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?
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 !
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Account Closed
Agreed must buy multiples run them for 3 to 5 years then figure out were your at.
And its one of the reasons Multi is a little easier to gage usually your buying something that has history track record and unless and owner cooks the books you can get a good feel for actual's ... Were in buying a brand new turn key or any other rental for that matter its all just blue sky as you have no history.
many who have commented on this thread have owned them 6 months.. or one year.. there is no way to get any kind of meaningful return numbers from properties that have been in service for so little time.
I am with you 4 year stay seems a bit long from my experience in the asset of the mid west. If I think of the 12 new constructions I bought for GO zone 6 to 7 years ago.. I have 2 of the twelve that the original tenant is still there... both of them though have had issues but I get to busy to really figure it out and then make deals with them.. ( again I am the absolute worst land lord when it comes to being an easy push over) the rest have turned over yearly or max went two years...
And if your SEction 8 ( which I don't believe Chris takes anymore I could be wrong but I think I remember him saying that). those terms are annual your not allow longer leases. And those folks if you do not keep them very happy take their golden ticket to the next landlord that wants that government subsidized rent.... ( I did not say guarantee on purpose) because tenants can get kicked of off HUD mid lease and then your fubared as they won't have the money to pay market. At the end of the day this is just all about landlording and the three TTT's how you go about acquiring may vary... TK operators are just fix and flippers that concentrate on rentals.. as opposed to fix and flippers that do retail.
When I first got into HML in the mid west 2000 or so... my first year was almost all fix and flip. then this crazy idea that someone in the Mid west could advertise a home in LA or SF for the price of a new Mercedes and an industry was born
- obviously some of the profit will be removed in using a TK- its a business. You cant say you don't have time to do the leg work, but expect the same type of returns as if you did it yourself. I would also say that a lot of proformas are not going to be conservative either when they are selling how "great" of a deal you are getting. I would avoid buy and hold completely if you are looking to invest passively.
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
11y
Originally posted by @Account Closed:
@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.
Anish, you are spot on - the averages are always figured by those that do better....and those that do worse. That is why PM companies have a hard time keeping one house owners happy. If, by chance, they are part of the crowd performing worse then its hard to remedy their unhappiness.
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?
My best TK properties were all bought at the tail end of the recession at good prices like the example I gave you, 150K purchase price (worth at least 170K at the time of purchase), now worth 200K+ in 1 year with rents at 1775/month.
During the recession 2009-2013, you could buy at discounted prices from GOOD turnkey providers. Now, even the "good" turnkey providers have a hard time selling the rehabbed properties below market rates.
Currently, my 4 properties have experienced ZERO vacancies for 2 years running. While that has been a different story in Indianapolis. My memphis property is doing ok with a 2 year lease in place.
My plan is to stop TK purchases for at least next 1-2 years and see where the market goes.
Looking for the next recession or the next "virgin" market (not overrun by investors).
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?
My best TK properties were all bought at the tail end of the recession at good prices like the example I gave you, 150K purchase price (worth at least 170K at the time of purchase), now worth 200K+ in 1 year with rents at 1775/month.
During the recession 2009-2013, you could buy at discounted prices from GOOD turnkey providers. Now, even the "good" turnkey providers have a hard time selling the rehabbed properties below market rates.
Currently, my 4 properties have experienced ZERO vacancies for 2 years running. While that has been a different story in Indianapolis. My memphis property is doing ok with a 2 year lease in place.
My plan is to stop TK purchases for at least next 1-2 years and see where the market goes.
Looking for the next recession or the next "virgin" market (not overrun by investors).
Exactly, I plan to hold cash for the next recession unless I can find a reliable partner.
800+ deals later, I'm not still not a market timer. I'm always a buyer. Good Markets, bad markets, seller's market, buyer's market, I'm still a buyer. The only difference is the price I'm paying.
800+ deals later, I'm not still not a market timer. I'm always a buyer. Good Markets, bad markets, seller's market, buyer's market, I'm still a buyer. The only difference is the price I'm paying.
David,
I can see the value in your strategy but you need to elaborate.
How do you maximize returns while
#1 keeping risk low - in a high priced market like now.
#2 Finding capital to invest - you need time to save more to buy more and need time to pay down debt (HELOC) so you can re-use for future purchases.
you have definitely been as successful or more than anyone but I would ask if your market might be different than many others on here in that its not overrun by TKs and/or out of state buyers and all that it brings with it?
There are THs here, several relatively large in the 50-100 houses a year. As previously mentions, one large operator told me that they get 505 of their deals from the MLS, whereas I'm getting more like 25% from the MLS. The TKs typically do a lot of marketing, billboard, radio, TV, and mailings. There are out of state buyers, met one here on BP who invests locally from CA. Prices are much lower here, but don't tell anyone. good to hear from you Charles, hope you're not working late tonight.
#1 Risk is all relative. Once when I was speaking, somebody asked about all the risky ways I buy property; Including probate, foreclosure, title defects, life estates, failed perk tests, IRS liens, tax sales, un-locatable owners or partial owners. There's ways to mitigate each of those issues. As I said 75% of my purchases have come from off market. The niches are harder to work, but there is less competition.
#2 As I talked about in Bigger Pockets Podcast #82, the first 11 properties that I bought were all essentially 100% financed, one way or another. I've had mountains of debt, which isn't for every one, least of all Dave Ramsey, but its just another risk, that if you can manage it; it won't defeat you.
#3 I've said this multiple times, think "Portfolio Lending". The costs are just slightly more than Fannie/Freddie and they are often fixed rates either full amortization of 5 years fixed. And then there's commercial lending. If you have the deals, the financing will follow.
#4 I do some small wholesaling, last year I sold a property that I owned 9 days, did nothing to the property, didn't even turn the utilities on, and sold it to a rehab/flipper. I also flipped a few houses where I rehabbed the houses and sold them retail to end users. If I'm flipping a property, I'll generally rehab to maximize the retail price and sell to owner occupants. In that BP Podcast #82, Josh asked me why i flipped some properties. My answer was that some of the flips were condos that prohibited or limited rentals or I bought land for subdivision and resale. But Buy and Hold and land development are a higher percentage of my business.
Investor · Miami, FL · Member since 2013 · 49 posts · 7 votes
11y
Very happy I found this thread since I am seriously considering investing in a turn key property.
What are the major red flags to look for to sort out duds? From a few of the posts it seems the common tactic to manipulate numbers is low ball maintenance and taxes to make the cashflow seem more attractive. Another part of the "due diligence" would be to verify the type of neighborhood the property is in. What else should new investors look for?
Right now the companies I'm considering are all companies I've seen posting actively on BP.
I wrote a little E book on the Do's and Don'ts of out of state investing.. happy to send it along if you like.. it will give you the questions to ask and the items to Check off your list , so you can make an educated and prudent buy decision
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
11y
Sorry, just got online from the weekend and am just now seeing people's questions. Sorry if my delayed response got anyone thinking I'm more of a bluffer/scammer than some already want to believe! :)
To everyone wondering about my portfolio size, you're right, I don't say exactly how many I own. I think anyone giving our their portfolio size (more often if it's a big one than small one), can be a major liability. You're basically telling people whether or not you are worth going after, if someone wanted to. Maybe it's not most of you reading this, but because I have a large online presence and how many people know about me, the last thing I care to do is convince someone I'm worth coming after. So, no, I don't say exactly how many I own, BUT, I am more than willing to try to convince you a) I do own turnkeys and b) I do half-know what I'm talking about. With that said,
What kind of "proof" would make you feel better about my claims, other than me sending you the closing documents on all of my properties or the deeds on them that shows my name attached to them? Even if I told you exactly how many I own, that doesn't for a minute mean I'm telling you the truth. Who knows, maybe I am the world's largest scammer (although if I were that could I'm certain I'd pick something other than turnkeys to be selling off to people). No number I give should convince anyone of anything (it's online hello, anyone can lie about anything).
What if I tell you about specific experiences I've had with my turnkeys? I refer to a lot of them in the blogs (I have over 100 articles you're welcome to peruse through). I can tell you stories about them? I have one that has proven to almost be too nice of a house for a rental, I have one that had a felon cable-hacker, I have one a tenant changed all the locks on me when she moved out (convenient), I have the famous walked-out-with-the-appliances tenant, I've had evictions, I've been screwed by a turnkey company who upped the market rent tremendously and I got boned after when I had to re-rent it for real, I'm getting a tree cut away from one property right now, I have an insurance claim on a property right now since a thunderstorm blew a hole through the roof...
I can go on...unless telling you stories about my properties isn't what will convince you of anything? (and seriously, I'm a really bad salesperson if I'm saying all these things about my properties...)
Oh, and if you've ever seen me play poker, it's atrociously bad. I'm actually a horrible bluffer. Ask anyone whose played with me.
@Account Closed
Sorry you feel that way. See the above about why I don't say the exact number.
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
11y
@Ali Boone I think thats not a very strong argument for not saying how many you own. Your equity in all of them could be zero or 100%. The value of each could be 10,000 or 100,000. Simply stating a number of rental homes tells nothing about your net worth. If you were just a private investor, you could fully claim right to privacy and none could fault you for it. But you make money selling turnkeys and you claim to be an expert on this subject As such its not unreasonable for people here to ask you your credentials. You can tell the truth, lie or decline to state (as you have) and that is your right. But it does somewhat diminish your credibility to many of us. Maybe you don't care and thats fine too. But if you claim expertise that also benefits your business on the board, people will question you on it. Anyway, how I feel doesn't matter. We don't do business together and I have some experience with my own portfolio that I am happy to share with others on this board. I seriously doubt that paints a bulls eye on my back!
I agree with @Account Closed that you have a very weak and unconvincing argument... you don't want to disclose anything because you are afraid people will go after you ? that seems a little narcissistic and paranoid.
how about disclosing how much commission you make for recruiting people to your turnkey company?
it just seems a little fishy to me. you don't have to disclose anything, but as you can see from this thread you leave many people suspicious of you, doubting you, and not wanting to do business with you.
You pass yourself off as an expert with no proof other than you work for a turnkey company. You never make any recommendations other than the company that pays you....how are people supposed to trust you? It's the equivalent of asking a BMW salesman advice on a car you can buy and then calling himself a "transportation consultant." Or a financial advisor not acting as your fiduciary pushing you to own loaded mutual funds and never showing they have any of what they sell....why would I buy something you haven't proved you own?
You can use any reasoning you want or stick with the excuse you gave, but nobody seems to be convinced
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
11y
I am going to speak up for @Ali Boone because I have a tremendous amount of respect for her.
I began to read her articles that she was writing for the BiggerPockets.com blog several years ago. Not several weeks, but several years ago. She is not some flyby night, one house investor who suddenly turned into an overnight expert. She also is not a forum poster who has never bought a property, but thinks they can give e everyone else advice. Her story was fascinating to me because she was very successful in her field, which happens to be Aerospace Engineering! In her blogs she told the story of buying real estate because she was passionate about it and she purchased across the country and even in central america. She bought everything passively and most of it turnkey. She told the story of making good decisions, bad decisions, making money and losing money and her writing style and story telling were excellent.
That is why I reached out to her through BP and met with her when I was in Los Angeles - again - several years ago. She is an impressive person when you meet her personally with a great personality and she is very intelligent. More than that, she knows what she is talking about as an investor. She has done it and she tells her story very plainly. All you have to do is go back and read the over 100 articles she has written for the BP blog. Take the time to read her personal blog at hipster investments.
She left her job as an aerospace engineer because she was passionate about designing her own lifestyle and creating her own business. She has done it.
AND....I say all of this even though she does has never sent a client to one of my houses nor has my company ever paid her or her company a referral. In fact, I disagree with some of what she says about the markets I operate in. But, that is her opinion as a professional real estate investor and if she wants to promote other cities and companies that she has invested in, then that is her choice.
However, that does not diminish my respect for her. She is a class person and if she wants to give details fantastic. If not, no big deal. As someone looking to passively invest, if that makes you uncomfortable - do not do business with her. I am sure she will be ok. She has told her story and it is in black and white and it is easy to find. No sense in attacking her or her credibility - just do your due diligence and learn her story.
Sorry, just got online from the weekend and am just now seeing people's questions. Sorry if my delayed response got anyone thinking I'm more of a bluffer/scammer than some already want to believe! :)
To everyone wondering about my portfolio size, you're right, I don't say exactly how many I own. I think anyone giving our their portfolio size (more often if it's a big one than small one), can be a major liability. You're basically telling people whether or not you are worth going after, if someone wanted to. Maybe it's not most of you reading this, but because I have a large online presence and how many people know about me, the last thing I care to do is convince someone I'm worth coming after. So, no, I don't say exactly how many I own, BUT, I am more than willing to try to convince you a) I do own turnkeys and b) I do half-know what I'm talking about. With that said,
What kind of "proof" would make you feel better about my claims, other than me sending you the closing documents on all of my properties or the deeds on them that shows my name attached to them? Even if I told you exactly how many I own, that doesn't for a minute mean I'm telling you the truth. Who knows, maybe I am the world's largest scammer (although if I were that could I'm certain I'd pick something other than turnkeys to be selling off to people). No number I give should convince anyone of anything (it's online hello, anyone can lie about anything).
What if I tell you about specific experiences I've had with my turnkeys? I refer to a lot of them in the blogs (I have over 100 articles you're welcome to peruse through). I can tell you stories about them? I have one that has proven to almost be too nice of a house for a rental, I have one that had a felon cable-hacker, I have one a tenant changed all the locks on me when she moved out (convenient), I have the famous walked-out-with-the-appliances tenant, I've had evictions, I've been screwed by a turnkey company who upped the market rent tremendously and I got boned after when I had to re-rent it for real, I'm getting a tree cut away from one property right now, I have an insurance claim on a property right now since a thunderstorm blew a hole through the roof...
I can go on...unless telling you stories about my properties isn't what will convince you of anything? (and seriously, I'm a really bad salesperson if I'm saying all these things about my properties...)
Oh, and if you've ever seen me play poker, it's atrociously bad. I'm actually a horrible bluffer. Ask anyone whose played with me.
@Account Closed
Sorry you feel that way. See the above about why I don't say the exact number.
Ali: I feel the specific questions about your portfolio/holdings ended up detracting from this thread. Which is too bad, because this is one of the better, if not best thread we've had on TKs. The OP asked about rental owners with larger holdings purchased and managed TK. 30 rentals is a big number, no matter how you acquire them. But totally do-able for a high income earner with cash and credit and a plan. You replied that you know many with more than 1-3. I asked, as did others how many do you know with more, and how many do they have. You're in the biz everyday as a TK marketer and owner. Forget your personal holdings (which of course you're free to withhold), what do the waters look like out there? How many volume buyers do you see, what kind of troubles are they running into when trying to acquire more, are they trying to acquire more, etc.
I have no doubt you're a class act, even without Chris's support. Your perspective as someone who works with those entering the TK market is important and needed. But I think it's fair and wise for those considering TK to demand real numbers from those in the biz. Chris's numbers pretty much said it all for his markets and his business: he doesn't have that many volume buyers. And he gave good examples of the challenges. You work different markets (and a different buyer demographic I think). I'm assuming your numbers are different. Still interested if you care to share.
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
11y
@Account Closed
Sorry again you feel that way. I'm not going to try to convince you of anything because I have no reason to. I will, however, encourage you to show me where on this site I have ever claimed to be an expert. I certainly can't remember anywhere. I've bought turnkeys, I have experience with turnkeys, and that is what I talk about--my direct experience. It could all be completely wrong and off-base, I have no idea. I just know about my experiences and that's all I talk about. And for clarification, I don't sell turnkeys. I refer people to people who do sell them, but that's all I do, and everyone I refer for I have personally bought through myself. If I introduce someone to a turnkey guy, it's completely up to them to do their own due diligence on the company and see how they feel about them. If they don't like them, so be it. I don't push. So again, I do encourage you to point out anywhere I've claimed to be an expert on anything or even tried to sell anyone on anything.
Sorry you feel that way too. I don't work for a turnkey company at all. I only tell people who I buy my own turnkeys through, when they ask, and I don't say a bad word about any others. Just about every company out there has offered me referral fees to send them people and I've told all of them no unless I personally buy through them so I'm not just sending people to whoever will pay me. You're welcome to have whatever opinions about me that you'd like to have though, but I am sorry my responding to your post caused such an uproar.
@k.marie.p (I hope you see this because I can't get your name to come up as a link thing)
Sorry I didn't respond to you...I missed your original post and everyone was asking about my personal portfolio so you're right, I didn't respond more in detail about my knowledge of the buyers (quite frankly I forgot that was the original question). In short, correct, most of the turnkey buyers I know are not mass buying. I'd say they are averaging 1-4 per year, ballpark? I've only been around them for 4 years, so that does add up, and I do know some buyers who have bought 4-6 at a time, but then relaxed for a bit after that. I'd say most of them are wanting to buy more, and they are literally only waiting to build the capital. Or, a lot of turnkey buyers are brand new investors, so they often buy one and then while they build more capital they see how their purchase goes (no harm in making sure something actually works out! And I encourage it). I'd say capital is the main driver as to how many people buy, and second to that is really their goals--are they shooting for financial freedom, or are they just wanting some additional supplemental income? Big difference. Sorry again for missing your questions, and please do ask (or re-ask) any others or any I missed. I'd be happy to continue responding to help the thread!
Well, sir, I think it's official--I'm buying the next round of pancakes next time you're in LA!! (wait, that may give off a wrong impression...for clarification, it was International Pancake Day when Chris came to visit so we celebrated at iHop...lol). But seriously, thank you for the kind words. I really do appreciate them, not just because they were awesome, but because they came from you and you are such a well-respected member of the community and everyone holds you in such high regard...it means a tremendous amount to me for you to say all of that. I actually forgot for a second anyone hated me ;) But seriously, I feel the same way about you and your business and I do still tell every single person that mentions Memphis to me to be sure to buy through you guys! I hold you and your company in such high regard, it is unexplainable. AND I don't make referral fees for saying so! :) So between me pushing your company and not getting paid for it, and only accepting referral fees from companies I have personally bought through (despite how much I could make it I referred for everyone else who has asked me to)...I'm sad that some people don't want to trust me. But seriously, again, thank you so much and those same words wouldn't mean half as much coming from other people as they do coming from you! I definitely owe you a pancake :)
Thanks for your reply. Sorry my name is a mess in the mention function. It was bad with just the K. Marie, I assume due to space and punctuation? And somehow Marie got a lowercase letter a few days ago. Now I can't get the quote function to work. Must. press. on.
You say you've been working with buyers for 4 years and some buy a few a year. So how many of them are up to 10 props? I think of 10 as someone on the path and I'm totally interested in how many are getting there. Especially now as it's harder in many markets for any buyer to get a rental prop at a purchase price that makes sense, rehab buyer or TK buyer or otherwise.
I ask as I'm interested in both how and if your buyers are able to buy any volume through your TK referrals. And as someone who resells props. It's been suggested to me more than once that I sell TK but the mgmt part just turns me off. That being said I know there is way to hand that off or be the nonworking partner on the PM.
How can I get in on the next LA Pancake Summit? Better yet, fly into Burning Man this year and come to my camp. I'll make you pancakes.
Taking the high road?? Because some investors are asking a few reasonable questions? Trying to find truth and answers through all the marketing bull so we can do what's best for us? That's an irresponsible thing to say especially someone in your position Marco.
Do you know why this thread has been so popular Marco? Because people are asking real questions and demand real answers...and they never find it on any turnkey thread since it's always marketers like yourself or Ali and a few others saying how wonderful and perfect turnkey is when we all know that's misleading. The numbers and expectations are unrealistic and manipulative.
That's why this thread has been so popular, there is no high road as you put it...you seem to think just because investors are demanding some simple answers, they are being immature??
