Advice for Military Member interested in a Turn Key solution

13 Replies

Hello Bigger Pockets!

I'll cut right to the chase so here are the facts:

  • I am in the Coast Guard.
  • I have one rental in the State of Maine for the past 1 1/2 Years which used to be my primary residence.  I have been doing well and the experience has been great.
  • I now live in NJ.
  • I have no debt other than the mortgage on the rental, and I have disposable income to invest.
  • I have no qualms with being an Out of state Land Lord, what matters to me is a good opportunity.  Anything I buy will end up being out of state in time due to Transfers.
  • I want to utilize the buy and hold method as the primary way to invest, but I am open minded.
  • I would like to purchase properties in the 30K-60K price range... for now.
  • My skill set is in the Electrical field.

Those are the facts about my situation, so here is my Question:

     Moving every 2-4 years has certain disadvantages to the game of Real Estate.  To overcome these disadvantages I have been looking into Turn-Key solutions.  What advice can the community throw my way to help overcome the biggest challenges I have?

  1.              1. What markets do you recommend?  The reality is my fishing net is pretty wide.  I am not tied down to any one place.
  2.              2.  Should I even use Turn-Key?  It seems to be heavily debated.
  3.              3.  Building trust and finding a good property manager.  I know they are not all bad, does anyone have suggestions.

I know that my fishing net is too wide, but because of my circumstances, i am starring out into an ocean of opportunities and need to narrow it down to only one fish.

Thank you in advance, and I am appreciative of all and any advice.

Brandon

Hey Brandon.

I'm down here on the MS Gulf Coast.  Former military myself.  Here I deal with a lot of military personnel.  We have Keesler AFB Biloxi, NCBC & Coast Guard station in Gulfport, Camp Shelby, Veterans Hospitals, NASA.etc. 

We are also a good market to own properties in to service what I consider the best tenants available....Armed Service Members. 

My contact is below.  I have many military clients and tenants as of now, so I would be happy to have an in detail discussion with you.  Odds are I've probably answered your questions before.  Feel free to hit me up anytime.

Andries

@Brandon Tahincioglu   there are tons of people out there who offer turnkey properties in just about every market.  I've purchased only turnkey out of state properties in multiple markets in my investment career.  I think finding people you trust is extremely important.  A good way to build trust is asking a lot of questions, listen for fishy answers or people trying to side step certain questions.  And as far as finding a market, I suggest you look at anything you can get your hands on.  Create your own pro forma, don't use the returns provided by a seller, and analyze the properties yourself.  Also set your investment criteria, do you want old properties that have been rehabbed, or brand new properties?  And what kind of area do you want to be in, class A or class C?  This should get you started.

Hi Brandon

When your always on the move it maybe a bit difficult to manage a career such as this one. But I think it depends on which strategy a person uses. There are more than one way to win in this industry. So by you travelling as much as you do, I believe one solution is to flip houses as soon as you can. Maybe you can hire a little assistance or research how to do it on your own. A great book that teaches on how to buy houses for dirt cheap and flip in 90 day. 

I don't think it's too wide at all. Here's my answers to your questions:

  1. 1. What markets do you recommend? The reality is my fishing net is pretty wide. I am not tied down to any one place.
  2. Trenton and Philly are great and close to you being in NJ, Birmingham is growing fast as a turnkey market, Houston, Chicago, Indy
  3. 2. Should I even use Turn-Key? It seems to be heavily debated.
  4. It's all I've ever used and all I plan to use. I love it. The debates are mainly between people who are trying to value-add to their properties by rehabbing or whatever (basically DIY options) and don't mind working on their properties. Turnkeys are best for people who don't want to work on their properties, or can't due to other obligations or location. Turnkeys are great opportunities for the people that they fit the needs of, which is not everybody.
  5. 3. Building trust and finding a good property manager. I know they are not all bad, does anyone have suggestions
  6. Turnkey PMs are typically more reliable in general than the general population of PMs. There are non-turnkey PMs who are good, but it takes awhile to find them. The reason turnkey PMs are often better in general is because them performing well is imperative for the turnkey seller's company to survive. If a turnkey company has a bad PM in place, their buyers will get hosed and never buy from them (the sellers) again. And because the profit margin is so low with PMs, it causes PMs to oftentimes be kind of the bottom of the barrel of people, but the turnkey companies make money not just from PM fees, so that opens a lot of doors.

Medium hipsterinvestment logo black300dpiAli Boone, Hipster Investments | [email protected] | 310‑957‑2101 | https://goo.gl/x52ZKJ | CA Agent # 01911993

@Brandon Tahincioglu hello fellow Coastie.

You are wrong on a few points. Moving every few years is actually an advantage as an investor. You can take full advantage of VA or FHA loans as an owner occupant. Keep those mortgages on when you leave and rent it out, then move on to the next place. Look at 2-4 families that need a little
Work but are mortgageable within commuting distance of your station. Why drop your savings into a turn key that you probably won't be able to vet properly?

Make the sacrifice. Live cheaply in an area that has smaller multi families available. Or at least a single fam with a rentable basement or something. Rent out the extra bedrooms to your shipmates.

When you move on to the next duty location repeat the process and keep the prior home as cash flow.

Brandon

I am in a similar situation. I am active duty Army. When I started looking at real estate I quickly realized nothing I buy will be local. Accepting that anything I would be doing would be out of state opened the entire country up for opportunities. The first thing I did was to decide how I wanted to protect myself. I recognized I was taking a risk and was willing to loose the money I invested but did not was a catastrophe to affect everything else's I have accumulated. I chose the creation of LLCs to hold the properties. I then started working to identify what I was comfortable with. I understand single family residences so this was what I looked at. I then read a lot about areas that are growing and investor friendly. I then looked for individuals in those areas that I felt comfortable working with. I ended up investing in Memphis and Cleveland because of those relationships. 

Stephanie

@Brandon Tahincioglu  - So to potentially solve your problem, but not answer your actual question: Have you considered partnering with someone that does live in the area? You might get a bit more upside, with all of the other turnkey benefits. The downside is depending on the partnership, you may have to front more capital in the partnership. Though that may not necessarily be a bad thing. 

Scenario: you partner with a rehabber, you bring the capital and shoulder the financial risk, they do the work. 1 year later, do a cash out refi, you get a good chunk of your capital back (say 80%, maybe more, depending on the structure), and now you've got your "turn key property" managed by someone else with skin in the game.

I want to thank everyone for the very informative information.  It is very much appreciated, and i will use that info moving forward.  Thanks again

Brandon

@Brandon Tahincioglu , I agree with @Drew Vukov . Use your VA loan to buy in each duty station and rinse and repeat with each move. Buy near bases where military demand is high and you have good connections. You can add another rental with disposable income if you like.

@Brandon Tahincioglu  what are your specific concerns about using a turn-key company in your case? As my follow Philadelphian @John Matthews   suggested, a private partner who could co-invest and handle the on the ground management piece for you might be a good solution, if you can find the right partner. I have worked partners who wish to invest in rentals, but have neither the time nor the inclination to do the legwork. I've done all the work to locate, renovate, and rent out, and manage new units, with an agreement in place on splits of the net profits. This has worked out well for them because they've made good returns, and avoided the concerns around turn-key companies as well as the numerous not so glamorous aspects of rental business, such as responding to complaints about clogged plumbing. Feel free to PM me if you're interested to know anything more about how I've been structuring this and what these deals have looked like in the past.

My husband is active duty military (Navy). We have done very well turning this transient lifestyle into a great thing. We buy houses at every duty station that it makes sense. This is awesome because you can buy house for 0%(VA) to 5% (conventional down). While they are always personal properties they are bought to be good investments. So we buy rentals that we anticipate living in. While they don't cash flow "tons" because they are highly leveraged you can see great cash on cash returns. We buy in every town and plan on eventually when we retire in 15 years selling them and using the equity to buy in one area. Till than we are "gathering" houses.

We also buy pure properties with 15-25% down. These are located in various areas that make sense. These interest rates are higher and require more down.

I had the amazing opportunity to discuss our business model on podcast 103. For us transient has turned into a great rental strategy.

@Brandon Tahincioglu  

Turnkey is always an interesting option.  The main thing to keep in mind with a TK solution is that they own the property they are trying to sell you, and don't have to represent your best interest.  You will generally pay top of the market, if not over market value for TK solutions.  Find an agent in the area to run unbiased comps for you on any turnkey property your looking into.  

It is better to buy a property for 80k, have a PM company in place that can get 5k-10k worth of work done for you, then pay 110k for the same property.  On your end, similar workload, but your in a much better equity position when the time comes to cash in.  

I work with investors in the Cleveland area, happy to share what I am seeing going on in Cleveland if it is an area of interest for you.  

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