Does Anyone Own ALL turnkey??

Boca Raton, FL · Member since 2015 · 135 posts · 132 votes

I know there are many people who like to get their feet wet with turnkey, but does anyone actually own ALL turnkeys? Does anyone own 30 turnkey properties?

Can anyone actually speak up that owns nothing but turnkey and has had a great experience?

I rarely hear from anyone who owns turnkeys other than the turnkey provider marketers, and of the people that do own them, it seems they only own 1-3. Is there a reason for this?

I want to believe turnkey is a great investment for busy professionals who have no desire to rehab/find deals/landlord/manage properties/deal with contractors etc....but why isn't it more common then?

I do also get concerned when I see proformas by turnkey providers that are only accounting for 5% vacancy (seems optimistic since just one month vacant should be 8.3%), 3-5% maintenance which seems low, absolutely no Capex inclusion etc.....

When you put regular numbers in to account for those things, it seems that many of the turnkeys aren't profitable...Don't get me wrong, I'm sure you make something, but just seems like 6-7% after you PROPERLY account for all possibilities and have a margin of safety.

I also don't buy the answer that people got involved with turnkeys and then realized they can go out on their own and do it....this makes no sense...if they are busy professionals and don't want to deal with the headaches of real estate, why all of a sudden after one turnkey experience they are starting their own empire?

So, again, anyone out there own ONLY turnkeys and have more than 10 of them?

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

11y

@Kyle Scholnick

Super post.

As you expand your search or options of investing in Real Estate you may want to consider some alternatives to turn key SFR's s there is certainly more to the industry than just that model. And like a good stock portfolio you may want to diversify across the industry.

Some examples may include:

1. Investing in Debt IE a GREAT HML in your city that you can sit down an eye ball and or has impeccable rep . these investment can easily bring you 8 to 12% with little hassle factor actually once up and running probably the most passive of the bunch.

2. Crowdfunding portals... That are doing debt deals they have matured.. check out Realty Shares and Realty Mogul I know those folks personally and they are very diligent in what they bring to the investor.. go with the very simple fix and flip loans for safety and least exposure to market up and downs.

3. There are some really good Syndicators in the US>. And the sponsor is critical but once you get with one of them you can establish a very long term relationship.. etc.

4. Look at larger Multi with Professional institutional type management.

5. Class B Mobile Home parks.. don't go lower other wise your buying your own mini Ghetto.. I have owned 3 and I love these.

6. Find a really good local fix and flipper and fund their deals doing a JV this can be very rewarding financially of course just like picking a TK company caution must be taken.

7. If you have not already buy your own medical practice facility and rent it to the Group ! you know you will get rent !

And as you state there are plenty of ways to make money in RE... but you may want to spread your risk to a few different scenarios so you don't have all your eggs in one asset class. just some Saturday morning food for thought !

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Chris ClothierBusiness Member
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
11y
Originally posted by @Che Chiu Wong:

Originally posted by @Charles Worth:
@Reed Starkey
same reason you can advertise to sell your car. The rules that you are referring to are very very specific and in many ways don't make much sense. Second reason that those and many other laws which apply to many other purchases do not apply to RE is because the real estate lobby in Washington is very powerful and has over the years managed to keep RE relatively regulation light compared to other areas as well as maintaining the existence of the GSEs and various RE tax deductions that have helped make RE such a great investment for many owners.
@Chris Clothier
I too found the 67% vacancy number shocking considering you are mostly selling SFRs in good areas in a town where I don't see why people would be moving every year. Did you possibly mean 67% over the life of their investment so far?
Yeah, 67% vacancy??? I know people who buy the properties and purposely keep them 100% vacant, but they have different gameplans...
No - 67% DID NOT experience a vacancy in the 12 month period. That is 67% of investors and 82% of the actual properties DID NOT experience a vacancy. Just to be clear...
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Che Chiu Wong
Jersey City, NJ · Member since 2015 · 280 posts · 98 votes
11y
Originally posted by @Chris Clothier:

Originally posted by @Che Chiu Wong:
Originally posted by @Charles Worth:

@Reed Starkey
same reason you can advertise to sell your car. The rules that you are referring to are very very specific and in many ways don't make much sense. Second reason that those and many other laws which apply to many other purchases do not apply to RE is because the real estate lobby in Washington is very powerful and has over the years managed to keep RE relatively regulation light compared to other areas as well as maintaining the existence of the GSEs and various RE tax deductions that have helped make RE such a great investment for many owners.
@Chris Clothier
I too found the 67% vacancy number shocking considering you are mostly selling SFRs in good areas in a town where I don't see why people would be moving every year. Did you possibly mean 67% over the life of their investment so far?
Yeah, 67% vacancy??? I know people who buy the properties and purposely keep them 100% vacant, but they have different gameplans...
No - 67% DID NOT experience a vacancy in the 12 month period. That is 67% of investors and 82% of the actual properties DID NOT experience a vacancy. Just to be clear...
Thanks for the clarification. That's more reassuring.
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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
11y
Originally posted by @Che Chiu Wong:

Originally posted by @Charles Worth:
@Reed Starkey
same reason you can advertise to sell your car. The rules that you are referring to are very very specific and in many ways don't make much sense. Second reason that those and many other laws which apply to many other purchases do not apply to RE is because the real estate lobby in Washington is very powerful and has over the years managed to keep RE relatively regulation light compared to other areas as well as maintaining the existence of the GSEs and various RE tax deductions that have helped make RE such a great investment for many owners.
@Chris Clothier
I too found the 67% vacancy number shocking considering you are mostly selling SFRs in good areas in a town where I don't see why people would be moving every year. Did you possibly mean 67% over the life of their investment so far?
Yeah, 67% vacancy??? I know people who buy the properties and purposely keep them 100% vacant, but they have different gameplans...
Chris posted that 67% of his investor did NOT experience a vacancy. That's 33% that experienced vacancy. Even so, the vacancy rate isn't 33%. Rather 33% of his investors experienced one or more days of vacancy.
C'mon people. Stats are not that hard to read and understand.
1 Reply
Chris ClothierBusiness Member
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
11y
Originally posted by @Account Closed:

Originally posted by @Chris Clothier:
I like this line and we send out a letter from our family at the end of the year to our clients. I think I will borrow this from you in the next year, because it just makes good business sense to prepare your clients for exactly what they can expect in the next year based on statistical data that we have been collecting and analyzing for years. I've shared this data before, but I like the way you put it.
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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
11y
Originally posted by @Chris Clothier:

Originally posted by @Account Closed:
Originally posted by @Chris Clothier:

I like this line and we send out a letter from our family at the end of the year to our clients. I think I will borrow this from you in the next year, because it just makes good business sense to prepare your clients for exactly what they can expect in the next year based on statistical data that we have been collecting and analyzing for years. I've shared this data before, but I like the way you put it.
Don't even think about it. It's already copyrighted.
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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
11y
Originally posted by @Account Closed:

Originally posted by @Chris Clothier:
Originally posted by @Account Closed:

Originally posted by @Chris Clothier:
I like this line and we send out a letter from our family at the end of the year to our clients. I think I will borrow this from you in the next year, because it just makes good business sense to prepare your clients for exactly what they can expect in the next year based on statistical data that we have been collecting and analyzing for years. I've shared this data before, but I like the way you put it.
Don't even think about it. It's already copyrighted.
That was so uncharitable, even as a joke. Please accept my apology. You are free to riff on any copy or ideas of mine posted here. I get way more out of what you contribute to BP than vice versa.
1 Reply
Kyle Scholnick
OP
Boca Raton, FL · Member since 2015 · 135 posts · 132 votes
11y
@Chris Clothier
What is your opinion on the sleight-of-hand pro formas I was mentioning before?
The fact that such a low percentage is going towards vacancies especially since you said that 33% of your clients experience a vacancy... Many turnkey pro formas only account for 5%
Or the complete lack of accounting for capital expenditures
Or overestimating rental rates and under estimating maintenance costs which many pro forma's only dedicate about 3% to which seems ridiculous
This was my concern from the beginning, it seems like many turnkey providers are trying to take advantage of investors by using these unrealistic numbers. What are your thoughts on that ?
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Kyle Scholnick
OP
Boca Raton, FL · Member since 2015 · 135 posts · 132 votes
11y
@Harry Zhou
That's a great idea Harry, do you know many others like us on here ?
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Chris ClothierBusiness Member
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
11y
Originally posted by @Kyle Scholnick:

@Chris Clothier
What is your opinion on the sleight-of-hand pro formas I was mentioning before?
The fact that such a low percentage is going towards vacancies especially since you said that 33% of your clients experience a vacancy... Many turnkey pro formas only account for 5%
Or the complete lack of accounting for capital expenditures
Or overestimating rental rates and under estimating maintenance costs which many pro forma's only dedicate about 3% to which seems ridiculous
This was my concern from the beginning, it seems like many turnkey providers are trying to take advantage of investors by using these unrealistic numbers. What are your thoughts on that ?
Like I said earlier, I think it is more a case of not knowing their data or not being in business long enough to be able to make proper assumptions so they are overly optimistic. It does not mean they are trying to use sleight of hand although I would be the naive one to say that no companies intentionally use bad data.
So again, on the 33% number, that says that 1 in 3 will experience a vacancy. For us, our average length of stay is right at 4 years and I only turned 18% of a portfolio in one year. Average loss, including a lease up fee is 2 months rent every 4 years. So I can tell all of my clients, based on real statistical data on our portfolio, that they can account 4% vacancy yearly and I would be accurate.
As for maintenance, I can show where last year, 3.84% of every rent dollar collected went to maintenance across our entire portfolio including a maintenance fee that our management company charges on most, but not all, jobs. So again, I have the data to show exactly how much should be calculated.
The reality is that most companies do not have the team, the systems or really the business savvy to track these things and then know how to improve them. They certainly cannot market an actual number to use. Neither can we really since these are just averages, but they are excellent data points to back up the numbers we may use. We are lucky that Kent Clothier, Sr. is a smart man who just celebrated his 50th year in the workforce and his 33rd as an entrepreneur. That was just a quick little tribute to my father who has always ground the details and the data into our routines.
I don't know what to say about rents. I hear this often on here, but it is usually a line repeated by posters that are extremely sour on turnkey with little actual evidence. I am sure it happens, maybe even intentionally, but how shortsighted is that of a company? I just cannot imagine a company does this on purpose and I cannot imagine they could do it for long.
At some point the things Turnkey say and the way they market has to match up with performance. If you cannot perform, then how can you expect to stay in business or build your business.
I think as an investor, the best thing you can do is use numbers you are comfortable with and if your calculations look a little thin, tell that to the TK company. Challenge them on their numbers. We get challenged all the time. Sometimes an investor understands and likes what they hear and other times they say they are going to go in a different direction. I think that is great and have no problem with it. Everyone wins when investors challenge themselves and anyone they do business with to justify a purchase.
That is my advice. Forget about if you think the numbers are right or wrong. Challenge them if you think they are wrong and if you don't like the answers, move on and do not buy.
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Chris ClothierBusiness Member
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
11y
Originally posted by @Account Closed:

Originally posted by @Account Closed:
Originally posted by @Chris Clothier:

Originally posted by @Account Closed:
Originally posted by @Chris Clothier:

I like this line and we send out a letter from our family at the end of the year to our clients. I think I will borrow this from you in the next year, because it just makes good business sense to prepare your clients for exactly what they can expect in the next year based on statistical data that we have been collecting and analyzing for years. I've shared this data before, but I like the way you put it.
Don't even think about it. It's already copyrighted.
That was so uncharitable, even as a joke. Please accept my apology. You are free to riff on any copy or ideas of mine posted here. I get way more out of what you contribute to BP than vice versa.
It made me laugh.......
Thanks for the compliments though and don't sell yourself short! I get a ton out of your posts - including laughs!
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Chris E.
Investor · FL · Member since 2015 · 202 posts · 34 votes
11y
@Kyle Scholnick, @Chris Clothier, @Jay Hinrichs, @Account Closed
Fantastic thread! Thanks for sharing.
I am also a busy professional with a long commute and a family, so I joined BP to find out best way to transfer proceed from our condo in Orange County, CA to out of state (with a 1031). Turn-key is something I am now looking at, which I had never heard of until last week.
Chris.
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Chris E.
Investor · FL · Member since 2015 · 202 posts · 34 votes
11y
Originally posted by @Chris Clothier:

Originally posted by @Kyle Scholnick:
@Chris Clothier
So again, on the 33% number, that says that 1 in 3 will experience a vacancy. For us, our average length of stay is right at 4 years and I only turned 18% of a portfolio in one year. Average loss, including a lease up fee is 2 months rent every 4 years. So I can tell all of my clients, based on real statistical data on our portfolio, that they can account 4% vacancy yearly and I would be accurate.
As for maintenance, I can show where last year, 3.84% of every rent dollar collected went to maintenance across our entire portfolio including a maintenance fee that our management company charges on most, but not all, jobs. So again, I have the data to show exactly how much should be calculated.
Chris,
As an engineer, I appreciate your way around numbers!
Chris.
1 Reply
Joe Kim
Rental Property Investor · SF Bay Area, CA · Member since 2014 · 352 posts · 543 votes
11y
Originally posted by @Kyle Scholnick:

I know there are many people who like to get their feet wet with turnkey, but does anyone actually own ALL turnkeys? Does anyone own 30 turnkey properties?
Can anyone actually speak up that owns nothing but turnkey and has had a great experience?
I don't have 30 turnkey but have 7 turnkey units. As California resident, it made sense to buy turnkey investment homes. I agree that turnkeys are problematic, largely because of ONE very important factor.
Like they say in real estate - you make nearly ALL your money when you buy and when you sell. Why would people say that when most buy/hold investors are crazy about cash flow?
You cannot cash flow well if you DON'T buy properties at a discount from ARV or FMV. The problem with most turnkey providers is that they take nearly all the profit and sell you properties at or near market price.
There are THREE ways to get around this problem:
#1 Timing - Buy during a down market, recession, etc. Timing in one location is very different from another market. Just don't buy at or near the peak of the market. The homes I bought in 2013 were much more discounted then in 2014 generally speaking.
#2 Leverage - 100% financing is not for everyone but for high income earners. I think one can handle the risk as long as the cash flow is positive. For example borrow 25% downpayment from HELOC (at low 4.25% interest) and then get a Fanny/Freddy conventional loan. Use most of the positive cash flow to paydown the HELOC first.
#3 Buy for cash flow AND appreciation: Picking the right market AND the right neighborhood to allow the chance for appreciation ("A" neighborhoods, good schools, etc.)
I generally buy at rents greater than $1000/month and home prices around $120-$200K range rather than less than 100K price range.
Here is an example of how turnkey buying can work well.
Distressed property purchased by rehabber for 100K.
25K repair costs. Sells the property for 150K to investor. The home ARV is 170K so their is 20K equity or (20K discounted price).
After one year, the home appreciates by 30K to 200K. Rent started at 1700 but renewed at 1775/month with $450 positive cash flow/month
This is is a real life example for me on a home I bought in Houston in May/2014 at 150K - 5 bed 2.5 bath, 3100 sqft home in a B+/A- neighborhood.
I bought it from a turnkey provider. But right now I've slowed down acquisition because pricing is too high.
Unless you have the time, ability to wholesale and/or flip your own properties, buying from turnkey providers is still a viable option that requires careful selection. I have not even started to talk about finding the right PM (property management) to avoid vacancy.
4 Reply
Brad B.
Investor · Bakersfield, CA · Member since 2013 · 146 posts · 93 votes
11y
Originally posted by @Kyle Scholnick:

@Brad B.
I couldn't disagree with you more. You said "even busy professionals gravitate towards real estate because they realize with a little education and networking they can create much better returns than they can from turnkey"
No offense but that makes no sense, and that is exactly what I posted about on my first post on this thread.
Just to use myself as an example, I am a very busy physician, I have surgeries, I have emergency room calls, I have patients in the hospital, I see 35 patients a day in my office, I work about 12 hours a day... Not to mention the fact that if I am lucky I would like to actually get to the gym, spend time with my family, and possibly get more than five hours of sleep one night.... I am nothing special there are many people like me I am just using myself as an example..
Us busy professionals do very well in our industry, this is what we do, this is how we make money .... It may be hard for people on this site to understand but there are many other ways of making money and being very happy what you are doing without flipping houses.
So those of us busy professionals who barely have time to breathe have absolutely no desire nor time to start sending out direct mailings, driving for dollars, searching the MLS all day, dealing with contractors, dealing with tenants, etc. .... Not to mention the fact that in my area just outside Washington DC this is not a cash flow market so to have any profitable rentals, you need to be out of state, therefore need a great team to help run your rentals .... You can try to build that team yourself or you can buy the package of everything a.k.a. a turnkey company.
Busy professionals like me understand that real estate is a great investment and you can make more money than the stock market down the road with more consistent returns.... That doesn't mean I am going to start doing all this crap myself even if I can get a few more percentages of return because my skill is better used treating patients and I make a lot more money doing that....so I would rather do my full-time job and invest in turn key real estate with the hopes of making a higher return than the stock market even if I have to give up a few percentages to avoid the hours of hassle and time that I don't have to try to find deals and manage everything myself.
That is why turnkey is so important to so many people, and it is so frustrating when people are not transparent or give honest feedback about them
Kyle- I think we actually agree. I didn't mean to imply that people like you will eventually quit their day job and become flippers. I just meant that most busy professionals will probably not just buy turnkeys but instead will eventually look at some of the other passive options already mentioned. Which, might partly explain why you don't see a lot of people with 30 turnkeys. Turnkey may be the perfect solution for your situation though.
Thanks for all your insight. Great posts!
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Steve Babiak
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
11y
Originally posted by @Chris Clothier:

Originally posted by @Account Closed:
Originally posted by @Account Closed:

Originally posted by @Chris Clothier:
Originally posted by @Account Closed:

Originally posted by @Chris Clothier:
I like this line and we send out a letter from our family at the end of the year to our clients. I think I will borrow this from you in the next year, because it just makes good business sense to prepare your clients for exactly what they can expect in the next year based on statistical data that we have been collecting and analyzing for years. I've shared this data before, but I like the way you put it.
Don't even think about it. It's already copyrighted.
That was so uncharitable, even as a joke. Please accept my apology. You are free to riff on any copy or ideas of mine posted here. I get way more out of what you contribute to BP than vice versa.
It made me laugh.......
Thanks for the compliments though and don't sell yourself short! I get a ton out of your posts - including laughs!
Unfortunately, that maybe wasn't a joke even if that was the original intent; BP has copyright claims - see link:
http://www.biggerpockets.com/terms.html
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Steve Babiak
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
11y
Originally posted by @Chris Clothier:

Originally posted by @Reed Starkey:
Great post!
What I would like to know is why can a turn-key company solicit their "deal" witch is basically a security. Why don't the same laws apply?
Reed, you asked a great question and one extremely relevant especially here on BP. There are very subtle nuances that are violated by some of the companies who have entered the niche recently and some that are marketing here on BP. They could - and I have to say could because I am not an expert but did correspond with the SEC on this - they could be violating SEC and FCC laws by:
- using the words guarantee. even simply guaranteeing happiness and satisfaction.
- limiting clients or excluding some investors, thus creating a "group" who benefit from being a part of the group.
- charging money for investors to join your group or get in line for properties.
- tying the performance to your property management company
- using one contract for all services (textbook definition of security)
These are just a few of the ways it can be a violation and all are examples of things that are actively done. As long as a person or company sells a property and offers PM as an added benefit they should be ok. As long as the property will perform whether or not an investor uses their service, they should be ok. A TK company should never limit or close their company to a certain number of individuals, charge money to wait in line to get a property or charge money just to see properties and they should always separate their services into separate companies with separate contracts. Most importantly, they should make sure that any property sold will perform exactly as advertised whether or not an investor chooses their PM company. If they follow those rules, they should be able to avoid any compliance issues with the SEC or FCC.
What does the FCC have to do with this? The FCC (Federal Communications Commission) regulates the "airwaves". Link:
https://en.wikipedia.org/wiki/U.S._Federal_Communi...
Maybe you intended to write FTC. Not sure what role they might have:
https://en.wikipedia.org/wiki/Federal_Trade_Commis...
1 Reply
Chris ClothierBusiness Member
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
11y
Originally posted by @Steve Babiak:

Originally posted by @Chris Clothier:
Originally posted by @Reed Starkey:

Great post!
What I would like to know is why can a turn-key company solicit their "deal" witch is basically a security. Why don't the same laws apply?
Reed, you asked a great question and one extremely relevant especially here on BP. There are very subtle nuances that are violated by some of the companies who have entered the niche recently and some that are marketing here on BP. They could - and I have to say could because I am not an expert but did correspond with the SEC on this - they could be violating SEC and FCC laws by:
- using the words guarantee. even simply guaranteeing happiness and satisfaction.
- limiting clients or excluding some investors, thus creating a "group" who benefit from being a part of the group.
- charging money for investors to join your group or get in line for properties.
- tying the performance to your property management company
- using one contract for all services (textbook definition of security)
These are just a few of the ways it can be a violation and all are examples of things that are actively done. As long as a person or company sells a property and offers PM as an added benefit they should be ok. As long as the property will perform whether or not an investor uses their service, they should be ok. A TK company should never limit or close their company to a certain number of individuals, charge money to wait in line to get a property or charge money just to see properties and they should always separate their services into separate companies with separate contracts. Most importantly, they should make sure that any property sold will perform exactly as advertised whether or not an investor chooses their PM company. If they follow those rules, they should be able to avoid any compliance issues with the SEC or FCC.
What does the FCC have to do with this? The FCC (Federal Communications Commission) regulates the "airwaves". Link:
https://en.wikipedia.org/wiki/U.S._Federal_Communi...
Maybe you intended to write FTC. Not sure what role they might have:
https://en.wikipedia.org/wiki/Federal_Trade_Commis...
I meant the FCC since running an ad on BP guaranteeing satisfaction as a way of soliciting investors would fall under their juristiction.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Chris Clothier
Each states division of Corporate Securities would be keen on these things as well. I know in Oregon they are Uber proactive on these things... And SCC when you start to guranatee performance and such it becomes selling a security.. at least that's were a plantiff attorney will try to take it.
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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
11y
Originally posted by @Steve Babiak:

Originally posted by @Chris Clothier:
Originally posted by @Account Closed:

Originally posted by @Account Closed:
Originally posted by @Chris Clothier:

Originally posted by @Account Closed:
Originally posted by @Chris Clothier:

I like this line and we send out a letter from our family at the end of the year to our clients. I think I will borrow this from you in the next year, because it just makes good business sense to prepare your clients for exactly what they can expect in the next year based on statistical data that we have been collecting and analyzing for years. I've shared this data before, but I like the way you put it.
Don't even think about it. It's already copyrighted.
That was so uncharitable, even as a joke. Please accept my apology. You are free to riff on any copy or ideas of mine posted here. I get way more out of what you contribute to BP than vice versa.
It made me laugh.......
Thanks for the compliments though and don't sell yourself short! I get a ton out of your posts - including laughs!
Unfortunately, that maybe wasn't a joke even if that was the original intent; BP has copyright claims - see link:
http://www.biggerpockets.com/terms.html
Oh my. I'm not even going to click on that link. There is so much copyright stress in my family already. My husband is a photographer and journalist. The internet age makes is so difficult to manage his images so they are not used without permission or pay. To make matters more complicated he shoots at a few large events that require shared copyright, thereby agreeing to have less control. A few years ago, people started lifting my marketing copy off my website and from my mailings. It's one thing to riff on my copy. It's another to lift multiple paragraphs word for word. This might be the one time when less info is better for me. Although I'm sure I initialed and agreed to the BP use terms....as though I read them.
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Trevor Ewen
Rental Property Investor · Weehawken, NJ · Member since 2014 · 1k+ posts · 704 votes
11y
@Kyle Scholnick
Apologies for the lateness on the requested response. I had to get outside for just a bit, yesterday.
I'll give you some general ideas on my approach to syndication. I think it would be best to get together when I am in DC in a month (August 8th-9th), and we can talk more if you like. I am not in the business of selling these deals, so hopefully you can take my feedback as just from genuine experience.
1) Meet everyone, meet references: Phone is good, and works for some people, but I always go in person and share a meal. The advantage to this is getting a chance to see the operation, walk some properties, talk casually, and get an idea of the overall value statement of the deal. You are essentially investing in people, the properties are just a side effect.
2) Too good to be true is what it is: If someone is guaranteeing a 25% return, I suggest taking your money elsewhere. You don't want someone to throw outlandish unattainable numbers at you. A conservative estimate is much better, a chance for dividends or extra money on the side is always nice, but the word guarantee is dangerous
3) Track record: Unless it's a close friend/family whom your trust, don't be the first person to ever write them a check. Usually syndicators will get their feet wet w/ friends and family, I think this is a good thing. The folks we invested with had run several successful (and still producing) funds in the past. Their first investors were close friends.
In a way, you are buying yourself into a good company of real estate investors. Everyone has something to offer, and even though we don't talk about it like that, money is what busy professionals have to offer.
There is a tendency in the REI community to want to be DIY about everything, and I think it's also an American ideal of self-made entrepreneurs. Sometimes you have to divorce yourself from that pride and just hand a check to someone with the time. You are still (arguably the most) crucial to the operation. Your input is the fact that you work hard at being a physician.
We should be investing with what we have. Time: swing a hammer, Knowledge: write a book, Money: fund a deal.
For me, it was worth the risk (and will continue to be). All our money that has gone into real estate has actually passed first through the stock market. We've made a killing since 2009 and I am not waiting around for the market to fall back down. We have a percentage of our total portfolio we want in real estate. We maintain that ratio as we go. We only sell investments to re-invest.
The best part of a syndicated deal is the fact that it exposes me to a market I can barely self fund. I can be a part of a larger real estate play that seems obvious to me and others, but is hard to attain given the cost of the market. I think this is how a lot of commercial investors approach the problem, and it's ultimately the company I would like to keep.
3 Reply
Kyle Scholnick
OP
Boca Raton, FL · Member since 2015 · 135 posts · 132 votes
11y
@Joe Kim
Thanks for sharing your experience Joe. The main problem I see with what you mentioned is that although the turnkey companies can buy a distressed property and then sell it to you they seem to be taking all the profit out and selling it to you at the highest possible market rate... Leaving no room for that after repair value equity when the investor buys it since the turnkey company is trying to maximize their profit.
What has your overall experience been in terms of percentage of vacancies, maintenance, capital expenditures, the responsiveness of property management, different insurances needed, lawn care, trash removal?
You do have 7 turnkeys so sounds like you have been happy with your experience, what has your overall return been? is it what the turnkey promised or has it been more in the 6 to 7% range?
Are you going to continue to buy turnkeys? And if not why and what will you be looking into instead?
0 Reply
Kyle Scholnick
OP
Boca Raton, FL · Member since 2015 · 135 posts · 132 votes
11y
@Trevor Ewen
Great post Trevor, I would be happy to meet up with you when you are in DC at that time
0 Reply
Trevor Ewen
Rental Property Investor · Weehawken, NJ · Member since 2014 · 1k+ posts · 704 votes
11y
@Kyle Scholnick
Great. I sent over a private message to coordinate.
0 Reply
Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
11y
Originally posted by @Kyle Scholnick:

@Joe Kim
Thanks for sharing your experience Joe. The main problem I see with what you mentioned is that although the turnkey companies can buy a distressed property and then sell it to you they seem to be taking all the profit out and selling it to you at the highest possible market rate... Leaving no room for that after repair value equity when the investor buys it since the turnkey company is trying to maximize their profit.
What has your overall experience been in terms of percentage of vacancies, maintenance, capital expenditures, the responsiveness of property management, different insurances needed, lawn care, trash removal?
You do have 7 turnkeys so sounds like you have been happy with your experience, what has your overall return been? is it what the turnkey promised or has it been more in the 6 to 7% range?
Are you going to continue to buy turnkeys? And if not why and what will you be looking into instead?
This point is why turnkey (or any rental purchase) only makes sense if the rental income and expense numbers work for your purposes. Don't buy TK or any fully rehabbed property to get a great below market deal. No rehab, turnkey or otherwise, is being sold for any less than what the market will bear. I've seen some TK marketing that suggests they are setting you up with equity on the buy. Be suspect of that kind of spin. Especially with lower end properties..... it's very easy to show or create 20% or more equity by selective editing of the comps. Buy TK if you like the properties and the operator.
0 Reply
Account Closed
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
11y
@Chris Clothier Your statistics are great. Thanks for that. The point to make though is that you have a statistical average over hundreds of properties. For an investor with one property, all the numbers could be far higher (or lower) than the average. Thats why I maintain that unless you plan to build a significant portfolio and have patience for the averages to work, you may be disappointed. I have a friend who bought one home in Indy the same time as I did. He had some initial issues and got discouraged and quit and is unhappy with the experience. I also had some issues with the initial investments but stuck to it and built a portfolio which on average is doing well. Some units still have issues but others make up for it. I have to say that I have not really seen 4 year tenants though. My typical tenant turnover is more like two years. I assumed one turn over 18 months and like Chris says I assume at least 2 months rent loss for that.
3 Reply

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