Turnkey Properties Worth it & why?
New to Real Estate · NJ (new jersey) · Member since 2019 · 75 posts · 41 votes
Turnkey Properties Worth it & why?
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Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
2yQuote from @Jonathan Rivera:
As an out of state investor, my goal is to purchase properties long term for cash flow to start off. I know there’s pros & cons against this turnkey strategy.
For me i personally felt since I'm investing remotely, cutting out the rehab part, dealing with contractors would be less of a headache going into my first rental.
I also understand that I won’t have any appreciation to start off or built in equity.
I just need some advice here regarding turnkey properties and the best way to go about it.
To me I feel like this can be a smart move starting out until get comfortable in the market I’m in & I’m able to build connections overtime and eventually I can really do the whole BRRRR strategy.
Please let me know your thoughts whether it’s good or bad. Peace ✌🏻
Traditional turnkey refers to someone else doing a BRRR (R) for you - except the refinance: that's you buying it. Subpar work and poor tenant screening are common, unfortunatley.
But I think you are referring to buying a move in ready property, which is what I have been doing lately - instead of BRRRRs, which were our main strategy did for a decade. Our market is so tight that getting 20k doscount for a property that needs 50k of work does not make sense to me. Inventory is so low in Milwaukee, that sellers don't need to give much of a discount. Some first time home buyer with overoptimistic DIY skills and a gross underestimation of how to fit 500 man hours of rehab into a few weekends will pay list price.
So we have bought properties that are really well taken care of by a long term owner and need minimal work before being put in service. We typicall upgade lighting by popping in recessed LEDs on dimmers where previously lamps on switched outlets were used, maybe some paint or LVP, but usually not much. Instead of 6 months of work and holding cost we have it rented in 2 weeks and I let apprciation generate the equity, which is frankly something we did not have much of in the past. BRRRR was the way to get equity.
I still try to get a good deal. We look for things like overpriced listings that sit or deals that fell through before on financing. Sellers sometimes have a nightmare experience with a shakey buyer - we come in with a no-contingecy offer and that's attractive to a seller, who has been burnt before and just wants it to be over with. You also have to finance only once, with a BRRRR you typically finance twice (or all cash up front).
Finally Rent. We are very picky with tenants and we can be, because we offer a premium product and will usually find a tenant to match. We put probably as much effort into screening tenants as we put in finding the property. If you think about it the tenant is the real cash flowing asset.
23 Replies
- 2yAndrew BoscoBusiness MemberRental Property Investor · NH · Member since 2023 · 448 posts · 421 votes
I like turnkey for house hacking. To live rent reduced, net 0 or potentially cash flowing positive is attractive so I can focus on other things. You will pay a premium, but stabilization is good. For some, stabilizing a property and learning the rental path can be difficult in tandem, so for house hackers I say go turn key. Turn key also works for investors that are absentee if their goal is to park money/defer on taxes. It just depends on your strategy.
Andrew Bosco - Candor Investment Group532 Reviews - Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes2y
Hey Jonathan, I'm personally not a fan of the turnkey model. It's just not for me and my goals.
You hit the nail on the head... there's no equity when you buy like this and you're paying up for convenience. But if you understand that going in and it works for you, it can be a solid way to get started.
I do BRRRR's in Detroit from California and have a great team there that I work with. I prefer this model because you're forcing equity and creating wealth from the start.
- 2yJoey BanasihanPro MemberInvestor · Boise, ID · Member since 2019 · 238 posts · 189 votes
Hey @Jonathan Rivera, I agree with some of the points mentioned, losing equity for convience and cash flow, with your goals wanting to scale may not be the most adventitious. Cash flow is great, do not get me wrong, but its much harder to leverage $300 dollars a month on cash flow than it is to leverage 6% appreciation. There are folks who do turnkey differently (including us) where the headache of project management, finding tenants, and all of that stuff is taken care of without paying extra fees. But at the same time, some folks need the stabilization and security that turnkey models provide in order to get started.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes2y
Quote from @Jonathan Rivera:
As an out of state investor, my goal is to purchase properties long term for cash flow to start off. I know there’s pros & cons against this turnkey strategy.
For me i personally felt since I'm investing remotely, cutting out the rehab part, dealing with contractors would be less of a headache going into my first rental.
I also understand that I won’t have any appreciation to start off or built in equity.
I just need some advice here regarding turnkey properties and the best way to go about it.
To me I feel like this can be a smart move starting out until get comfortable in the market I’m in & I’m able to build connections overtime and eventually I can really do the whole BRRRR strategy.
Please let me know your thoughts whether it’s good or bad. Peace ✌🏻
You have the potential to earn more money if you do the rehab, source the contractors, determine the ARV etc.....You also have a higher risk of failure. It's really up to you, your skills, and your risk tolerance.
- Real Estate Broker · Jupiter · Member since 2024 · 10 posts · 4 votes2y
I think there are property types for every investor. Yes, rehabbing does add some "built-in" equity, but you also are losing out on cash flow due to vacancy in your home. Also, in order to rehab you need to have cash upfront which is hard for a lot of people to do. In your case, you have a long-term approach to investing, so you will be able to capture equity anyway. Like you said though, there are pros and cons to every strategy.
- Memphis, TN · Member since 2021 · 82 posts · 37 votes2y
@Jonathan Rivera Going turn key is a great way for out of state investors who want to invest somewhere outside their market. Also it's a great way to diversify your portfolio. There are some great companies on this website who specialize in that industry and who do all of the heavy lifting for you. Please feel free to message me if you want any additional information.
- 2yAlan AsriantsBusiness MemberReal Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
All depends on what kind of deal you are getting. You have to consider that turnkey will usually mean less investment up front (down payment + renovation costs) but lower cash flow.
Its a trade off compared to buying something that needs work - this would require a larger up front investment for a larger cash flow
Its not a good or bad strategy, its more about what is more important for you right now. What is more important is the area and what kind of property you invest in.
A fully renovated turnkey property in a D class area is not the same thing as a full gut in an A class area.
Look at your location first. I would always recommend buying in a better area. Once you know your location, understand what properties are selling for and see if you can afford the turnkey ones.
Investing in a Turnkey property in a solid B-A area will be one of the safest plays as an out of state investor IMO
Alan Asriants - New Century Real Estate 592 Reviews - 2yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
@Jonathan Rivera we've taken over management of 100s of supposedly turnkey rental properties.
Two biggest issues:
1) Turnkey PM sevices were terrible, hence why we got hired.
2) We do a TakeOver Evaluation Video that ALWAYS shows subpar turnkey work and not uncommon to find work that was never done.
So, we recommend owners find a beatup property and have it renovated themselves. Then you KNOW what was/wasn't done and how well it was done. Mant PMCs offer this service.
We have seen a few turnkey companies that provide pics/videos showing the work being done to PROVE what they did and the quality - at different stages of the work (not just at completion).
You would also want to DEMAND similar proof of anyone you hired to rehab a beatup purchase.
Let us know what other questions we can answer.
Logical Property Management4.9459 Reviews - 2yAlecia LovelessPro MemberMember since 2019 · 3k+ posts · 2k+ votes
@Jonathan Rivera I typically buy properties that could at least at some point use some love to get them to their best potential. Whether that’s when I buy them or as each tenant moves out just varies from property to property.
If I came across a turn key property that checked my boxes I wouldn’t hesitate to buy one. I did buy one two years ago and then ended up selling it due to a problem I could not solve with it. But it cash flowed great! Turn key is just not where I’m making the most bang for my buck currently.
I can see how starting out and learning the business and building your team and developing your systems this could make a lot of sense. Most likely you will just have a higher price point of entry and possibly a lower cash flow starting out. Depending on your neighborhood your equity growth may be quite solid.
Best of luck!
- New to Real Estate · NJ (new jersey) · Member since 2019 · 75 posts · 41 votes2y
Quote from @Andrew Bosco:
I like turnkey for house hacking. To live rent reduced, net 0 or potentially cash flowing positive is attractive so I can focus on other things. You will pay a premium, but stabilization is good. For some, stabilizing a property and learning the rental path can be difficult in tandem, so for house hackers I say go turn key. Turn key also works for investors that are absentee if their goal is to park money/defer on taxes. It just depends on your strategy.
Yeah, I wouldn’t do it for house hacking only bc I would investing out of state and wouldn’t be able to live in the property. I personally just felt a little worried dealing with a rehab living out of state vs just buying something ready to go
- New to Real Estate · NJ (new jersey) · Member since 2019 · 75 posts · 41 votes2yThank you! I would definitely like to connect to get more info on the out of state investing
Quote from @Travis Biziorek:
Hey Jonathan, I'm personally not a fan of the turnkey model. It's just not for me and my goals.
You hit the nail on the head... there's no equity when you buy like this and you're paying up for convenience. But if you understand that going in and it works for you, it can be a solid way to get started.
I do BRRRR's in Detroit from California and have a great team there that I work with. I prefer this model because you're forcing equity and creating wealth from the start.
- Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes2y
Quote from @Jonathan Rivera:
Thank you! I would definitely like to connect to get more info on the out of state investingQuote from @Travis Biziorek:
Hey Jonathan, I'm personally not a fan of the turnkey model. It's just not for me and my goals.
You hit the nail on the head... there's no equity when you buy like this and you're paying up for convenience. But if you understand that going in and it works for you, it can be a solid way to get started.
I do BRRRR's in Detroit from California and have a great team there that I work with. I prefer this model because you're forcing equity and creating wealth from the start.
For sure. Just hit you back!
- 2yGarrett CrosbyPro MemberReal Estate Agent · Los Angeles, United States · Member since 2021 · 392 posts · 163 votes
Hey @Jonathan Rivera!
I absolutely love my out of state situation. About 6 years ago I started developing relationships with agents and prospecting out of state markets to find the best possible deals and cash flow. Many mistakes later I landed in North Carolina and developed some great relationships with a group of different people (agents, lenders, contractors, property managers, etc.) Since then I’ve bought a number of properties. I started with turnkey buy and holds and then moved to distressed buy and hold fixers. As I built relationships and confidence, I started flipping properties as well.
I personally love my turnkey properties. They cashflow about 400-600 each for me. I picked a location that is nearly economy-proof since it predominantly houses military families. And best of all, because of this reason, I’ve never had an issue with collecting rents or vacancies thanks to the location.
It really comes down to the location, the team you assemble and your research.
Happy to talk to you if you have any questions about this! :)
- 2yWale LawalBusiness MemberReal Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
Investing in turnkey properties as an out-of-state investor can indeed offer several benefits, especially in terms of convenience and reduced management responsibilities. Here are some considerations and tips to help you make the most of your turnkey investment strategy:
Pros of Turnkey Properties:
Ready for Rental: After refurbishment, turnkey homes are usually ready for occupancy right away, saving you the time and hassle of doing repairs and improvements.
Professional Management: A lot of turnkey companies provide property management services, taking care of tenant selection, rent collecting, upkeep, and other daily tasks on your behalf.
Passive Income: Investing in a turnkey property allows you to immediately begin earning rental income without having to take on major maintenance or remodeling tasks.
Tips for Investing in Turnkey Properties:
Take some time investigating turnkey suppliers in-depth and select reliable businesses who have a proven track record of effective property management and satisfied clients.
Make sure you have done your research about the property, its surroundings, the nature of the rental market, and its potential for long-term income flow.
Analyze the financials of the turnkey property.
Even though turnkey homes can generate rental revenue right now, think about your long-term investing objectives and plan.
As an out-of-state investor, investing in turnkey properties can be a realistic way to increase your real estate portfolio and generate passive income if you do your homework, weigh the pros and cons, and match your investment plan with your long-term objectives.
NETWORTH BUILDERS5237 Reviews - 2yEngelo RumoraBusiness MemberInvestor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
Quote from @Jonathan Rivera:
As an out of state investor, my goal is to purchase properties long term for cash flow to start off. I know there’s pros & cons against this turnkey strategy.
For me i personally felt since I'm investing remotely, cutting out the rehab part, dealing with contractors would be less of a headache going into my first rental.
I also understand that I won’t have any appreciation to start off or built in equity.
I just need some advice here regarding turnkey properties and the best way to go about it.
To me I feel like this can be a smart move starting out until get comfortable in the market I’m in & I’m able to build connections overtime and eventually I can really do the whole BRRRR strategy.
Please let me know your thoughts whether it’s good or bad. Peace ✌🏻
Hey mate,
IMO it's very difficult to invest out of state and buy, fix and manage unless you are buying turnkey.
"When the cat leaves, the mice will play"
As an out of state investor, the mice are always playing.
It takes years and years to develop trustworthy relationships with feet on the ground.
Even then, you will loose money just like we do to this day in Toledo to shady contractors, etc...
And we have a whole team of people on the ground including myself and my co-founder.
Granted, if you do it right you can find amazingly cheap deals, renovate and have immediate equity plus jaw dropping cashflow.
I would advise moving to the market you are considering and getting your hands dirty for a few years.
Easier said than done but if I moved from Sydney, Australia to Toledo, Ohio.
Anyone can do the same lol
Wishing you much success
- Investor · NJ · Member since 2022 · 155 posts · 224 votes2yIf you're interested in new construction out of state, you most certainly can have built in equity with turnkey. That's how I did it. I'm from Jersey too Jonathan, hit me up if you want to get some ideas.
Quote from @Jonathan Rivera:
As an out of state investor, my goal is to purchase properties long term for cash flow to start off. I know there’s pros & cons against this turnkey strategy.
For me i personally felt since I'm investing remotely, cutting out the rehab part, dealing with contractors would be less of a headache going into my first rental.
I also understand that I won’t have any appreciation to start off or built in equity.
I just need some advice here regarding turnkey properties and the best way to go about it.
To me I feel like this can be a smart move starting out until get comfortable in the market I’m in & I’m able to build connections overtime and eventually I can really do the whole BRRRR strategy.
Please let me know your thoughts whether it’s good or bad. Peace ✌🏻
- New to Real Estate · NJ (new jersey) · Member since 2019 · 75 posts · 41 votes2ySent you a message thanks
Quote from @Bernard Joseph S.:
If you're interested in new construction out of state, you most certainly can have built in equity with turnkey. That's how I did it. I'm from Jersey too Jonathan, hit me up if you want to get some ideas.Quote from @Jonathan Rivera:
As an out of state investor, my goal is to purchase properties long term for cash flow to start off. I know there’s pros & cons against this turnkey strategy.
For me i personally felt since I'm investing remotely, cutting out the rehab part, dealing with contractors would be less of a headache going into my first rental.
I also understand that I won’t have any appreciation to start off or built in equity.
I just need some advice here regarding turnkey properties and the best way to go about it.
To me I feel like this can be a smart move starting out until get comfortable in the market I’m in & I’m able to build connections overtime and eventually I can really do the whole BRRRR strategy.
Please let me know your thoughts whether it’s good or bad. Peace ✌🏻
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes2y
Quote from @Jonathan Rivera:
As an out of state investor, my goal is to purchase properties long term for cash flow to start off. I know there’s pros & cons against this turnkey strategy.
For me i personally felt since I'm investing remotely, cutting out the rehab part, dealing with contractors would be less of a headache going into my first rental.
I also understand that I won’t have any appreciation to start off or built in equity.
I just need some advice here regarding turnkey properties and the best way to go about it.
To me I feel like this can be a smart move starting out until get comfortable in the market I’m in & I’m able to build connections overtime and eventually I can really do the whole BRRRR strategy.
Please let me know your thoughts whether it’s good or bad. Peace ✌🏻
Traditional turnkey refers to someone else doing a BRRR (R) for you - except the refinance: that's you buying it. Subpar work and poor tenant screening are common, unfortunatley.
But I think you are referring to buying a move in ready property, which is what I have been doing lately - instead of BRRRRs, which were our main strategy did for a decade. Our market is so tight that getting 20k doscount for a property that needs 50k of work does not make sense to me. Inventory is so low in Milwaukee, that sellers don't need to give much of a discount. Some first time home buyer with overoptimistic DIY skills and a gross underestimation of how to fit 500 man hours of rehab into a few weekends will pay list price.
So we have bought properties that are really well taken care of by a long term owner and need minimal work before being put in service. We typicall upgade lighting by popping in recessed LEDs on dimmers where previously lamps on switched outlets were used, maybe some paint or LVP, but usually not much. Instead of 6 months of work and holding cost we have it rented in 2 weeks and I let apprciation generate the equity, which is frankly something we did not have much of in the past. BRRRR was the way to get equity.
I still try to get a good deal. We look for things like overpriced listings that sit or deals that fell through before on financing. Sellers sometimes have a nightmare experience with a shakey buyer - we come in with a no-contingecy offer and that's attractive to a seller, who has been burnt before and just wants it to be over with. You also have to finance only once, with a BRRRR you typically finance twice (or all cash up front).
Finally Rent. We are very picky with tenants and we can be, because we offer a premium product and will usually find a tenant to match. We put probably as much effort into screening tenants as we put in finding the property. If you think about it the tenant is the real cash flowing asset.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes2y
The chicken or the egg of the real estate world. This question will live on forever.
In terms of house hacking, I prefer turnkey. Being able to live rent reduced, net 0 or potentially cash flow positive is appealing to me so that I can focus on other things. The cost of stabilization will be higher, but the benefits will be greater. For some, stabilizing a property and learning the rental path can be difficult in tandem, so for house hackers I say go turnkey. Turnkey also works for investors that are absentees if their goal is to park money/defer on taxes. It just depends on your strategy.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Marcus Auerbach:
Quote from @Jonathan Rivera:
As an out of state investor, my goal is to purchase properties long term for cash flow to start off. I know there’s pros & cons against this turnkey strategy.
For me i personally felt since I'm investing remotely, cutting out the rehab part, dealing with contractors would be less of a headache going into my first rental.
I also understand that I won’t have any appreciation to start off or built in equity.
I just need some advice here regarding turnkey properties and the best way to go about it.
To me I feel like this can be a smart move starting out until get comfortable in the market I’m in & I’m able to build connections overtime and eventually I can really do the whole BRRRR strategy.
Please let me know your thoughts whether it’s good or bad. Peace ✌🏻
Traditional turnkey refers to someone else doing a BRRR (R) for you - except the refinance: that's you buying it. Subpar work and poor tenant screening are common, unfortunatley.
But I think you are referring to buying a move in ready property, which is what I have been doing lately - instead of BRRRRs, which were our main strategy did for a decade. Our market is so tight that getting 20k doscount for a property that needs 50k of work does not make sense to me. Inventory is so low in Milwaukee, that sellers don't need to give much of a discount. Some first time home buyer with overoptimistic DIY skills and a gross underestimation of how to fit 500 man hours of rehab into a few weekends will pay list price.
So we have bought properties that are really well taken care of by a long term owner and need minimal work before being put in service. We typicall upgade lighting by popping in recessed LEDs on dimmers where previously lamps on switched outlets were used, maybe some paint or LVP, but usually not much. Instead of 6 months of work and holding cost we have it rented in 2 weeks and I let apprciation generate the equity, which is frankly something we did not have much of in the past. BRRRR was the way to get equity.
I still try to get a good deal. We look for things like overpriced listings that sit or deals that fell through before on financing. Sellers sometimes have a nightmare experience with a shakey buyer - we come in with a no-contingecy offer and that's attractive to a seller, who has been burnt before and just wants it to be over with. You also have to finance only once, with a BRRRR you typically finance twice (or all cash up front).
Finally Rent. We are very picky with tenants and we can be, because we offer a premium product and will usually find a tenant to match. We put probably as much effort into screening tenants as we put in finding the property. If you think about it the tenant is the real cash flowing asset.
this has been the West coast strategy for decades and it works.. At the least an OOS investor should go and check out neighborhoods and meet with potential PM's before investing a single dollar.
the turnkey concept works for some but more threads on BP talk about missed expectations from the turnkey operators.
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