Turnkey and Out of State Investing

7 Replies

Hi all,

Since everyone was so helpful on my first post, I thought it'd be interesting to hear from folks who do turnkey or out of state investing, or both. For those of you who have done turnkey, a couple of questions :

Turnkey

1) What was your experience like, positive or negative?

2) What turnkey provider did you work with?

3) Would you do it again, or hear you done it again?

4) What were tour biggest hurdles, and what advice do you have for those interested in turnkey investing?

For out of state investors

1) What was your experience like, positive or negative?

2) How did you build your team and purchase your first property?

3) What were tour biggest hurdles, and what advice do you have for those interested in out of state?

4) Where did you invest?

Please just consider the above guidelines, because any insight that you can offer would be very helpful. Those who have not invested in turnkey or out of state, but have informed opinions, feel free to share. I'm sure @Ali Boone and company will have some insights. Not that it hasn't already been said, but I'm curious to hear the discussion around the charges of inflated rent in turnkeys and how endemic this actually is.

Looking forward to seeing everyone's responses! Thanks in advance.

I am currently working with a 'turnkey' provider to purchase our first investment properties in the DFW market. My wife and I live in Los Angeles and we both work full-time and have pretty busy schedules. After doing a lot of research here, reading books, and listening to podcasts for about 6 months, I gained a good grasp on the different avenues of REI. Off the bat, we chose to be buy/hold/lease investors, as it is the easiest way to earn passive income immediately. We chose to use a turnkey provider because it's a lot less work than doing a traditional purchase using an agent. Most real estate agents, I've found, are not very seasoned when it comes to working with real estate investors. The turnkey guys are valuable because, from an investors standpoint, they know where to focus and who to network with- they deal with these kinds of transactions daily! Surely, if you have access to the MLS or if you are motivated enough/have the time to network and scour hundreds of deals daily, then you could definitely find a better deal than what you'd get from a turnkey provider. It depends on your business model, how much you value time, and your lifestyle. As I mentioned, we are very busy people who cherish our time off. Therefore, I do not want to spend x amount of time finding those really good deals when I'm off, at least at this present time. All I care about is that 1.) The property meets my criteria and 2.) The deal makes sense the day I buy it. With a turnkey provider, you are generally going to pay right around market value for the property. The difference is that they're there to hold your hand if you need that kind of attention. They are also there to do all of the networking and communication with the rest of the team, if you were to choose to be so removed (which I do not recommend). For me, I generally trust no one. I do my own research and then I will consult with other people to make sure that the information is consistent across the board. From my experience working with a TK provider, I'd say that the whole process has been very transparent. I have never felt that I was being taken advantage of or that someone was trying to withhold information from me (and I would have known because I did my due diligence). Overall, my experience working with a TK provider has been very positive. From our first conversation (about 3 months ago) up until now (about 2 weeks from closing), the provider I am working with has been very informative, diligent, and willing to help me with any questions I may have. PM me and I will give you the company's contact information.

Well since you called me out, I suppose I should offers my answers :)

Turnkey

1) What was your experience like, positive or negative?

Both. Buying was easy for all, but had some mega property management issues on a couple that cost me a fortune. I've bought from good and bad turnkey providers.

2) What turnkey provider did you work with?

Won't say the names on here, especially since some of them were bad. But will tell them to anyone offline who wants to know.

3) Would you do it again, or hear you done it again?

Yes. Turnkeys are all I'll buy, especially since I know of so many more good providers.

4) What were tour biggest hurdles, and what advice do you have for those interested in turnkey investing?

Make sure you get a property inspection by a good inspector and make sure the property management is good. If it's not, it doesn't matter how good the rest of the deal is, it can cost you a fortune.

For out of state investors

1) What was your experience like, positive or negative?

See above.

2) How did you build your team and purchase your first property?

Turnkeys already have the teams in place. I met mentors first who introduced me to the teams on the ground.

3) What were tour biggest hurdles, and what advice do you have for those interested in out of state?

Property management was the biggest hurdle. Most people think it's controlling things or running things from out-of-state but that has always been easy. It's what phone and email are for. Advice, see above- home inspection and good property management are required.

4) Where did you invest?

Atlanta

TURNKEY INVESTING

1) What was your experience like, positive or negative?


I’d say my experience was similar to dealing with a real estate agent because back when I was investing heavily, there were very few turnkey providers. For the most part you would find real estate agents and rehabbers operating as islands but trying to work together as one virtual business. It was fragmented and clunky and you still find this today.

2) What turnkey provider did you work with?

The two companies I worked with went out of business after the housing market imploded but the experience was invaluable! It gave me plenty of ideas on how to “raise the bar” in this industry, how to truly define what turnkey real estate investing is, and how to do it right.

3) Would you do it again, or have you done it again?

I would not work with the same providers I worked with in the past, nor would I ever work with a company similar to them again. My past experience, good and bad, has defined what turnkey investing should be for me, both from a provider’s perspective as well as an investor’s.

4) What advice do you have for those interested in turnkey investing?

  • Look beyond your backyard. Most of the time your best deals will be found elsewhere.
  • Do your due diligence: on the markets, the neighborhoods, the properties, the providers, the managers, etc.
  • Find a reputable full-service provider. Ideally a company that can provide you with strategic advice and a tactical plan while “holding your hand” throughout the investing process.
  • Always, always, always ask for recent client references.
  • Treat your investing like a business.
  • Take action!



OUT-OF-STATE INVESTING

1) How did you build your team and purchase your first property?

My first out-of-state property was purchased through a real estate agent referred to me by another real estate investor. The agent wasn't very knowledgeable when it came to investing in income-producing real estate, but she was willing to spend the time I needed to show me whatever I wanted. She was also willing to give me access to the MLS using her account. I ended up educating her on investing as much as she educated me on the various neighborhoods. I guess you could call it a win-win.

As for the rest of my team of contractors and property managers in the early days, I had to keep asking for referrals until I found trustworthy people I could work with from home. Back when I started investing there were very few, if any, true turnkey providers so it was on me to do the leg work and bring together all the resources I needed. I made it happen after several months of traveling and meeting with various people, but I figured out everything that was needed and created my systems.

3) What were your biggest hurdles?

  • Determining the best market(s) to be investing in back then. There were too many speculators preaching "their" market was the hot market to be in. The problem was these "investors" were speculating and flipping; they were not thinking about where the solid long-term buy-and-hold markets were. I had to eliminate the noise and educate myself.
  • Finding trustworthy property managers. I’ve been ripped off by several of them. One of them stole $6,000 from me and claimed she mailed it to me via UPS.
  • Separating fact from bias. Recognizing that whenever you speak to real estate agents or someone referring you to a builder or turnkey provider, there is almost always a commission or referral fee being paid. That financial incentive almost always guarantees a market bias, provider bias, or property bias. I’ve learned to step back, ask questions, and look at “the forest” objectively.


4) What advice do you have for those interested in out-of-state investing?

  1. Educate Yourself
  2. Set Investment Goals
  3. Never Speculate
  4. Invest for Cash-Flow
  5. Be Market Agnostic
  6. Take a Top-Down Approach
  7. Diversify Across Markets
  8. Use Professional Property Management
  9. Maintain Control
  10. Leverage Your Investment Capital

I’ve elaborated on each of these points in my article 10 Rules of Successful Real Estate Investing.

5) Where did you invest?

California, Florida, Georgia, Michigan, Nevada, and the great state of Texas.

Continues success!

I have never worked with a turn key company nor bought out of state but I do intend to buy out of state.

From my research, most turn key companies buy distressed properties, rehab and sell to make a profit. Like any seller, the more they sell for the bigger their profit so it is in their interest to sell at market value. Hopefully you get a great company in it for the long haul, trying to build a excellent reputation and get repeat customers/referrals. That company will buy carefully in the good areas, sell at a reasonable price and carefully screen excellent tenants. There are a lot of ways to take advantage of out of state people and new investors though. Tell them the AVR is high and comp it to properties it is not really comparable too, buy it for dirt in a war zone and tell them its a great neighborhood, subsidize the rent so it looks like it commands a high rent, lipstick rehab, etc.
If you are looking to own a investment property or two then you are best off with researching an excellent turnkey company and buying from them.
If you plan on real estate being your thing and owning a lot of property you should research a market and build a team. This is a much bigger investment of time but the rewards are much higher too. You can find that distressed property, rehab it and have equity right away, refinance and pull that equity out for new acquisitions. Ultimately end up with more properties and feel more secure because you know your market.

Originally posted by Brant Richardson:

From my research, most turn key companies buy distressed properties, rehab and sell to make a profit. Like any seller, the more they sell for the bigger their profit so it is in their interest to sell at market value.

Correct, most of the properties are newly-rehabbed properties. Like any real estate "flipper", their goal is to build in a profit on top of the acquisition and rehab costs and still be able to sell it in a timely manner. That does not mean that you're always paying full market price. A little research and valid comps will show you the true market value. Do your due dilligence.