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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Marco Santarelli
Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
11y
@Kyle Scholnick -- It appears you misunderstood my point. What I was reflecting on is how derailed this thread has became from the original posted question.
Nothing more sir. Sorry to confuse.
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Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
11y
Kristine (is that right, it's the name in your signature, and I still can't get the copy thing to work), ok, WHAT! You're a burner?? Do you know I literally just yesterday got an email from a woman I met at a burner party the other weekend saying she has found me a ticket if I will fly them in. What! Lol. I told her I probably couldn't do it because I have zero idea how I would even pretend to use my brain after that many days at BM to be able to fly everyone home. Using my brain at all for that--ergh.
Send me a PM, for sure! Let's chat. I've never met a burner on BP!! :)
As far as the buyers, I'm actually not sure. I've been involved with turnkeys for 4 years, but that is when I started buying them myself. I casually started referring people I knew around the same time (neither of those bought that many) before I was even licensed (i.e. not getting paid for the referrals), and it wasn't until I'd say really 2.5 years ago I started working more with buyers? So hasn't been as long. And I honestly don't know the final outcomes of a lot of them as I really just do introductions and then from there they work with the companies. I'm not usually in touch with them anymore. I could try to dig through all my records and see what I can put together, but I really just don't have specific stats right now.
I think @Chris Clothier would be the best person to ask since he owns a turnkey company directly, so he'd probably know more specific stats on buyers and repeat buys?
And you are totally invited to mine and Chris' next pancake venture! :)
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Mark Shaffar
Real Estate Agent · Madison, WI · Member since 2015 · 328 posts · 88 votes
11y
@Kyle ScholnickThanks for the thread! I think tons of people were thinking the same thing. Tons of interest in passive income on BP from people with cash but little time, but we're talking big numbers and lots of risk. I completely understand the frustration with finding straight numbers from people who are not impartial. Take this with a grain of salt because I work for a turnkey provider, but my 9 units have produced 9.5% on average the last 2 years not including appreciation which has been significant in Minneapolis. If I'm in your shoes with a bunch of cash I want to invest for my kids or my retirement I want to make sure I am doing everything I can do to lower my risk. Turnkey sounds nice and plenty of people on BP are getting rich off buy and hold rentals but there are also many horror stories of people losing everything. There is tons of advice on BP about ways to lower risk: buy multiple properties, at 2% rent to price, and 70%LTV, with a rehabber, realtor, TK provider, tenant, banker, and property manager that you trust, in a great A or B neighborhood in a growing city that's not in a flood zone, and has low crime and taxes, brick exterior, new roof and mechanicals, multifamily, landlord friendly laws..... These deals are hard to find now as more investors get scared by the stock market peaks and jump into real estate and prices rise. I'm guessing most TK providers would be tickled pink to sell those deals if they could get them. To answer your question you might pm @Larry Fried
he seems to have a fair number of turnkeys. Again thanks for asking these questions because obviously many other folks are in the same boat. Best of luck to you!
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Petra M.
Investor · Los Angeles, CA · Member since 2015 · 73 posts · 49 votes
11y
My question to TK operators: do you negotiate on price?
I've seen some houses on a TK inventory for months on end. I make an offer and often get told, "The price is what it is."
Doesn't seem practical.
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Chris ClothierBusiness Member
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
11y
@Matt R., @Kyle Scholnick -
Here is a rough update to the numbers that Matt posted earlier. Again, we have no investors with 30 plus properties and only 1 in 5 or so own five properties or more. I don't think that really means anything - that is probably the same ratio of non-TK investors that own 5 or more. I think @Jay Hinrichs is correct in the reasoning as well. Most of it is due to
1. its' an immature niche,
2. mostly new investors without the resources or experience in real estate,
3. poor financing choices,
4. bad property management,
5. lack of quality leverage choices
6. and maybe biggest of all a poor setting of short and long term expectations.

But then again, those are the same reasons that all investors stop at one or two properties. Nice thread Kyle.
1 with 22 - 22 properties
1 with 15 - 15 properties
2 with 14 - 28 properties
1 with 13 - 13 properties
2 with 12 - 24 properties
2 with 11 - 22 properties
5 with 10 - 50 properties
5 with 9 - 45 properties
21 with 8 - 168 properties
19 with 7 - 133 properties
41 with 6 - 246 properties
39 with 5 - 195 properties
62 with 4 - 248 properties
122 with 3 - 366 properties
287 with 2 - 574 properties
473 with 1 - 473 properties
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Chris ClothierBusiness Member
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
11y
Originally posted by @Petra M.:

My question to TK operators: do you negotiate on price?
I've seen some houses on a TK inventory for months on end. I make an offer and often get told, "The price is what it is."
Doesn't seem practical.
There is no one answer - that is going to be up to each company. I'll give you our companies answer in a second.
One MAJOR thing to keep in mind. There is no definition of turnkey. You have no way of knowing who you are dealing with or what their processes are without really interviewing them and drilling down. So, there are many companies that market themselves as Turnkey because it is a great buzz word. That does not mean they own what they sell. Often times they do not. Often times they may have a contract to buy it - they may be selling another companies inventory or worse - they are just marketing the MLS. So they are not in control and couldn't lower a price anyway.
With my company, we have a pretty standard answer of we do not negotiate. We feel we offer a tremendous value for the price listed. However, with existing clients who have built up or are building up a portfolio and they ask for some concession, we are always open to reviewing it and do often work with them. If it were a first time buyer just wanting to buy lower, we probably would not make many - if any - concessions. We are lucky in that we have no issues with selling the properties we own and this has been our policy for a number of years so it has not hurt our ability to operate.
Very good question Petra.
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Vincent Crane
Realtor · Atlanta, GA · Member since 2015 · 693 posts · 357 votes
11y
The quickest way to build wealth is to add value to the house, (kitchen/baths/paint, flooring) so then you can rent it for more without paying the higher purchase price, and then you could even do a cash-out refi. Not a huge fan of turnkeys unless you're out of state or want something 100% hands off as a buy and hold for future retirement income
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Charles Worth
Investor · New York City, NY · Member since 2015 · 808 posts · 417 votes
11y
@Petra M.
@Chris Clothier gave a great answer but there is something he did not really touch upon (correct me if I am wrong Chris) but to me holding it for a few months is not as bad as you think because there is rental income offsetting many of the cost of holding. Eventually, assuming financing is being used a sale becomes more of a need but there is a good amount of time there where it sitting on the market is not so bad.
For other firms where the TK does not produce an already tenanted unit the house is typically under construction during that time period so if the construction takes 3 to 4 months and it was listed for most of that as "for sale" than a wait of 3 months to sell it is not so bad. In fact if they do end up waiting until there is a tenant the buyer pool could increase because it is now true TK (there is a tenant in place) thereby lowering the risk.
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Charles Worth
Investor · New York City, NY · Member since 2015 · 808 posts · 417 votes
11y
@Chris Clothier
Great stats thanks Curious how many of those that have fewer houses (1 in 5) are probably solely due to financing problems related to the issues with getting a mortgage (obviously that is less of a stat than based on conversations and someone who says I would buy more if i got a mortgage may not). I think that is interesting considering how fast financing is changing.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Charles Worth
the hedge funds have wrestled with this strategy and some of my other clients from abroad.. IE: do we want a tenant in place before we close.. or do we want to close and have some input on the tenant that gets selected...
I have seen it both.. ways of course.. the risk of having tenant in place is their could be undo motivation on the TK provider to get someone in the DOOR... thereby maybe not the best tenant.
Then you have the buyer that wants cash flow day one... etc.
Or the hedge funds that have changed to wanting the home rent ready then they want a LOT of input into who goes in the DOOR>
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Chris ClothierBusiness Member
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
11y
@Charles Worth - you made a couple of great points to Petra's post. Those are certainly very valid reasons that any seller might not negotiate on a property - time is still on their side before they have to sell.
On the other post, it certainly plays a part. We have been managing one house for some investors for a long time. They may have other investments and other houses elsewhere, but only one with us. I don't really have the data on how big the financing issue is with these investors. But, alluding back to the study that Josh and I conducted with a professional surveying service. They found that self-identified real estate investors listed lower interest rates, tax incentives and the removal of financing limits as the best incentives to induce them to buy more (I know - that is not exactly ground breaking research).
So I do think the lending environment, for better or worse, limits some investors who want to pursue more. In some ways though, I think those limits are good and as it relates to this topic - it prevents TK companies from just signing up and selling to anyone who can fog a mirror as a way of generating sales. Some of the restrictions have actually helped strengthen todays real estate investors.
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Kyle Scholnick
OP
Boca Raton, FL · Member since 2015 · 135 posts · 132 votes
11y
@Chris Clothier
Any chance you can get in touch with some of your investors, especially the one who owns 22 properties, but really any of them that own >13....and have them introduce themselves. I am sure everyone would love to hear from people like that who own so many turnkeys. How did the people with so many turnkeys secure financing for them?
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Charles Worth
Investor · New York City, NY · Member since 2015 · 808 posts · 417 votes
11y
@Chris Clothier
Valid point on the constraints helping though that is a double edged sword. It certainly helps if your TK is not looking for you by protecting you from yourself or hurts if you have the right TK and have the financial ability and desire to grow.
From a macro view, it definitely does protect the overall RE area from things like what happened in 2007. In fact, it is one of the reasons that despite the fact that everyone complains about NYC co-op procedures being really tough on applicants (much worse than lending standards typically) it really helped them do a little better during the crash for co-ops that had stronger standards.
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Leonid Sapronov
Investor · Laurel, MD · Member since 2012 · 149 posts · 33 votes
11y
To @Kyle Scholnick and everyone else bashing @Ali Boone
Have some respect, man. What Ali has done for the BP community is times and times greater than what you, most likely, will ever do. Why don't you first write a few dozen blog posts, spend countless hours responding to questions and actually show us how to design your lifestyle around the things you love doing and THEN come back with your critique and comments.
Here's a hint - rather than prying into the financial lives of people you don't know, why don't you befriend them? Weird concept, I know, but if you connected with Ali, exchanged a few emails, became online buddies and then asked her privately, "hey, so how many props are you holding?" something tells me you might have better luck.
Just because you can ask something in a public forum, doesn't mean you should. A lot of information on here is exchanged through private messages. It's all part of the forum etiquette. Learn it, master it and you too could be eating pancakes with @Chris Clothier some day.
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Kyle Scholnick
OP
Boca Raton, FL · Member since 2015 · 135 posts · 132 votes
11y
@Leonid Sapronov
Thanks for the life lessons Leonid. I really don't want to dignify your post with a response as this has already been addressed and you are bringing up information we have already discussed, but investors want to know where their information is coming from. Ali is very active on here and that is why people want to know more about her and why they should be taking advice from her....really that simple Leonid, nobody is bashing Ali just to be mean, people have a lot of money on the line and want to make sure they get reliable and honest answers and want to know who that information is coming from. I hope I have explained this enough for you to understand Leonid.
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Leonid Sapronov
Investor · Laurel, MD · Member since 2012 · 149 posts · 33 votes
11y
@Kyle Scholnick
No life lessons here, just sayin there's a better way to talk to people. Back on topic.
Given what everyone has said about the turnkey industry as a whole, I don't expect to hear from many people who hold a lot of turn keys. Many of them may not be on BP at all. As someone else mentioned, your best is to try to get some numbers from the bigger turnkey providers, although I understand you wanting to hear from the investors themselves. Also, I suspect few providers are willing to be as open about their numbers as Chris Clothier has - most of them probably don't have those numbers at all. So maybe a friendly challenge?
If you are a turnkey provider, can you share the following:
1) How many of your clients hold > 1, 5, 10, 20 properties?
2) Are most of your houses sold at full retail based on appraisals?
3) What are your vacancy/turn over rates?
4) What is YOUR definition of turnkey? Specifically, do you go the extra mile to ensure that the roof, HVAC, appliances and all the major mechanicals will not have to be replaced in the next 15-20 years?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Leonid Sapronov
I am not a Turn Key provider but I do floor a lot of inventory for the Turn Key industry. IE I fund their A and D and have been since 2000...
I see turn key as big companies like Chris ( he does not need me LOL) medium sized and what I like to call Boutique or somewhat under the radar companies. My largest client did 220 Turn Keys last year and that's about his average.. that would rank him I think as one of the top 5 in the country and he markets and sells all of his himself although is in talks now with some marketing groups that we all know. .. His focus is on IRA buyers. and as such they will buy 1 to 4 usually...
My Boutique provider actually has a lot fewer clients but a lot of repeat business.. and I know he has one client with over 50 homes bought from him and other investments they do together. And he has many in the 10 to 20 range.. But I think its a different relationship than most.. He is much more hands on and personal service than any of the big companies can really do.. the big companies have lots of employees and they MUST delegate much of the work a day issues to their maintenance department or customer service department or sales department.. This boutique provider is in the trench's and personally see's to his clients success and happiness . He does out source management but his office is in the Management companies office ( sub leases) so he is right there every day and totally on top of his clients assets etc... I like his model.. But I also like my high volume TK operator model as well he does a great job and is in two markets. However that volume he must delegate like other big providers.. and the key is hiring very good staff.. we all know how important that is.
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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
Any chance you can get in touch with some of your investors, especially the one who owns 22 properties, but really any of them that own >13....and have them introduce themselves. I am sure everyone would love to hear from people like that who own so many turnkeys. How did the people with so many turnkeys secure financing for them?
At one point, I was one of the top 10 referrers to BP. Not sure if that is still the case, but not all of them were my clients. A number of BP members are clients of Memphis Invest and some have introduced themselves although I am not sure how many are actively participating on BP. Many simply are not active investors and posting comments or answering questions is just not their thing, but I am always pushing BiggerPockets as a resource and will do it again and encourage participation.
I can tell you a few commonalities to those investors that have more than 10 properties and some would gladly spend a few minutes talking with you about how they built their portfolio. Send me a PM and I will certainly try ot put you in touch with them.
Here is what they have in common. Most if not all already have wealth. They have disposable assets either in other investments or in active income. They have W-2 incomes so they take full advantage of qualifying for GSE sponsored loans. To get beyond the GSE limits, they have local banking relationships. The gentleman with 22 lives in northern Mississippi and had multiple sources income including being an airline pilot as well as an entrepreneur. He had local banking relationships and we helped develop more. He had several who would finance 3-5 purchases for him in a year.
One other trick he used, was structuring his loans for early pay-off. Very early. He owns most of his portfolio free and clear and will retire as a pilot with full pension before his early 50's.
So they have existing wealth or high income, access to local bank funding and a plan for early pay-off, which induces a bank to want to lend you more money over and over to build the portfolio.
I and other members of my family have used this same approach and we have a little over 100 properties between us and several commercial buildings. Local banks and creatively structuring the payoffs are going to be the keys to building a larger portfolio, IMO.
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Kyle Scholnick
OP
Boca Raton, FL · Member since 2015 · 135 posts · 132 votes
11y
@Chris Clothier
Thanks Chris, I will send you a PM as I would love to get that information.
Thanks for sharing that information. My question to you, which we alluded to earlier in the thread, would be if that investor of yours with 22 properties has such high income and wealth, why not invest in other passive real estate investments like syndications which seem to have a similar return?
Believe me, I totally understand the passive part, which is what I am looking for too, but as an accredited investor he has access to many other opportunities, so why did he decide to go all turnkey?
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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
Thanks Chris, I will send you a PM as I would love to get that information.
Thanks for sharing that information. My question to you, which we alluded to earlier in the thread, would be if that investor of yours with 22 properties has such high income and wealth, why not invest in other passive real estate investments like syndications which seem to have a similar return?
Believe me, I totally understand the passive part, which is what I am looking for too, but as an accredited investor he has access to many other opportunities, so why did he decide to go all turnkey?
Well, in his case and I suspect the same with most investors with such a high number of turnkey properties, they are diversified into other passive investments. They are invested in the stock market, bonds, mutual funds, private lending among other things. The investor with 22 is also an active investor as well having bought and retailed some property in the past and he owns commercial buildings.
Are you wondering why they would use a TK provider to buy so many properties as opposed to investing in some other way that may provide a better or even similar return? Because, just having that many properties TK does not necessarily mean that is the only real estate investments they have.
I can say that so many of my clients are simply looking for a hassle free way of investing. Most do not know how to actively invest in real estate and do not want to spend the time to learn. They view time as an asset and they don't want to spend it learning something when they can spend money instead to get their desired result in a shorter period of time. They give up money to gain time. Lets not kid ourselves though. They are not giving up much in their eyes. They give up equity to gain a return and they want to do it quickly. They find value in the trade-off of having a professional handle the heaviest lifting and they gain a quick - but lower - return. Again, most if not all have other investments
That will be a common theme among investors who have built sizable portfolios especially with a passive investment.
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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
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Originally posted by @Chris Clothier:

With my company, we have a pretty standard answer of we do not negotiate. We feel we offer a tremendous value for the price listed. However, with existing clients who have built up or are building up a portfolio and they ask for some concession, we are always open to reviewing it and do often work with them. If it were a first time buyer just wanting to buy lower, we probably would not make many - if any - concessions. We are lucky in that we have no issues with selling the properties we own and this has been our policy for a number of years so it has not hurt our ability to operate.
Very good question Petra.
Great stuff and fascinating to me. Are your properties offered/marketed in such a way that you could get a bidding war and get more than asking? Or is it a product that is first come-first served for the investor willing to pay your asking?
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Leonid Sapronov
Investor · Laurel, MD · Member since 2012 · 149 posts · 33 votes
11y
@Jay Hinrichs
That's really interesting. The trade-off between volume and the personal touch seems natural - hard to be personally involved when you have hundreds or even just tens of clients.
Curious how the returns for the clients compare - do you have any idea if the boutiques tend to be more profitable? Also, I wonder if they are more open to a strategy where a client would finance the purchase and rehab, thus capturing a little more equity for themselves.
@Chris Clothier thanks for the wealth of info!
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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 @Chris Clothier:
With my company, we have a pretty standard answer of we do not negotiate. We feel we offer a tremendous value for the price listed. However, with existing clients who have built up or are building up a portfolio and they ask for some concession, we are always open to reviewing it and do often work with them. If it were a first time buyer just wanting to buy lower, we probably would not make many - if any - concessions. We are lucky in that we have no issues with selling the properties we own and this has been our policy for a number of years so it has not hurt our ability to operate.
Very good question Petra.
Great stuff and fascinating to me. Are your properties offered/marketed in such a way that you could get a bidding war and get more than asking? Or is it a product that is first come-first served for the investor willing to pay your asking?
Strictly first-come, first-serve - there is no bidding and we've never entertained trying to get prices bid up. They are fair prices for both us and the investor so no need to encourage bidding that ultimately will make them an unhappy investor and hurt their experience with us.
Also, all are sold through one-on-one interaction so there is not a listing of properties or an email blast with the houses. When we have a property ready to be marketed to investors, there may be several investors who are good matches for the properties - maybe investors who have been waiting longer than others or are in a scenario (1031 exchange) that they need to take priority. We then take that property to those investors personally and at that point they are on a first come, first served scenario. In some cases, properties are not purchased right off the bat and then our team will expand and offer that property to other investors, but never on a mass blast scale.
Most investors never know all of the properties that are available. In some small way, that is protecting investors from just jumping onto a property as soon as they see it or as soon as it is emailed out without knowing details or having an opportunity to learn a little about the property before they go to contract. It is funny how real estate investors especially seem to be in a real hurry to buy and that can lead to unhappy clients.
Remember that as Turnkey company we keep clients for the life of the investment, so we really need to avoid scenarios that ultimately lead them to a bad experience. To be fair, that already happens (you can never make everyone happy all the time) so it is smart to avoid those cases as much as possible.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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Originally posted by @Leonid Sapronov:

@Jay Hinrichs
That's really interesting. The trade-off between volume and the personal touch seems natural - hard to be personally involved when you have hundreds or even just tens of clients.
Curious how the returns for the clients compare - do you have any idea if the boutiques tend to be more profitable? Also, I wonder if they are more open to a strategy where a client would finance the purchase and rehab, thus capturing a little more equity for themselves
Yes absolutely they will customize a program for their buyers.. it goes back to that question is it best to buy tenant in place or not. One of the bigger marketing companies that sells for many TK operators that's their pitch they insist tenant in place.
however a big caveat is that when you ( investor) is participating in the rehab phase this leads to other sets of issues, and starts to move away from the encapsulated TK approach were everything is done for you at time of purchase... the companies I speak of are also teeing these up for hedge fund buyers. AS an operator you could get micro managed to death with some buyers...
I know when I build new construction here in Oregon.. I have a sellers out in my contract for this specific purpose.. since our market is so robust virtually everything we sell is sold pre or during construction.. and the buyer all of a sudden is expecting a custom built home.. and has no regard for the fact that its MY equity and MY construction loan I am paying for LOL.. So we get micro managed we can terminate and give them their deposit back and they can't come after us for specific performance
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Ariel Cohen
Investor · Valley Stream, NY · Member since 2008 · 71 posts · 18 votes
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I do not own any TK properties. The first time that I reached out to some TK providers was in mid 2013. My biggest issue that I had with the TK model was, like others have mentioned that the TK provider is making substantially all their money up front when you buy the house and was not offering much if any discount to FMV or retail. I was actually told you can't compare the prices of the houses we have available to any numbers you will see of other market comps since most of the properties in the area were foreclosures.
Which made me most concerned about an exit strategy to which I was told that you would need to list the house with a local Realtor if you wanted to sell and that they don't offer any help with the disposition of a property.
I would hope that a TK company would manage the entire investment cycle for the client rather than simply the acquisition (where the TKP is partial to the sale) and the management (fees and leasing) and not provide any help with the end of the investment cycle.
It seems like the TKP is simply selling you a retail priced property and then will manage if for you.
Curious if there are any TK companies that manage properties that they did not sell to the investor.
Bottom line is I never got comfortable with the model.
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