have told myself and probably him as well that I want to meet up out in Cali for a beer and a surf lesson next time I'm there.  I admire and respect his posts and think he gives great level headed advice.  However, lol.  If we're going to use sports analogies, if my math is correct, a batter laying down 10 bunts is batting 1.000, has 3 runners on base and 7 across the plate.  Those bunts may not be sexy, but over time and adding up, they amount to a lot of wins.  I work with a lot of investors who have no need nor desire to go any public forum, they just love the consistent and reliable realization of hitting their goals and expectations.  Many with well over 10 bunts!

    Lastly, investing does not have to be an "or" strategy.  You can have "and" strategies.  In other words, you can invest in passive, turnkey real estate and be an active investor.  You can invest in passive, turnkey real estate and invest in index funds or syndications.  You don't have to choose just one.  It's not invest in one or the other.  I have invested in syndications and while they have been good, I didn't "own" the asset and I could not borrow against the asset.  I have lent money in real estate deals and earned great returns, yet I didn't own the asset when it paid off.  I buy the same dollar amount of an index fund on the same day of every month, and even with the recent corrections, I am still in the black on my investments in the market.  And you know what, the whole time I am making those investments, I have a resident paying off my mortgage where I leveraged a high-quality property passively.

    Hopefully this long post sheds some light on your next steps. I'm sure in a city like Atlanta you and find investors who have traveled the path you are discussing and can help shed some light for you. If you have any trouble finding one, reach out and I'll help connect you. I know two investors over there with REI clubs and several on here that are active. Best of luck to you ~

    Wow, this is more than I hoped for! Thank you so much Chris for taking the time out of your busy day to write that out for me and other newbies to benefit from your experience. You've given me a ton to think about, not just in this singular RE strategy I was considering but in my entire investment strategy going forward. I'm also going to rewatch BPP 224 as soon as I have time. 

    1Reply
  • Andrew M.
    OP
    Atlanta, GA · Member since 2017 · 54 posts · 30 votes
    6y
    Originally posted by @Mark S.:

    @Andrew M., thanks for posting.  I’ll share my personal experience thus far and am happy to chat offline if it helps you.  

    I currently own 5 turnkey SFRs in Memphis, TN.  

    Here’s a brief general overview of my situation:

    High income W-2 earner.  Not handy at all and no interest in buying a job (i.e., managing my own property, doing my own rehabs, etc.).  On the path to (somewhat) early financial freedom.  Heavily invested in the stock market and fully understand what that entails (discipline, long-term focus, ability to tune out the noise, etc.).  Interested in using leverage to create passive income that is durable and sustainable.  Realize bunting may be different than hitting a grandslam, but bunting beats bystanding.  

    What I’ve learned so far:

    Turnkey providers can be EXTREMELY different in both the product they provide and the service they deliver.  Always run your own numbers (which you seem to be doing and that’s good).  As already mentioned, property taxes can jump on you so always assume the property will be assessed at your purchase price to avoid surprises later.  In the meantime, you may enjoy a short period of time of (seemingly) higher cash flow.  My cash flow numbers aren’t the sexiest, but my total returns are difficult to beat (consistently) so far - and I assume 0% appreciation in those calculations.  Generally speaking, if you play in a slightly higher rental rate sandbox, you will probably have a better overall experience - I don’t buy properties that rent for $600/month (I’m sure some people do great in lower rent ranges, but I feel that the rental amount can sometimes be reflective of the type of tenant you may be able to attract).  Reserves are definitely important; I’m going through my second turnover right now and I’m glad I consistently set aside reserves each month that were more than adequate to cover these expenses.  In order to get any SIGNIFICANT monthly cash flow, I will need many more of these or to pay off the mortgages (arguments for/against this and that’s for another day).  

    Final Comment:

    I think as long as you buy solidly rehabbed properties (not the lipstick on a pig stuff), have a solid property management team (that you will absolutely pay for but that make your investment possible and your life easier), who is able to attract and retain high quality tenants, this can be a great addition to your overall financial portfolio (and doesn’t have to be the end all be all); it’s just one component.

    Feel free to PM me if you’d like to chat.  I have nothing to sell you.

    Thanks Mark, this is definitely the kind of reply I was hoping to get when I started this thread. And I don't mean I just want people to agree with me or tell me how great my strategy is. What you're saying seems really logical and balanced; and it's just great to hear from someone who's been down this road before. Like you said, I'm not looking to buy a job either, if the numbers don't work for this to be a passive (mostly) investment, then I don't want it. 

    I was wondering, for the 5 turnkeys you bought in Memphis, did you buy from the same provider or different ones? Could you recommend to me a good provider? Thanks for your time!

    1Reply
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