Would You Recommend: A Turnkey Property Company for OOS REI?

17 Replies

@Debbie Mayerson Looking at the bigger picture of real estate I'd consider why you want to buy turn-key properties. I'm not bashing turn-key but look at our markets. DEALS are hard to find and it's not any different for turn-key companies. 

I don't know your market but I'm in the mid west. I'm in the same trenches looking for the same cash-flow those companies are selling to you (only marked up). Have a realistic expectation of location, ROI, and condition because the odds are pretty low to find good deals in C-B class neighborhoods. When you factor in expenses, property management, and taxes it leads me to believe it's not even possible. I don't know how this niche even works 2021. Hopefully someone can enlighten me or show me how. Either way run your own numbers and research the neighborhood. Don't just assume what they're selling is fact.

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Originally posted by @Jaron Walling:

@Debbie Mayerson Looking at the bigger picture of real estate I'd consider why you want to buy turn-key properties. I'm not bashing turn-key but look at our markets. DEALS are hard to find and it's not any different for turn-key companies. 

I don't know your market but I'm in the mid west. I'm in the same trenches looking for the same cash-flow those companies are selling to you (only marked up). Have a realistic expectation of location, ROI, and condition because the odds are pretty low to find good deals in C-B class neighborhoods. When you factor in expenses, property management, and taxes it leads me to believe it's not even possible. I don't know how those guys make any money in 2021. Maybe someone could chime here and show me how. Either way run your own numbers and research the neighborhood. This research would tell you if they are lying about cash-flow and neighborhood trends.

keep in mind every sales agent or wholesaler or direct seller     sells BLUE SKY  I would not call it lying LOL.. thats a tad harsh.

Originally posted by @Jay Hinrichs:
Originally posted by @Jaron Walling:

@Debbie Mayerson Looking at the bigger picture of real estate I'd consider why you want to buy turn-key properties. I'm not bashing turn-key but look at our markets. DEALS are hard to find and it's not any different for turn-key companies. 

I don't know your market but I'm in the mid west. I'm in the same trenches looking for the same cash-flow those companies are selling to you (only marked up). Have a realistic expectation of location, ROI, and condition because the odds are pretty low to find good deals in C-B class neighborhoods. When you factor in expenses, property management, and taxes it leads me to believe it's not even possible. I don't know how those guys make any money in 2021. Maybe someone could chime here and show me how. Either way run your own numbers and research the neighborhood. This research would tell you if they are lying about cash-flow and neighborhood trends.

keep in mind every sales agent or wholesaler or direct seller     sells BLUE SKY  I would not call it lying LOL.. thats a tad harsh.

Agreed and I adjusted my post. Nothing wrong with BLUE SKY but I haven't seen much talk about turn-key investing lately.... maybe I'm clueless. 

Originally posted by @Jaron Walling:
Originally posted by @Jay Hinrichs:
Originally posted by @Jaron Walling:

@Debbie Mayerson Looking at the bigger picture of real estate I'd consider why you want to buy turn-key properties. I'm not bashing turn-key but look at our markets. DEALS are hard to find and it's not any different for turn-key companies. 

I don't know your market but I'm in the mid west. I'm in the same trenches looking for the same cash-flow those companies are selling to you (only marked up). Have a realistic expectation of location, ROI, and condition because the odds are pretty low to find good deals in C-B class neighborhoods. When you factor in expenses, property management, and taxes it leads me to believe it's not even possible. I don't know how those guys make any money in 2021. Maybe someone could chime here and show me how. Either way run your own numbers and research the neighborhood. This research would tell you if they are lying about cash-flow and neighborhood trends.

keep in mind every sales agent or wholesaler or direct seller     sells BLUE SKY  I would not call it lying LOL.. thats a tad harsh.

Agreed and I adjusted my post. Nothing wrong with BLUE SKY but I haven't seen much talk about turn-key investing lately.... maybe I'm clueless. 

the one who spun the tall tales and out right fibs was Clayton Morris and he devastated a lot of Indy and other market investors with his 

tales of how great 50k all in rentals are in the US..  for OOS investors.  locals that's one thing OOS that's a whole nother kettle of fish and that kettle usually has a strong odor. 

Originally posted by @Zev Jankovic:

@Debbie Mayerson - I haven't used them personally but I believe @Zach Lemaster with Rent to Retirement is a legitimate turnkey provider probably worth checking out. Either way, definitely do your due diligence with any provide you choose.

Zev, thanks for the shout out for Rent to Retirement. 

Debbie, while I work for Rent to Retirement, I started buying turnkey properties before I ever started working for turnkey companies. I've personally found it very beneficial. My cash flow is good on all of my properties, the maintenance is pretty low (except in Jackson, MS this year where the snow storm froze some pipes and we basically had to do a bathroom remodel, but that's not the turnkey providers fault), and my involvement is minimal.

I fully understand I gave up equity upside when I bought turnkey, but that was a tradeoff I was willing to make because I wasn't going to travel OOS and do a BRRRR or anything of that nature, and I wasn't going to even try and make something work in Austin where I live. There's tradeoffs to everything in life, but to me turnkey was the right choice. Having a network recommend managers and sellers to me was incredibly beneficial. You're not tied to anyone long term. You aren't required to keep the manager or even buy another property from RTR ever again (if you use us).

If you choose not to go turnkey and invest out of state, make sure you have built a team you trust before you purchase a property. You're going to want to have a team in place to do the rehab (or have a plane ticket and extended stay booked), have a wholesaler or agent looking for properties for you, and an idea of how you're going to manage your property when it's all finished.

Best of luck!

I started with turnkey remote rentals in 2009-2015 while working my engineering W2 job. Then went into syndications once my net worth went over 500k.

TKs are a great place to start... even if you are over paying 5-20k from market.

Originally posted by @Debbie Mayerson:

Has anyone had a great experience with a Turnkey property company? How so? What has your experience been? How has it helped you accomplish your financial goals? If so, which company? 

I had a good experience with my TK provider (Ohio Cash Flow). There will always be marginal differences when it comes different markets, but I think the absolute most important thing is to find a provider that you can trust...and OCF proved to me that they were trustworthy and they stood behind the properties they sell.

With that said, before investing in TK, I would ask myself the following questions when considering whether or not to go the TK route:

-What is my exit strategy?

-Do folks who started with TKs continue to do TK many years later?

-With prices the way they are now, how much will TK properties appreciate in 5 years, 10 years?

-How scalable is this strategy?

-What will my IRR be after the first cycle of capex expenses are required?

-Do you want to retire with a portfolio of SFR's that are probably badly aging and are located in areas that generally aren't owner-occupied? (non-owner occupied areas don't appreciate nearly as fast).

-Will you even be able to retire while holdings 40+ TK properties? If not, then back to question #1.

@Debbie Mayerson, l support Tony Kim’s comments. I bought a property from Ohio Cashflow (OCF) two years ago and they have so far not disappointed me. I may buy another property from them in early 2022. The only disadvantage with OCF is that they only sell to cash buyers.

However, don’t listen to anybody’s recommendations without doing your own due diligence prior to purchasing a property. I bought two turnkey properties from a provider in Kansas City, Missouri in 2020 and l have had foundation and plumbing issues with both properties. Feel free to send me a private message if you are interested in the details regarding this provider.

@Debbie Mayerson turnkey companies are generally a base hit. Nothing wrong with that. I own two.

I would definitely NOT recommend Easy Street Properties in Davenport IA based on my personal experience.

@Debbie Mayerson This is a completely situational answer to the question. However, generally speaking it comes down to your goals, available capital, access to financing, time, experience, etc. For most people turnkey investing will be similar to investing in the stock market. Its mostly passive, with a modicum of control that you won't have in an index fund. A good turn key deal might give a 10% IRR, which is fine. If you are looking for better returns you will have to typically add more value to a deal, either knowledge, time, effort, etc. It is all a trade off. If you have a high income career or business and limited time, turn key might make sense for you. Personally, if I was looking for a passive investment, I would rather invest into a syndication, it is even more passive with lower personal risks. However there are requirements for investing into most syndication funds as well, that may not fit everyone. Good luck on your decisions!

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@Debbie Mayerson .  Turnkey is certainly a good and viable investment strategy, especially right now. There are material shortages, as well as labor challenges.  If you are interested in looking at the KC market, I would suggest @Mike D'Arrigo .  He does a great job with the rehab and makes it quite easy for the OOS investor to purchase a rent ready property.

Please feel free to message me if you would like to chat.

Best,

Melinda

I’ve worked with two turnkey providers and am 0-2. One was small and the other was a large national one. If you can get a recommendation from a happy investor who used a turnkey company, that’s the way to go. Just be careful: sometimes those referrals are coming from people associated with the company in some way.


Happy to share the names of the companies to avoid if you DM me. 

Turnkey providers are only as good as their track record. Get several refferals and make sure that you make at least (1) trip out to see the property before closing on it. I agree with several comments about this being a good way to start out but perhaps not a long term viable option to grow and scale. 

Pro tip - When interviewing the company ask them to tell you a time when they made a mistake that cost the owner and what they did to make it right. If they can't I would certainly count that as a strike against their credibility. 

@Debbie Mayerson turn key can be a great way to go for a busy, OOS investor that wants to be more hands off. There are some things that you should watch out for when considering a turn key company. Here are some of the key things to look for and avoid.

  • Don't allow financing or a finance contingency (it can be a good indication they are selling above market value)
  • Don't allow for your own independent property inspection
  • Are not realistic with their pro forma's (i.e. they don't include vacancy or maintenance projections or use unrealistically low vacancy factors)
  • Require you to pay for any renovation upfront
  • Sell only in cheap. low end neighborhoods
  • Don't accurately represent the neighborhood/property classification
  • Don't have consistent rehab standards for all properties
  • Don't provide a scope of work for the property
  • Can't provide references of repeat investors
Originally posted by @Melinda McDonald:

@Debbie Mayerson.  Turnkey is certainly a good and viable investment strategy, especially right now. There are material shortages, as well as labor challenges.  If you are interested in looking at the KC market, I would suggest @Mike D'Arrigo.  He does a great job with the rehab and makes it quite easy for the OOS investor to purchase a rent ready property.

Please feel free to message me if you would like to chat.

Best,

Melinda

Melinda, thanks for the vote of confidence. You brought up a great point for anyone thinking of doing it on their own. Managing a renovation is tricky enough as it is but with the current materials and labor shortage, it's extremely challenging.