Turn Key Lessons Learned

17 Replies

For those folks who have gone the turn key route, what were the determining factors that guided you to a particular market? Also, were there any lessons learned that you would like to share with a semi-novice investor?

Currently, I find myself looking to expand my small portfolio. All of my properties are single family homes, located within locations I have resided in, and all were built within the past few decades. Yet due to appreciation, it is time to start looking elsewhere and this can be a scary thought at times.

My research has lead me to locations that are far away from my stomping grounds. At the top of my criteria: reasonable ROI, expected appreciation and economic growth. Additionally, I prefer newer development (1990 and newer). So far, I have considered Dallas, Oklahoma City and Indianapolis.

To those brave souls, who have gone the turn key route, how was the experience? Any advice would be greatly appreciated!

Indy seems to be a very popular place for turnkey properties. You can do a search on the forums for the term "turnkey" and some results should jump out at you.

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Have not done any turnkey but i currently own and manage quite a few rentals in the okc metro. been happy with the market here overall. came here from Los Angeles about 7 years ago.

Hi @Sandra Roddy , of the 3 criteria you listed, I would put economic growth or strength at the top. It will drive the other factors. The 3 top things to look for in a market in my opinion are: 1. Population trends, 2. Income growth and 3. Price to rent ratio's. Of course, there are a lot of other things to look at put I see these as the core fundamentals. All 3 of the markets you're looking at are good for different reasons. From a pure cash flow and ROI basis, Indianapolis is the best in my opinion. Dallas and Oklahoma City both have very strong and healthy economies but the price/rent ratios are not as good and Dallas has high operating costs (taxes and insurance) which will compact your ROI. I've been involved with turn keys in Indianapolis for quite awhile and know the market very well. I'm happy to share my thoughts with you. I also have a report on how to choose a market and one on how to buy how of state that I can send you if you'd like.

Thanks to all who have responded. Of the three places I mentioned, Indi and OKC seem to be at the top of the list. Yet, I also like Dallas...but Texas' RE taxes are too much (yet, it can also be a deduction). Ah, the joys of being a REI!!!

@Mike D'Arrigo, I would love to get a copy the report...went ahead and sent you a PM.

Hi @Sandra Roddy My piece of advice would be, if you're going to go the turnkey route, make a trip to whichever market you choose and see the work each turnkey company produces. Pictures don't typically show any cut corners or "bad" work. Once you have seen the work for yourself and chosen a company, you can typically trust any future purchases without having to see them. Yes, it costs money to travel to the market but how much may it cost you if you buy a shoddy turnkey property?

Original post by @Sandra Roddy Yet, I also like Dallas...but Texas' RE taxes are too much

Texas also has some of the highest homeowners insurance rates in the nation. High taxes and insurance really eat in to your cash flow.

When looking at turnkey providers, look for someone with boots on the ground...not just part of a team with boots on the ground but someone who actually lives and breathes that particular market. Look for a provider who has an incentive to perform after the initial sale as too many of these turnkey deals turn into $30k to $60k paperwieghts and then you're stuck. Forget about pictures...get a video of the property with updates as any repair work progresses. Taking these steps will at least minimize your risks.

Indy comes up a ton as a good market for decent returns on lower end properties. Mike has been working there for many years now. Atlanta is also a great place to park if you can partner with the right group. I would also look to some smaller markets. We have almost 100 renovated and rented properties coming into inventory that will sell in the $35k to $60k range, some with owner financing. Most are rented Section 8. These are all coming from smaller markets in GA with very good returns and are rented single family...not the normal shared housing route that we usually go.

If you are facing higher prices in your local markets....turnkey is a great way to go.

@Sandra Roddy one of the things I did was network through BP for people who lived in the area of where I wanted to buy. They could tell me more about my location on a property, ie good or bad location in a few minutes. It would have taken me weeks or months to learn that on my own if I went there in person. it was a huge help. That means you you do not have to trust the turn key provider so much.

@Sandra Roddy

Hi Sandra,

Being a turn key provider myself and having bought many turn key properties while I was still living overseas I always stress to anyone considering buying turn key to make sure that they establish relationships with people on the ground that have the investors best interest at heart.

No matter how long it takes.

Having great property management is also vital.

Thanks and have a great day.

I've always been a turnkey buyer and I totally agree with @Mike D'Arrigo on his ordering of the buying criteria. Your list works as well as long as you count cash flow and economic/population growth as being equals as far as importance. I think a consistent growing trend is a requirement, and then appreciation/growth potential is an option. I always shoot for both personally. For myself I vote against buying in declining markets (like Detroit), which is why I say the growth and then I do prefer to buy in markets with more upside potential. I prefer new properties as well, as you suggested.

Indy is great but it has a lot less upside potential. It's a very stable market, which means it shouldn't depreciate much, but on the flip side isn't expected to appreciate much either. A lot of people like that stability though and the cash flow can be nice. The properties tend to be older though. Dallas is the opposite where the upside potential is huge but the cash flow is less. I'd be totally fine sacrificing some cash flow for such a big amount of growth potential but Dallas is really struggling for inventory right now. Although there is still some. I don't know anything about OKC.

Hey @Sandra Roddy . Of your criteria for purchasing, I was going to caution you that the criteria you listed were all mostly economic. Many have already told you that the team you build or purchase from is important. To me, after the economic outlook for the future of the market, the team is most important. Long before looking at possible ROI in a market. Your return is going to be greatly effected by the team you choose to work with. How well they renovate a property as well as finding out if they defer maintenance as a way to hold down your entry costs. If they defer maintenance and renovate poorly, then a market presenting a great ROI can end up being a disaster. Same goes for the property management.

Really good renovations coupled with really good property management can extend the working life of a property as well as occupancy. It can also hold down routine maintenance as well as improvement costs after move-out. All of those issues directly effect the ROI of an investment regardless of how good the market is or isn't.

As for those markets, You can find good and bad in all of them. You can also find good and bad in Jacksonville, FL., Memphis, TN., Louisville, KY., Houston, TX. and Kansas City. All of them have good companies operating in those cities. I personally do like Texas. The operating costs are higher, but so far we have found that the rents are stronger and the length of stay (from our experience so far) is just as long in Dallas as it has been in Memphis.

Even with those higher costs - good quality homes with good quality renovations and property management will be better investments than properties that look like they should have a really strong ROI but have poor teams in place. Market and market characteristics are very important, but I think the way a team you choose performs daily is much more important and should be high on your list.

This post is great! Thanks everybody for your insightful comments on turn key lessons!

After been on BP for a few days, I have started thinking about investing in Indianapolis as I have read so many good things about that area! 

@Mike D'Arrigo   Would you also be willing to share with me those reports and some of your thoughts about Indianapolis? Many thanks

@Sandra Roddy and

@Alejandro Lisson Ramirez  

I think the most important aspect of turn key investing is to have someone local who you can trust as your boots on the ground.  Someone who doesn't work for any one particular turn key company in particular, but rather someone who looks to serve your interest.  

I agree with Sandra when she calls out of state investors brave souls.  I can't imagine doing it without having boots on the ground locally.

@Sandra Roddy @Ben G. @Alejandro Lisson Ramirez @Chris Clothier @Ali Boone @Engelo Rumora @Jerry W. @Andy Luick @Mike D'Arrigo @Eric Black  Like Alejandro, I would like to thank all of you for passing down your knowledge gained from years of experience on how to buy turnkey!!!!! And I would like to thank Sandra for starting the post.  Thank BP community for helping me to fast track to my goals.

Originally posted by @Lisa Mauritis:

@Sandra Roddy @Ben G. @Alejandro Lisson Ramirez @Chris Clothier @Ali Boone @Engelo Rumora @Jerry W. @Andy Luick @Mike D'Arrigo @Eric Black  Like Alejandro, I would like to thank all of you for passing down your knowledge gained from years of experience on how to buy turnkey!!!!! And I would like to thank Sandra for starting the post.  Thank BP community for helping me to fast track to my goals.

Pleasure Lisa,

Have a great day.

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