Ok to purchase turnkey (new investor)

19 Replies

I’m close to purchasing my first turnkey and I wanted to see what others thought about doing this during a pandemic. With unemployment rates running so high it seems likely that I could end up with an unemployed tenant that’s unable to pay rent. I want to invest just not sure if now is the best time. I know there is probably never a perfect time for anything. Would be great to hear your thoughts

Originally posted by @Shawn S. :

I’m close to purchasing my first turnkey and I wanted to see what others thought about doing this during a pandemic. With unemployment rates running so high it seems likely that I could end up with an unemployed tenant that’s unable to pay rent. I want to invest just not sure if now is the best time. I know there is probably never a perfect time for anything. Would be great to hear your thoughts

 Consult with the Turnkey Provider. If they are a TRUE provider then they are currently managing the Turnkeys they sold. Ask them how they are performing right now. Are tenants paying etc. 

Ideally, the Turnkey Provider will do everything in-house. They should own the property first (NOT a listing from the MLS) then they should do all of the renovations in-house, place a tenant PRIOR to closing, and then the TK provider should stay on as the manager, again in-house.

@Shawn S. It depends on your market.  Here in Fayetteville, NC properties are renting really fast.  So if you wanted an easy property that can be on the market quickly, a turnkey rental isn't a bad option.  

I take your meaning of turnkey as a property that is ready to be rented once purchased, not a property from a turnkey service.  

@Shawn S. what @Chris Stroup said about here in Fayetteville is absolutely correct. One of the best things about this city is the military presence essentially makes the economy super stable. This ultimately is expresses itself in slightly lower than average price appreciation, but the rental returns simply outclass the rest of the country. And then there's astonishing property turnover, especially from VA foreclosures. Which means there are always reno projects available to either flip or BRRRR to keep your capital rolling forward.

Tenants are either military or they work in the services that are oriented toward military. There will always be money going to, for example, the bars, the fast food places, Target, Walmart. No matter what the rest of the country is going through economically, Fayetteville is very well insulated. So there's a degree of protection against cyclical unemployment.

And if you are specifically looking for a turnkey vendor, I can definitely help you.

@Shawn S. Not sure what turnkey provider you're talking to, but my friend @Stuart Grazier runs a great turnkey company that would be worth checking out if you want to vet a second provider. He and his partner are active duty Naval Officers, and their business is awesome. Most trustworthy team I know!

Hey @Shawn S. ,

First, the word turnkey and the fact that you are buying passively can really be taken out of the equation.  Even if you were actively investing and managing yourself, you would be facing the same question.

Take a second to consider if you are uncomfortable with the fact that you don't have control over the resident in your home and the management.  If that is the case, I would slow down and re-evaluate before buying.  You really want to be comfortable having someone else make all of the management decisions for you and comfortable knowing you can trust them to make good decisions for you.

If you are comfortable with that, then I will tell you that you are probably over thinking the timing and the unemployment rates.  If you are close to purchasing, then you have a city in mind.  What is happening in that particular city with unemployment?  You most likely have a management company in place as well, so what are they telling you about the last 90 days?  How have their rent collections been?  How have their showings, closings and rental rates been during the last 90 days?  Have they had to run any specials to get properties rented or are they having to work with residents to keep them in properties (lowering rents)?

How a property is going to perform - regardless or market, city, unemployment rate - will come down to the city you are investing, the neighborhood of the property, the rental rate compared to average for the area and the team you have managing your investment.

It is not more likely that you will have a renter fail to pay.  Even with a higher unemployment rate.  The likelihood of that happening has much more to do with the things I listed above.  If I were in your shoes I would simply make sure I asked the proper questions.  Many investors find out the hard way that regardless of low or high unemployment rates, a poorly located property with poor management is going to unpaid rents, vacancy and issues making it a poor investment.  The timing and the name of the investment (turnkey) really have little to do with performance.  Feel free to continue posting questions in here if you have more.  Best to you ~

@Chris Clothier

I’m considering investing in Memphis TN. I’m in the process on researching some TK companies and came across Turnkey properties.

I know they are a competitor of yours, so what are your thoughts on that company?

@Dan DiFilippo is absolutely correct about Fayetteville. It can be a great and terrible place to invest. It was immune to the real estate market crash 10 years ago but at the same time it was "immune" to the market surge of the last few years. Value of properties now is identical to 10 years ago. Investing in this market is all about cash flow and earning equity by paying down the mortgage. You will not realize appreciation here.

Originally posted by @Percy Matsunaga :

@Chris Clothier

I’m considering investing in Memphis TN. I’m in the process on researching some TK companies and came across Turnkey properties.

I know they are a competitor of yours, so what are your thoughts on that company?


Can you tell me exactly whom it is you are researching?  I'm not sure who Turnkey Properties is.  What is the website of the company you are looking at?  Unfortunately, there are companies who copy names and try to grab a name that may confuse a searcher with other more established companies.  There are several companies here in town with long, established track records.  There are also companies that pop up from time to time and have slick marketing messages, but no track record or experience.  

I can tell you I won't have anything negative to say about any company, but I'm happy to help you discern where they operate, how long they've been in business and if they would be a good fit for your expectations as an investor.    Best to you ~

Hey @Shawn S.  

I guess you would need to consider where you would be investing money instead of into real estate right now?

Also consider what your risk tolerance / risk to reward ratio is at? 

Personally and my opinion I am still buying and investing in real estate right now. We are still collecting good rents, tenants are moving into houses, people are buying and selling. Avg DOM is low. Interest rates are low.

I recently wholesaled a turn key/rent ready deal near Fort Bragg for 63k and the end buyer just informed me that it appraised for 93k!!! Needless to say, the BRRRR strategy in Fayetteville is alive and well.

Also, it appears that we've fared pretty well with the pandemic as far as collecting rents. I have a small eight door portfolio and we've been able to collect 100%. Friends with larger portfolios have had a handful of tenants that couldn't pay but it's nothing a good PM can't handle.

In my humble opinion, I'd stick to the BRRRR strategy unless you have a large amount of cash for multiple down payments. My first purchase was done with a conventional loan which means that cash is stuck in the deal for now. Decided to BRRRR my next deal and I was able to pull my cash out and buy another. At some point we need to consider the velocity of our money.

@Percy Matsunaga I am located near you in Roseville Ca. I am also interested in turnkey properties in Tennessee. I'm looking for a property in Clarksville. If you woudnt mind sharing, I am very interested in your experience with TK Properties. Tia! 

@Casey Corr

Hi Casey, I'm in the beginning stage of investing in the TK properties. I started with researching certain markets and I'm narrowing them down now. I also have researched certain companies that offer TK properties that I want to do business with.

What would you like to know?

@Shawn S. - it's nice to have some upside. You don't have to buy a huge renovation project, but why not find a property with value-add potential? The ideal purchase for many buyers will be a good condition/ready to rent, with opportunities to increase rents with cosmetic updates or extra square footage. In our market turnkey properties just don't perform well enough to be safe. 

Unless you are flipping, real estate is a long game. Worrying about current market conditions only makes sense if you do not have sufficient liquidity to withstand a temporary downturn/setback. If you do not have sufficient liquidity, investing in real estate is invariably a mistake. Your post does not disclose much about your goals in making this investment. Hard to advise beyond that simple point. It appears to me that a lot of investors in turnkey real estate (i.e. who want to remain passive) would do better buying quality commercial bonds unless they have a reason to believe the real estate investment will do better. What is your investment thesis?