Does anyone own Four or more Turnkeys?

64 Replies

I was reading BP Brandons latest turnkey blog post and there were just a couple comments. I know there are some bpers into turnkeys but when you check they only have 2 or 3 turnkeys tops...even with the bp folks who are the biggest advocates...they don't have more purchased.

It seems odd as it gets a lot of attention but when you start to pull back the layers....well it is like the Wizard of Oz...just one guy behind a curtain making a lot of noise. 

Now I am talking about from a traditional TK company, I was curious is there anyone on BP who has bought four or more?

How many? 

What is your longest hold time?

Thanks!

I wonder whether someone who invests primarily in turnkeys, has found success in doing so, has no real desire to try any other form of real estate investing, and isn't a marketer, would tend to frequent sites such as BP.

@Matt R.  

  from every post I have read from Ali Boone she ONLY buys turn keys and only invests out of state maybe you can ping her and see how many turn key's she actually owns. form her post it sounds like she probably owns quite a few.. unless she is talking about the same one she may or may not own,, and talking about it over and over.  :)

But good question all in all. I think one restriction folks have these days which may keep the numbers down is the issues with getting more than 4 mortgages.

@Jay Hinrichs  , I know you know this.

@Matt R.  

I don't view the 4 mortgage overlay as that big of a problem.

After you get 4 in your name, you get 4 in wife or partners name.

Not all banks do the 4 mortgage overlay, FNMA is actually 10, so substitute 10 for 4 in first two paragraphs above.

Then you get portfolio mortgages, was just pitched one recently for 5% interest at 80% LTV. No limit here since no sold on secondary market could have 100 or more if you wanted.

Then there's private financing, seller financing, etc.

Turnkeys from my short experience, are just short of a scam in most cases.

We got one guy on here from indianapolis , that lies about the location(saying it's irvington,when it's not)  Then lies about the numbers, and using numbers that are high on rents for the area, and low on expenses. The houses are almost always in dumpy areas. He goes in and purchases the dump for 20k, puts 10k into it, on a crappy rehab, then sells it for $60k to an out of state buyer.  With an inflated cap rate.

I don't see myself buying a turnkey in the near future.

@David Krulac  

I know lending is regionalized our portfolio lenders ( Oregon) will not generally lend to anyone who does not reside in the community.. Same with some of the Deep south markets I have played in and Charleston SC were I am working right now... I definitely see these types of facilities available to locals investors though. once you go over the 4 loans sometimes cash reserves that are required hinder borrowing ability.. However if your buying good enough deals there are as you say private lenders that will let you roll up your portfolio.. There are a few in the Mid west I am acquainted with. rates are more in the 8 to 9% range.. But they are fully amortized and if your buying a low value 3 to 5% rule you can handle 9% compared to 5% with no difficulties whatsoever... your just paying a little extra for opportunity costs.... When I built my portfolio up to 350 SFR's I did it all with private money and we were paying 9% we could do that because of course we actually sourced and did our own rehab.. Turnkey of course will be a little more on the PP side simply because someone is doing it all for you and they deserve a profit for their efforts just like a home builder or contractor etc. Also for bigger players you have B2R and colony funding who are making in roads into the space.. Although they tend to be loan to cost lenders not ARV and so one would need some serious cash into the deals to pull off their financing.

@Gabe G.  

  I have seen that show so many times over the years.. its why its critical to use due diligence in markets your not familiar with..  ON the flip side your perspective is as a local

just like @David Krulac   you guys will never pay what a west coast turn key buyer pays.. because you are the middle man or the developer.. Its one of the great things about the markets you play in .. almost inexhaustible inventory  competition not nearly as keen as it is say on the west coast. 

However for those In SoCAL they just don't have the ability to pull off what you guys do.. They must rely on Turnkey if they are going to buy.. Or they need to take a leave of absence from work come out and live in the market for half a year and do it themselves. Its humorous but many Aussies do this exact thing. 

Turn key is getting better over all.. you should have seen it 15 years ago  :)

PS  I sold the Kokomo duplex to a nice young man there in Kokomo who is doing the fix up himself I gave it to him for 27,500  2500 down  400 a month at 5% interest due in 5 years.. He will get 850 or so gross.. And he will do the fix up himself.. so it should be a win win..And  I get to add yet another note to my passive note collection.. Trading rental income for interest income... one passive the other work.. but tax wise not quite as good as I lose my deprecation.. But me I am one of the worlds worse landlords when I have to actually do it myself.. So I will probably actually cash flow double what I would have if I would have tried to continue on as the owner... I just get to busy and really don't have the time to follow these little rentals spread all over the place  :)

@Jason Leong  That is a good point. I realize the vast majority would have under four and those who have more might not be on BP or are motivated to post much. Still it would seem there should be someone on BP who has 4+.  Heck you are going to need at least 10  doors to create any meaningful income worth noting. 

thx

@Jay Hinrichs  

When I talked to Ali awhile ago she had I think 3 TKs purchased which puts her at the top according to my research. It appears 99.9% have less than that. Maybe she has more now with all the buying we have seen IDK.  She is always welcome to clarify. 

Most of these TKs seem sub 100K and many sub 50K. I imagine most of those are being cash purchased but probably Chris Clothier has some better stats on that. 

sidebar - I imagine as your site populates you will have some interesting data to share on this subject. I am sure investors will appreciate that it is a TK info site vs marketing squeeze play. It looks very transparent as is so hats off for that! 

thanks

@David Krulac  thanks for commenting. I think I remember a post of yours where a large group was asked how many rentals they owned and it was just a couple hands after 2+. 

I do wonder how many TKs are cashed purchased vs financed. But I hear ya, it would not be difficult to use a spouse to get more than four etc....

@Matt R.  

I work with some out of town investors from BP that own more than 4 properties. Some of these are not traditional TK properties. Some of these are properties are fixer upper properties that investor buys, rehabs and rents out.

@Matt R.  

  Thanks Matt nice to look at real inventory without having to go through the squeeze page lead capture route is nice.  it seems like people own a few turnkey or they are really in the business and own lots of doors.. I am a huge proponent of going large if your going to do this way of investing... And if I lived in one of the cash flow markets I would have kept all my rentals I amassed and just continued being in the rental business.. I liked not paying or pay low income tax... Now a days as I have divested myself from virtually all my depreciable assets and turned it into note income.. I am stroking some pretty big checks to uncle..!! had gotten used to not doing that for some years.. But I like right on's much more than right offs.. There is a fine balance to all of this..

I have 8 turn-keys. The first ones are now 3 years old and the sat ones over 1 year. I would say that if you have less than 5, you are not going to see consistent results. Too many variations in the returns of a single property. You need to have enough to start seeing averages apply. I would estimate 10 as a good number to shoot for.

@Gabe G.  That is another factor. The numbers are questionable and there is no cap on a property with no history. Who knows what the cap is for sure. Some TKs seem more accurate than others with the numbers.  Also, to unpack your experience,  I have seen perhaps some of the worst locations available on the market in those random cities as the selected properties. 

You got to figure it is never always the best time to buy. Well if you are in a popular TK market it might not make a huge difference but I know in let's say more normal markets - It can never always be the best time to buy.

I think TK done transparently and smart with regards to location/Pm is great.  The thing is, I don't hear from BP members about it on any scale that is better than owning 100k in Reits.  Dang I hit this bold thing and it won't unbold.....

thanks for commenting. 

Originally posted by @Sharad M. :

@Matt Rosas 

I work with some out of town investors from BP that own more than 4 properties. Some of these are not traditional TK properties. Some of these are properties are fixer upper properties that investor buys, rehabs and rents out.

 Awesome Sharad. Thanks for responding. Were any of these straight up TKs, tenants in, rehabbed...or we are talking fix and holds. That is for sure would have many BPers on board. If they were traditional TK did anyone buy 4+? If so, ding, ding, ding, we have a winner! Thanks, I don't have a prize yet:)

@Anish Tolia  

Sweet Anish. I think you might be the BP record holder. I appreciate your input too. Can I ask what is your per door cash flow on those 8?

Gracias. 

Originally posted by @Matt R. :
Originally posted by @Sharad M.:

Matt R. 

I work with some out of town investors from BP that own more than 4 properties. Some of these are not traditional TK properties. Some of these are properties are fixer upper properties that investor buys, rehabs and rents out.

 Awesome Sharad. Thanks for responding. Were any of these straight up TKs, tenants in, rehabbed...or we are talking fix and holds. That is for sure would have many BPers on board. If they were traditional TK did anyone buy 4+? If so, ding, ding, ding, we have a winner! Thanks, I don't have a prize yet:)

 Yes, some of these were TKs..

I have another investor from LA that I work who has bought 2 TKs and he is planning to buy 7 more by end of year. 2 more in next 2 months. 7 more to max out his 10 loan limit.

Here are my theories:

1) People into TKs are not the do it yourself folk to be on BP. Sorry to say it but it might be a generational thing or the fact that they have better things to do (families) than troll forums. Frankly they are in the 2nd phase of living their life than stage 1 acquisition.

2) The 4+ loan hurdle becomes an issue with DTI and 6 months of cash reserves on all properties. A good loan person can over come this but it on barrier.

3) TK are embarrassed to post on the forums where the culture is filled with people who a busting their butt to make deals happen. Its like being the 8-hour a work dude in the office with 24/7 folks. The TK crowd get 80% of the gains with 1% of the effort.

@Anish Tolia   let connect

@Sharad M.  Nice. Sounds like you are doing a bang up job out there! This industry is still under 20 years old so it has not fully matured yet. I would expect if I ask this question in 10 years more that two BPers will report 4+. 

I have to factor there might only be a couple hundred regular bpers and of that a small percentage in the TK space. This is not exactly a total data population that I can derive any industry publishable stats. The question becomes how many folks on BP woke up today and feel like posting. I have met some bpers who have over a dozen in the LA area... not TKs formally, but still never post a single word.  So thanks for raising your hand here! 

@Matt R. I'm still waiting on my prize! I don't believe in cash flow as a metric. It depends too much on how much you put down, what term mortgage you have, interest rates etc, all financing terms you can manipulate to get any cash flow you want. What is meaningful to me is ROI because it allows me to compare returns on my invested cash vs. other investments (i.e stocks, bonds, reits whatever). My ROI last year which is define as cash flow + mortgage principal/cash invested came out to about 23%. When I had less properties in a bad year it could be as low as 10%. Most of it will be tax deferred due to depreciation. I think thats pretty good compared to other investments I have. Of course, as I pay down the mortgage the ROIC (Return on Invested Capital) actually goes down every year and when its all paid off it will level off at about 8% (which is the CAP rate). At that point it makes sense to cash out and deploy the capital elsewhere.

Lane K. Thanks for posting your theories. You might be 100% spot on or at least partially from what I have seen. Now there are over 100,000 bpers so I would think at least a few thousand could potentially comment but like most regular folks have better things to do than discuss their private holdings to random strangers on a Saturday morning.  

Originally posted by @Matt Rosas:

...

I think TK done transparently and smart with regards to location/Pm is great.  The thing is, I don't hear from BP members about it on any scale that is better than owning 100k in Reits.  Dang I hit this bold thing and it won't unbold.....

thanks for commenting. 

I can see how for some, TKs might offer benefits over REITs. Maybe they like owning an actual home because they feel it's a more tangible asset. Perhaps they like playing a slightly more active role than they'd have if investing in REITs. Or perhaps they see going the TK route as a way to gradually immerse themselves into the world of real estate investing with less perceived risk than if they were to take on everything (sourcing, rehabbing, property managing) directly themselves as newbies. 

@Anish Tolia  Cool, thanks for sharing those numbers. Those are pretty solid returns. It appears you are the winner times 2 so far. Still working on that prize;) 

@Jason Leong   Let me just catch you there you used a bad 4 letter word "REIT".  No friend of mine should every use these because the operator just skims all the profits for themself.

@Matt R. #Coffee #ProcrastinateDoingTaxes

@Jason Leong Agreed Jason. They are two different animals. I was considering time vs returns when I chuck the Reits in the equation. I am in one Reit that is at 5% div, grows 10% a year and has increase the dividends something like 24 out of the last 25 quarters. So I always look at that vs what I can do on my own with factoring risk and time. But in the grand scheme of things they are very different. I wonder if the majority who buy turnkey are in REI as a hobby sort of speak.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.