share your turnkey experiences

91 Replies

i see lots of questions about turnkeys, but very few real-life experiences. (i did find one). So, for those who did buy a turnkey, would you be willing to share your story? Specifically, what did you expect? and how have those expectations correlated with reality?

I have two turn key properties. I bought the first anticipating it to be too good to be true. The process was easy. The company that I bought from arranged everything I needed. It really felt like filling out paper work for money. I put 20% down on a conventional 30 year loan and started collecting rent checks the next month. They had placed a tenant a couple of weeks before I closed.

After six months, I bought another. All in all, it has been a good experience. Both properties cashflow about $300/month which equates to about a 20% cash on cash return. I do nothing. In fact, I have never seen the properties in person.

The only drawback is the management. They take a standard 10% fee, but they also take 200 for resigning a lease or half the rent for finding a new tenant. Not unfair by any means but it does cut in a bit. I bought them freshly rehabbed so any repairs were unexpected.

The real benefit of them has been to get us excited about real estate. When they ran out of inventory, my wife and I started rehabbing and renting properties ourselves. We've done six more in the last 18 months. I credit the inspiration to the turnkey properties. We make a much higher return by ourselves, but it takes plenty of work. Our turnkeys were stupidly easy.

Thanks @Kay Yu

This is a very interesting post. I am looking forward to seeing all of the responses.

Thanks and have a great day.

I was about to post a very similar topic before i found this thread - I'd like to resurrect it.

I have the exact same concern. With the apparent popularity of turnkey rentals - i'm really surprised that I don't find more personal experiences regarding them.

Good topic Kay! And @Jon Gable my guess as to why you haven't seen more on here about turnkey experiences is more of BP investors are flippers and landlords and wholesalers and such. There's a very small niche of us who are the turnkey advocates. There are pros and cons to turnkey or non-turnkey, but for the most part the BP community isn't as much the turnkey folks. Turnkey buyers don't have as much to talk about on forums and such because they don't do much, if anything, on their properties :) Plus in general turnkeys are a bit of a newer concept over the last few years so they are still picking up speed.

It would take a long post from me to cover my whole turnkey experience. I bought my first one three years ago and bought the rest not long after that. I bought when turnkeys were a slightly different breed- there were bad business models out there, there were quirky companies, etc. The buying process for mine were all easy and straight-forward, and I got the product I was hoping for, no question (there's nothing about a turnkey you can't check up on before you buy it). Where things went haywire for me was with bad property managers that came with the properties. They cost me a lot of money. But to be clear, a bad property manager is an independent issue from the turnkey business model. Turnkey is only a method of buying, not of owning. I since changed over management of those properties and they are back to functioning. Those managers also came from the bad turnkey companies, so I rarely see that type of manager come with turnkeys anymore.

I've been heavily involved in turnkeys since I bought mine and I've watched the business models tighten, the bad companies fall out of business, and I've seen a lot of success with people buying. The worst thing I've ever seen happen with an investor who bought a turnkey is there was a delay in getting her first check for a few months due to something quirky with the transfer of the management and checks or something weird. Not sure what it was, but she got paid in full what she was supposed to have received and all has been fine since. The only other thing I've heard of is someone who had a problem with the management company's invoicing system, it was a weird system or something, but that got worked out as well. I don't even work around those companies that those two people bought from as even those experiences are what I would consider to not be up to par for a turnkey experience, and those are really minor problems. Everyone else I've known to buy turnkeys have had the same experience that @Paul Wurster described.

Not sure that totally answers your question but it would take a long post for me to answer in full! But reach out with any specific questions if you have any.

Good luck!

Word. @Ali Boone summed it up nicely.

The TK properties that I bought were also managed by the seller so the customer service has to spread across the full ownership spectrum. He has to do a good job to keep me buying more.

@Paul Wurster where are the TK properties you purchase from this specific seller?

Yep, that makes a big difference- when the property management is tied into the selling side as well. More incentive to perform well.

I have bought 2 turn key properties in Chicago. Neither were from a turn key company... but from rehabbers/flippers. That experience was pretty good, and more similar to a standard MLS transaction

My third experience was with a "turn key" company and that was less than stellar. We just backed out of the deal because the roofs were shot, they had foundation and mold problems, ect. So I would advocate seeing the properties if you are out of state. At least for the first 2 purchsaes.

I'm closing on my third turnkey home in Memphis tomorrow. There are a few companies out there who have the procedure down pat and a few that are not so good.

This last home was set up for turnkey and then the company went under and now I am purchasing the home from the lienholder directly. While I have noticed the quality of the work in this home isn't very good I am purchasing the home at a lower price and will have the property management company fix the issues found during the property inspection. I will still get at least a 13% return on my money after the repairs.

@Paul Wurster

I looked up the homes you own and am curious as to how your experience has been going so far? Have you been getting a lot of vacancy and maintenance or turn over?

Originally posted by @David Hutson :
I'm closing on my third turnkey home in Memphis tomorrow. There are a few companies out there who have the procedure down pat and a few that are not so good.

This last home was set up for turnkey and then the company went under and now I am purchasing the home from the lienholder directly. While I have noticed the quality of the work in this home isn't very good I am purchasing the home at a lower price and will have the property management company fix the issues found during the property inspection. I will still get at least a 13% return on my money after the repairs.

This is a good way to go about investing in turn key. If an investor buys a few properties from a reputable turn key company and wishes to be more hands on after doing so they can start looking at getting better BANG for the BUCK with doing the ground work themselves.

Within a certain time of being invested in a particular area, decent relationships should be established on the ground where maybe a turn key company isn't needed any more.

Thanks for reading and have a great day.

I have to throw in the Bull @@@@ flag here. There are some folks who have done well with turn key models here but it is pure bull to say you have never heard of anyone having a bad experience from a turn key company. If you are going to post at least be honest. I have seen dozens of horror stories on here about turn key companies and I have seen @Ali Boone post on some of those threads. Things like rents artificially high, not being able to rerent at the quoted rents, prices being way higher than the market, war zones, finding out their renters were convicted felons so their renter insurance was useless, houses with horrible defects, there are lots of horror stories.

I wish all the luck to those who buy turnkey, there is a lot of due diligence, but do not believe for a second there are not horror stories out there about shady turnkey operators.

I myself have bought a property that was kind of a turn key, they are not evil but they can be high risk without a LOT of due dilligence.

If the turn key providers want to debate this fact I would be glad to bring bring a moderator or 2 into this thread to help out.

There are several so called turnkey providers in our market that can give legit ones like ours and others a bad rap. Even the best turnkey companies out there I am sure have issues one way or the other.

We even have some issues at times but we will do our best to get the issue resolved and take care of the client.

I've bought 8 properties so far in Indy, all turnkey. So here are my lessons.

1. This is NOT passive investing. Even with a property manager, its a lot of work.

2. Dont do it if all you are going to buy is one or two properties. Much like stocks or any other investment, a single unit is very high risk. But a diversified portfolio will likely give a consistent return. I have had one disaster home out of all of them with a bad inherited tenant and large damages and long vacancy. But even then, I made money on the overall portfolio that year. If it was my only home, I would have lost a ton of money.

3. You need business management skills. It is a business. You need a business plan and strategy. You need good processes for due diligence, managing your PM, accounting etc etc. And things will change. You may change PM/s. You may sell a bad performing home. You need to have good financial skills to analyze your numbers and see whats working and whats not. I do that kind of stuff all day at my day job so I am good at it. It helps a lot.

4. Focus on one or two markets and learn them. Develop the networks of people you trust in those markets. If you do out of state like I do, you need them to be ethical and efficient. I will trade some efficiency for honesty any day though because in the end, you have to trust them.

5. Don't sweat the small stuff. Whether a plumbing repair costs $50 or $100 will not make or break your ROI. Extra turnovers and vacancy will. Focus on the high value factors and optimize those as far as you can.

6. Don't put all your eggs in this basket. I wouldn't make turnkey properties more than 20% of my investment portfolio (i.e my cash in, not value). There are risks, many I don't even know about. Like any investment things can go wrong and I sleep better knowing it won't ruin my life if they do.

But overall I think I can get a solid high return over a 10 year period and so consider this a good strategy, at least for now. Money is cheap, rent ratios are decent and home prices are still low. If any of those factors change, I would stop buying more. No strategy is good at all times. You have to adjust as you go. But for now I am adding to my portfolio.

To be perfectly candid @Curt Davis I have never seen a negative post about your company on BP. I have even seen you post about some offered turnkey properties that I had an interest in that saved lots of folks a possibly bad experience. There are good and bad folks in all professions. Some areas of business are more prone to shady characters because of their nature of working off of trust.

I just did not want what appeared to be a misleading statement about "The worst thing I have ever seen happen with a an investor who bought a turnkey was there was a delay in getting her first check" That is in my opinion an out and out lie. I hate that kind of advertising. Be honest.

I did not in any way want to cast any negative connotation toward you Curt.

I do not even have any reason to think that the turn key operations that Ali is working with are in any way less than great, but sell on the merits of your plan not pie in the sky language that might mislead an unsophisticated Buyer.

Sorry if I went off, but right is right and wrong is wrong.

@Ali Boone

@Jerry W.

@Brianna S.

OK lets come at this from another angle... Lets talk about the Hedge fund effect... It was common place for investors to have to buy from TK companies and their marketing partners ( we know who they are) but with Hedges moving into markets the fix and flippers and turn key guys can now list on MLS and sell direct to Hedges and by pass the west coast marketing companies and do just as well... I fund many of these companies and that is what they are doing in certain markets..

what this has done is cause the TK companies to step up there game.. ( hedges are picky regarding rehab) and then list on MLS .. So those looking of for TK properties. NOw can just go direct and save a lot of money compared to buying through marketing companies. who just tack on their fee on top of the wholesale price.... Rehabbers could not sell their Tk properties on MLS in past years they needed West coast resellers IE Marshall Reddick and all the others radio show reseller gurus. Investors check it out.. Times they be a changing.

@Curt Davis I have had a good experience so far. Less than a month of vacancy on one property. They both started with renters.

Fees are not unreasonable. 10% management. Releasing fees were annoying but not crazy.

They were freshly rehabbed when I bought them and they came with a one year warranty so that has been in check.

I did have a break in and stolen furnace(wtf), but it was most likely the tenant that just moved out.

Most importantly, it was the inspiration and education to start doing this for myself. I make way more by myself. I probably won't buy another TK property, but that is only because I have the team in place to do it myself in a place that I know well. If I couldn't do this, I might consider it again.

I buy local and turnkey. I own properties in Chicago and Indianapolis. @Anish Tolia has some great tips there, and I also believe in geographical diversification (through different sellers). If you get burned in one market, you won't have all your properties there... Just treat real estate like you would with building a stock portfolio.

If you want the full scoop, send me a PM.

@Kay Yu - A timely topic for me, as I am just getting ready to do my first TK investment.

@Anish Tolia - Thank you for sharing your experience and insights

Originally posted by @Curt Davis :
There are several so called turnkey providers in our market that can give legit ones like ours and others a bad rap. Even the best turnkey companies out there I am sure have issues one way or the other.

We even have some issues at times but we will do our best to get the issue resolved and take care of the client.

Great post and agreed,

It is never smooth sailing in real estate and issues will always arise.

Its just a matter of working as a team to resolve them as quickly as possible and accommodating the investor as much as possible.

Most turn key operators will wash their hands as soon as the sale is made and never look back.

I believe a turn key company should always be of service to the investor no matter how long after they have purchased.

If its too much to ask then keep it limited to only a certain amount of properties sold per year and work with only a limited number of investors.

This limit can increase the quality of product and service.

I have seen to many times genuine companies and individuals starting of great with an awesome product and service and after they start building the brand and getting well known they get greedy and it all goes to s***.

As the saying goes "It takes a life time to build a reputation and only 5min to loose it"

Thanks for reading and have a great day.

Originally posted by @Jerry W. :
I have to throw in the Bull @@@@ flag here. There are some folks who have done well with turn key models here but it is pure bull to say you have never heard of anyone having a bad experience from a turn key company. If you are going to post at least be honest. I have seen dozens of horror stories on here about turn key companies and I have seen @Ali Boone post on some of those threads. Things like rents artificially high, not being able to rerent at the quoted rents, prices being way higher than the market, war zones, finding out their renters were convicted felons so their renter insurance was useless, houses with horrible defects, there are lots of horror stories.

I wish all the luck to those who buy turnkey, there is a lot of due diligence, but do not believe for a second there are not horror stories out there about shady turnkey operators.

I myself have bought a property that was kind of a turn key, they are not evil but they can be high risk without a LOT of due dilligence.

If the turn key providers want to debate this fact I would be glad to bring bring a moderator or 2 into this thread to help out.

You're right Jerry to pipe in with a comment like this. For any of us who have been in this particular niche and service for the past 10 years, you realize that there are a lot of misconceptions both good and bad about buying a turnkey model. Which, I think I have said before that I hate the word turnkey because it means absolutely nothing in this space anymore. It is nothing but a marketing term. There is no definition of what it means so the buyer has to really be aware and ask lots and lots of questions before moving forward.

Even the best companies, if they are being honest with you as a consumer, can tell you about investments where something went wrong both big and small and how they handled it. And any company that has been in business for a while will tell you that they have experiences where a client is not 100% satisfied and again, how did they handle it.

It is not so much that there are no problems or that everything is cupcakes and rainbows all the time and I think that was your point. It is much more important that a buyer has eyes wide open when they buy and know that problems will occur - sometimes BIG problems. They simply need to have a high level of confidence that the company/team they are working with will be there to handle those problems and communicate well with them.

Originally posted by @Paul Wurster :

The real benefit of them has been to get us excited about real estate. When they ran out of inventory, my wife and I started rehabbing and renting properties ourselves. We've done six more in the last 18 months. I credit the inspiration to the turnkey properties. We make a much higher return by ourselves, but it takes plenty of work. Our turnkeys were stupidly easy.

This is a really good point and there are a lot of other investors out there who would echo this. Many investors simply want to get started and actually get in the game - so to speak.

I have a client in New Jersey who had purchased multiple courses about "how to" and had created an account here on BP and attended her REIA every month and went to every event. The one thing she had not done was anything related to making money in real estate. She attended an event we had here after a guru would not take her on as a client and recommended that she actually buy TK property first to get started. She bought 3 properties, followed up with buying 3 more and suddenly found the confidence to feel like an investor. She is now wholesaling in her home market, bringing in more active income and actively talks at her local reia. It is amazing how much confidence you can get from simply taking steps to move forward.

@Anish Tolia - Your 6 tips for other TK investors were excellent. As an experienced buyer, there is little you could have said there to be more impactful for a reader. Those were all great tips and spot on. Thanks for sharing.

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