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?

@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 !

All of my properties are turnkey (except one, which was originally my personal house but I took a job transfer so now rent it out...but that wasn't an intentional rental property). Where are you getting all the info you provide...about how turnkey owners don't own that many and/or they go out on their own afterwards? Do you know specific people that fit that bill? Just wondering where you are getting all of this from. A couple responses though: - turnkeys are a newer concept, mostly since the crash in 2009. If someone were to buy 30 turnkeys since turnkeys came into existence, that would require a ballpark of $600k cash out of pocket, and that's if they were financing at 20% down. It's not typically standard someone can pay that much cash over the span of only a few years? Someone with that kind of spare cash is probably investing in commercial deals. But 30 aside, myself and plenty of other turnkey owners I know have bought plenty more than 1-3. - turnkeys not being more common (although I think they are more common than maybe you are thinking? I have no idea how common you think they are or aren't) is easily due, in my opinion, that the majority of people just aren't that comfortable a) investing outside their local market and b) trusting other people to run the deals. When I started buying turnkeys I thought they were too good to be true and wondered why everyone wasn't doing it...but now I understand. - I don't know the exact tallies of how my vacancies and repairs have turned out to respond directly to you wondering about realistic numbers. The properties I've always worked with estimate 7% vacancy and 5% repairs...but that is generic. Vacancy will depend on the market (but with a good PM, turnovers shouldn't be estimated to happen every year necessarily) and then repairs, again dependent on the quality of the rehab. A turnkey property should come 100% renovated to good standard, so there should be no repairs for awhile. But estimated 5% from day 1, that builds over time and then by the time the repairs happen, there should be enough in the pot. Of course this can be debated, and if you are shopping for a turnkey, use whatever estimates you want. You don't have to go off the word of the seller or promoter by any means. - Lastly, I've never known of a turnkey buyer who went out and did it all on their own afterwards. Except my cousin, who first bought a turnkey that performed excellent but then bought a rehab (no idea why) and they've yet to have seen income on that one. Not sure that even counts as 'going out on their own'.

@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

I sought out a few TK operators that were active here on the forums. The pro formas gave cap rates of 12% with cash flows of $250. Vacancies and maintenance were 5%. Taxes and insurance were under quoted. No cap ex. Rents overestimated. After running the numbers through my own criteria, which I admit are aggressive (vac 8%, maint/capex 12%, etc.), the numbers were half of what was quoted. I did decide to go with a few properties to "test the waters". I was assured the properties were in Class B neighborhoods and I did my best with Internet research, etc. I did get some photos of the rehab process and things looked good. Problems came up when my independent Home Inspector took a look and came up with a list of problems such as leaky pipes, bathrooms vented to living space, old hvac, etc. The measure of a good TK company is how they respond to these issues. One company was accommodating and said they fixed things, while another just canceled saying that there were too many issues to address. Always have an inspection contingency in your contract! For the company that said they fixed things, I made a surprise visit with my home inspector close to closing and found things that they said they fixed, but it wasn't. When I approached the TK operator, he got defensive and then I promptly canceled. At the same time, I went to visit a few property management companies and found out that the properties I had contracts on were actually C class neighborhoods and they wouldn't be willing to manage them. Always ask a couple PM firms whether they'd manage the property you're interested in and how much rent they think is realistic. In the end, I bought a couple properties off MLS and did some minor rehabs. They were near move-in ready. I know I didn't get the best 'deal' and am paying market, but I'd rather do a deal off MLS and do some minor rehabs myself than pay near market for a TK property with shoddy rehab. How could TK providers improve? I expect pro formas that are 'close' to realistic. Be good with a rehab. The quality of the rehab dictates the tenant. Follow plumbing and electrical code! But in truth, TK providers are a business and they are trying to maximize profits. My radiologist friend is even having problems with the purported "best" TK operator in the country with a shoddy rehab. Finally, careful with a lot of the smooth talking bird dogs on the site. They get $4-6000 for every TK they close and may falsely represent properties as a result. Good luck!

Nice thread! I'll throw my 2 bits in since I have some experience here. I started off as the busy professional who lacked time and knowledge and became a turn key provider myself, albeit in a very modest sense by most standards. My business has all come from acquaintances, repeat buyers and referrals as I really don't market anything. Now I'm focusing mostly on fix and flip and wholesaling in my local market, with some out of state deals ongoing to a lesser extent than in the past. I bought my first two investments properties in 2011 from a TK provider. This guy was Bay Area based like I am, but was running his TK business in Dallas-Fort Worth where he had built his own sizable portfolio over many years. After a significant amount of DD I decided to buy two properties from him. Decent enough guy/operation and it has worked out fine. But immediately after buying I figured, "I don't need this guy". So I started networking and buying and fixing my own in DFW for buy and hold . I did the same thing in the Atlanta Metro in 2012. I was working a full time job and managing 16 doors locally for in-laws at the same time. So I started out as the busy professional who just wanted to diversify and buy some real estate, but since I hated my day job it was easy to focus on RE. During this collection period I met the kind of buyer who in my mind is the type that turn-key is perfect for. It was actually a buddy of mine I went to college with. We were sitting on his deck enjoying the distant view of San Francisco and he asked how my "real estate stuff" was going. I went on about my various deals in progress. Then he said, "You know what? I don't know anything about this real estate stuff and I have no time to learn it. And frankly, I'm not interested in it. But I have money and I want to diversify and you seem to know what you're doing. So lets do business somehow." I agreed, and 6 months later when I was laid off from my crappy day job along with 75% of the company, I became a full time real estate investor and sold my first three turn key properties to my buddy. He is a partner in a major law firm and told me he wanted to buy 10 of these from me for starters. Turn key real estate was made for a guy like my buddy. As far as pro-formas from most TK providers being "dubious", I agree. Though in some cases this may be by design, though not stated as such. I'd like to give the benefit of the doubt. I eventually got to the point in my own turn key business that I stopped including variable expenses (e.g. vacancy, maintenance, CapEx) in the numbers. I often had buyers ask me not to include these numbers since it made it easier for them to compare apples to apples. Then I stopped including variable expenses all together. I'd tell my prospective buyers I was only including fixed costs since people often assign wildly different values to the variable expenses and I can't guess what numbers a person will use. If they want me to plug in numbers I will include theirs or I make what I think are realistic suggestions and give them new pro-formas that account for the changes. But to me the cash flow discussion on TK or any buy and hold single family home is moot. While the cash flow dominates the conversation it is actually the icing on the cake. In fact, I do not believe you get cash flow from single family homes as buy and hold. Between vacancy, maintenance and CapEx I think you're lucky if you are not feeding money into these properties for the duration you are holding them. I was told this same thing by a very seasoned investor shortly after I began buying my own single family homes for buy and hold. I didn't believe him. I didn't want to believe him. But 4 years and 17 properties later I think this is the truth. The real money from buy and hold SFH comes from equity built up by appreciation and principle pay down. As such, you should not chase cash flow that does not exist. If you are buying SFH for an investment you are buying for the appreciation and equity pay down. It is a get wealthy slow proposition. So buy in the path of progress where land is limited (for whatever reason). In these areas the value of the property is in the land, not the structure. Land is limited. The stuff used to build a house is not. So it is the land that will appreciate and property in land-limited areas/path of progress will do WAY better over time in terms of appreciation than any property in an area where there is nothing but land (but supposedly great cash flow). If you want cash flow, buy multifamily residential. Another reality about buying turn key...........you will not get amazing returns. Even on paper. Nor should you expect to. If you are doing no work beyond qualifying for a loan and signing some documents don't complain about "only" getting an 8% cash on cash return (fictitious though it may be). Happy Hunting!

@Harry Zhou @Joe Kim Don't wait to buy real estate! Buy real estate and wait! 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.

Not to pile on to @Ali Boone but I have never seen her state how many homes she owns. And I find it incredibly hard to believe that someone who has a portfolio and claims to be in the business of marketing turnkey doesn't collect statistics on her own portfolio. I know I calculate all kinds of percentages on my properties, vacancy costs, maintenance cost ratios, ROI, COC, ROE etc. C'mon Ali, tell us how big is your portfolio. I have 8 turnkeys in Indiana and 2 rentals in the Bay Area (not turnkey).

Kyle, you asked a few questions and this forum has taken on a life of its own, but since my name has been brought up a couple of times and I couldn't find where anyone had really answered a couple of questions, I thought I would chime in. First off, there is nothing special about turnkey. It is a marketing term created to describe the simple process of buying a single-family home (now it is even being used for multis and commercial) that has been or will be renovated, tenanted and managed. Nothing more and nothing less. It seems to have taken on a life of its own as some savior for some investors when in fact it has existed for a very long time, just as an extremely niche product and mostly for more savvy and in-the-know investors. Not really sure how to put that last sentence any other way - new investors simply were not aware until the last 6-8 years that something like this existed unless they were introduced in a REIA or something. So after saying all of that and understanding that it is nothing more than a "way" to buy a single-family investment house,in my opinion, there is no reason to expect that very many investors are going to own more than one or maybe two turnkey properties. Josh Dorkin and I undertook an investor study three years ago and then I ran the study again the next year and it pretty much showed that the average number of properties an investor owns was close to two. I suspect a vast majority own only one and a small but significant number own way more and that brings up the averages. @Matt Rosas I will update my numbers tomorrow once I pull them from our property management company, but they will show that the average investor with our company owns three properties. However, that is skewed because a majority of those investors only own one property. Roughly 15% of our investors own 5 or more while close to 40% own only one. Again, I could be off a little, but we are now at roughly 3,050 properties under management and I will update tomorrow AM the breakdown of investor owned properties for our company across all three cities. As for property managers, turnkey or not, an investor with one property is an unsettling prospect. They are either going to be happy or sad all the time - no inbetween. Their property is either occupied or it is vacant. Happy or sad, which stinks for the investor and it stinks for the PM company. You are either the hero or the goat. I can't speak for other companies, but we work hard to help investors get to that second or third property. It makes a big difference in their ability to actually hit a consistent return number. It helps tremendously to have a bucket for your buy & holds and not simply one rent income. As for Turnkey numbers, I can tell you that @K. marie poe is right (at least I think she is the one who pointed out) that many TK companies are young companies. They have popped up - many in the last couple of years and in some cases with little real life business experience. They are may be off with numbers, they may put too much emphasis on their own ability and they may view this as nothing more than a business transaction. Meaning that the numbers are what they are and it is up to the investor to do their due diligence. I have heard more than once that the investor is responsible for their buying decision and if they miss something then shame on them. Obviously, that is a ridiculously poor way to do business and there are many, many good companies around the country who do not operate that way. That being said, anyone can make mistakes with numbers or be too optimistic with their numbers. Doesn't mean they do it on purpose or with malice - sometimes they do not know better - they haven't experienced enough to know yet. For your statement about investors using turnkey as a spring board. I would say you are right and that may happen in a few instances, but that has not been my experience. The last time we surveyed our clients, roughly 10% were also active investors while closer to 30% had other passive investments in real estate such as notes or lending. I just don't think there are a lot of investors who buy turnkey thinking it will lead them to active investing. Maybe the other way around a little but not turnkey first in my experience. Last reminder on turnkey companies, people make mistakes. I would be the first to tell you that my company is not perfect. HOWEVER....so do real estate agents, contractors and rental agents and property management companies. If a buyer feels they are working with a company deliberately trying to take advantage of buyers - they should walk. If not, then remember that people and companies make mistakes - the real gauge should be if they correct those mistakes. I wouldn't expect to hear too much from Turnkey investors. They are no different from other buy & hold investors. I believe most have one maybe two and a minority own a lot more, but they are still passive investors. This site is fantastic but it is filled with active investors and users in some form of real estate business. I liken it to stock forums. I am a passive investor in the market with a good portfolio and yet, while I read on those forums, I do not post. Half the time I have no idea what they are talking about and the rest of the time I couldn't care less to get involved. They often make fun of investors who do what I do by turning over my money to someone smarter than I am about the market and whose job it is to make me money. I can imagine that is the case here at Biggerpockets. There was a time when a Turnkey investor would speak up about their experience - good or bad - and most likely get badgered by other users for not their stupidity for not being a "real" real estate investor. That does not happen anymore, but instead has been replaced by people like me posting on behalf of turnkey investors. Maybe, as time goes by, more and more actual turnkey investors will post more about their experiences. When, damn that was long. If you made it down to this point you are a committed reader!! Best of luck to you....

@Jon Alke "Expecting a property manager who loses $70 if my revenue falls by $1000 to "care" as much a I "care" about losing the other $930 is not realistic." I am not sure I totally follow you on your logic here. Of course it hurts to lose $1,000 a lot more than it hurts to lost $70, that goes without saying. And I was not criticizing you in any way, you are very successful and I ADMIRE that! More success to you! But in my way of thinking, an investor who won't use a PM because "no one will care about the investment as much as I do" is a weak argument. No one cares about my car as much as I do, but I still take it to a professional mechanic to fix it. No one cares about my children (of which I have six) as much as I do but I still trust others to educate, provide health care and provide other PROFESSIONAL services. And even though I was a property manager for years, TODAY, a PROFESSIONAL PROPERTY MANAGER will do a LOT better job than I will ever do. Talk about Economies of Scale! I get a full "Spring Service" including changing out all HVAC Filters, Smoke Detector Batteries, Sprinkler System check and repair, and a complete inspection by a Professional Contractor for a cheap price. That's because my PM orders 5,000 of them to be done. When I have a rental coming vacant, my PM emails their CURRENT 6,000 plus tenants that an availability is coming and see if they have any friends or family looking for a rental. Some times, I have two moving trucks in the driveway, one leaving and one moving in, because of my PM. But usually I leave a week vacancy for clean up and repairs. The intangibles provided by a Professional Property Manager are priceless. And a GOOD Property Manager WILL care about your success as much as you do. Not in the same way as you do, but in the way knowing that your success is also their success. They also treat their tenants well knowing that good referrals are priceless! I have no problem with people who want to manage their own properties. As a matter of fact, I still manage ONE of my own, because it is four miles from me. It was a past personal residence, so I know the house well. But, it still irks me when I get the occasional call "The AC is not working" or "The toilet is clogged." I answered calls like that for 30 years, time to move on. After each of those calls, I threaten to sell that house and buy something THOUSANDS of miles away. Which, by the way, 20 of the houses I own I have NEVER seen. Talk about being unattached!!! NEVER seen, not even when I bought them. We all want to succeed and we all appreciate success when it is achieved. And for each person, "SUCCESS" is defined a little differently. For me, it is knowing that if I die tonight, NOTHING will change with my Real Estate Investments. All my rents will be automatically deposited every month, the properties will be well maintained, turnover is light and my heirs can get on with their own lives and careers. I spend a little less than $2,000 a month on PM, mere peanuts. And because I do, last year I paid $500,000.00 for $800,000.00 worth of Real Estate, buying eight Single Family Homes in three different states. There was no way I would be able to do that if I were self managing my rentals, saving $1,800 to $2,000 a month. My time is better spent, WHEN I WANT TO WORK, finding deals than it is collecting rent and fixing properties. Earlier I mentioned we just returned from a two month road trip. We bought a Montana Fifth Wheel in June, 2014 and this was our 14th trip in it in 12 months, 30 weeks on the road! This is how I define success and I am happy! So Jon Alke, I APPLAUD your success and I admire your business model. Just remember that there are "different strokes for different folks" as we all play this game of Real Estate Investing! As for Turn Key properties, I LOVE THEM, just do your DUE DILIGENCE!

Does Anyone Own ALL turnkey??

Kyle Scholnick

OP

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

11y

@Ariel Cohen

Excellent point Ariel, the exit strategy is another huge concern for a lot of people.

1 Reply

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:

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.

Thanks for clarifying. So you're selling a set price pkg and the investor wants it or they don't. This has been so edifying. Maybe I AM in the wrong type of RE biz. For the last several years, I negotiate very little to not at all and my investor buyers hate it.....but they buy at my asking. On my flat fee listings for fixers I don't typically negotiate. The buyer's agents hate that, but their clients buy at my price. I use full listing services on the rehabs and willing to do the counter offer thing a little with the consumer buyer. But I don't budge when the buyer or their agents threatens to cancel because I won't buy them a stove or whatever. My agents think I'm hard core (because they always want me to concede to get the deal closed).

I think selling TK rentals as a set price product makes a lot of sense. And manages buyer expectations in a good way. Thanks once again for giving me some good food for thought.

0 Reply

Jay HinrichsBusiness Member

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

11y

Originally posted by @Account Closed:

Thanks for clarifying. So you're selling a set price pkg and the investor wants it or they don't. This has been so edifying. Maybe I AM in the wrong type of RE biz. For the last several years, I negotiate very little to not at all and my investor buyers hate it.....but they buy at my asking. On my flat fee listings for fixers I don't typically negotiate. The buyer's agents hate that, but their clients buy at my price. I use full listing services on the rehabs and willing to do the counter offer thing a little with the consumer buyer. But I don't budge when the buyer or their agents threatens to cancel because I won't buy them a stove or whatever. My agents think I'm hard core (because they always want me to concede to get the deal closed).

I think selling TK rentals as a set price product makes a lot of sense. And manages buyer expectations in a good way. Thanks once again for giving me some good food for thought.

I think much of the sales and buy process is dictated by market conditions at the end of the day... Sellers market and then you have buyers market .. then you have transitioning markets from one paradigm to the other. Generally in our PDX market all listings sell for about 98% of ask... if there are concessions its generally with seller paid closing costs

But I had two low balls this week on new construction.. just countered back at full price they both went away.. got another offer coming in tonight on one that will probably fly.

In the turn key industry.. much of what is sold to CA residences are so much cheaper than what they are used to... the thought of quibbling over a few grand kind of goes out the window... I am sure there are some volume discounts given in the industry.. etc etc.

the exit though that op brought up is one of the really big points that is often over looked. Many investors that buy rentals think when they buy them its like a marriage its forever.. then something happens either they get burned out landlord syndrome.. or other personal issues and a sale is needed.. they are on their own.. the Turn key company cannot afford to sell the properties at RE commish rates they would go broke plus a lot of them are not licensed to do so and its not their business.. So the investors exit is one with a local realtor and since in most markets TK dominates the non owner occ sales. It makes it tough in areas that are renter heavy to exit.. because homeowners are not going to buy these.

So that is a very good point and one that is not addressed in the industry. Just like trying to sell your used Time Share in many ways when you buy a time share your buying from Sales pro's that get top dollar now your on your own to resell and one ususally takes a pretty big loss.

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Account Closed

Registered Nurse (ICU) · San Jose, CA · Member since 2014 · 496 posts · 332 votes

11y

@Kyle Scholnick hey Kyle sorry for the delayed response to asking me about more details to my turnkey experience. But here it is. You seem like a very detailed oriented person and unfortunately I can't give accurate detailed numbers on my turnkey performances because it's just to early to get accurate numbers. I started buying back in October so my first properties have only been cash flowing less than a year. However I will elaborate in general. generally speaking I bought 6 properties from 36k-67k. Rents are $900, $850, and 4 at $700. 4 were complete turnkey and 2 were off MLS using the help of a turnkey company. some had minor issues/repairs like a frozen pipe, leaking pipe, creeking doors, damaged step, and stuff like that. 1 got hit by the recent floods in Indy requiring new furnace and water heater. Another had mold from a backed up pipe and tenant not installing dryer properly. 1 off the MLS was bought with tenant in place and then I had issues with her so we evicted her and replaced her with someone up to our standards and no issues since. That has pretty much been all the expenses so far.

All things considered I am still very happy with all of them. That flood from what I understand is something out of the ordinary this year for Indy and from what I am hearing other investors have been hit a lot harder than me so I am not complaining. my ultimate goal is to earn $200-$250/Month off each property. By the end of the year with all expenses calculated I should make at least $200/ month for all properties. If all goes well some may even bring me $300/month but that will all depend on what happens over the next 6 months. Time will tell!

3 Reply

Keith Anderson

Investor · Cambridge, MA · Member since 2014 · 92 posts · 87 votes

11y

@Jay Hinrichs

This is one of our major concerns. Aside from looking at homeownership rates in the turnkey neighborhoods and analyzing comps on the MLS, how would you suggest assessing a turnkey property's resale potential?

We wouldn't be banking on appreciation but wouldn't want to have to discount heavily below what we paid.

0 Reply

Jay HinrichsBusiness Member

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

11y

@Keith Anderson

its all subjective because the event is not going to happen for many years down the road.

And at the pace that some of these markets is turning from homeownership to rental's IE the industry keeps expanding.. its pretty hard to determine.

what could be a nice owner occ street you buy on today 10 years from now it could be 50 % or better of rentals..

But price point is really key here in my mind... if your buying at or above the median price point for a market your going to buying in more owner occ areas that hopefully will stay that way because investors all wanting the best cash flow possible won't buy a house that brings in 6% or 5% they want 10 to 12%..

Its just a fact that in many markets that are CASH flow heavy and renter heavy it can be next to impossible to ever sell those homes to a homeowner.. so what you need to count on is rental increase's so that when you exit to an investor you can show the returns they are looking for... but where you are handicapped is you do not have a national marketing presence with other National marketing and international marketing companies repping your rental homes. you are forced to Craig's list or MLS..

So you take the WEst coast or East coast for example the higher value markets were median price is 300k or so... Well buying a 200k SFR rental that rents for 1500.. is not something most on this site would be taught is a good deal for cash flow.. But that same house can be sold retail to a homeowner thereby gaining the most equity out of it and it could jump up in value significantly ... not the mantra that appreciation is the icing on the cake... ( which I personally think is a silly).. I want appreciation I want to cash those 50 to 100k profits.. I want to be able to 1031.. etc etc.

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Matt R.

Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes

11y

Perhaps if the investment has weak exit outcomes or handcuffed exit options that is probably not a great investment. If someone is not willing to pay more down the road I am not sure that even qualifies as an investment. It is something less. I know many are chasing cash flow, perhaps a regular business is what pure cash flow plays should look like ie Subways etc...I have to wonder how valuable a loss at exit investment is really worth?

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David Krulac

Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes

11y

@Jay Hinrichs

& @Keith Anderson

We're looking for neighborhoods with good schools and low crime, as well as mostly owner occupied SF houses.

We do look for property not to exceed the median price which here is about $165,000. We're looking for bargains that are below the neighborhood prices.

We're also looking for properties that are priced lower than peak prices of 2008 time frames. And we're looking for properties that have had some updates.

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Jay HinrichsBusiness Member

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

11y

@David Krulac

are you exiting any of your portfolio IE homes you have had for rentals for say 5 to 10 years and now you can sell to homeowner ? and make cap gains ...

or when you flip do you just to short term flipping?

or just buy and hold like a real estate hoarder.. always buy never sell LOL I know a few of those..

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Account Closed

Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes

11y

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.

Again, thanks Chris for the clear information. See, its not so hard to disclose your holdings to gain credibility! Not that Chris really needed to gain more!

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Account Closed

Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes

11y

I've negotiated price on most of my turnkey buys. I had my set of criteria for evaluation and if I could not get the numbers to work I wouldn't buy.

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Registered Nurse (ICU) · San Jose, CA · Member since 2014 · 496 posts · 332 votes

11y

I think the bottom line hear is that most turnkey companies can and will offer you a fair deal where everyone makes money. A win win situatution. The idea is to build strong long lasting relationships for long term buissness. They want you to be happy with your investment and come back to them to buy more. That said I strongly believe they are at or just below market price on most occasions. Furthermore on the management side of things with the same company being my PM, a trust continues to build as you use them over and over again. As mentioned earlier they will look out for your best interest so that you keep coming back.

However if you want to save a few thousand dollars you can search the MLS yourself, build your own team, rehab the properties yourself, find a PM, and do all this from a million miles away. And as a beginner (like myself) do all this without any experience or expert knowledge of the area and market. In the end I think I would probably get screwed somewhere along the way by my own team apposed to a turnkey company. Especially since I'm not there to monitor my team.

For me I'm willing to pay a fair price that provides great cash flow for a property that is ready to go and rented. I sign the papers and start collecting rent. Doing it yourself takes time, expertise, and stress. I don't have the time, I'm clearly not an expert, and definitely don't want any more stress in my life. For my situation it's kind of a "no brainer".

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David Krulac

Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes

11y

@Jay Hinrichs

Kind of all the above. After 800+ deals, I still own the second property that I ever bought.

I like to own for a long time, I have some properties that are depreciated to zero, so that gives you an idea how long I've owned them.

I also like long term tenants, currently have a 30 yr, 21 yr, 17 yr, 15 yr and others who have rented the same place for long period. One 21 yr tenant would only move when I found them a property that fit their criteria which wasn't easy.

I only flip a couple or so a year. Bought a house settled, nine days later had another settlement selling it. didn't touch the property, no cleaning, painted, detrashing, etc, didn't even turn on the utilities. sold to rehabber, who fixed up and sold.

A lot of the properties are flip and flip, rehabbing and selling retail.

In general, I don't like the short term tax treatment. Have some properties for sale now that I rented for 2 to 12 years, and now are selling retail, kind of a hybred of fix and flip AND buy and hold, not sure if there is a name for that, but I like it.

I do like to thin the herd every year, selling some of the slower performers and replacing with faster performers.

On all the SFH that I have rehabbed and rented then sold, I can only recall one sold to an investor, they're going to owner occupants, retail. Even SFH fixed and flipped, I can't recall any sold to investors. Perhaps I should start marketing to investors and become a turn key operator.

So for new acquisitions I do straight flip, fix and flip, and buy and hold, besides the land subdivision and scattered lot work.

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Jay HinrichsBusiness Member

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

11y

@David Krulac

TK is calling your name... I had that thought as well,, but I like letting them do the heavy lifting and we just create the opportunity for them and that flows down to the opportunity for the investor.

Retailing homes is fun as well but I have one new construction going now with a Texas buyer and they are some what persnickety.. when they came out for the first walk through and go through the punch list they wanted to know if it rained much on the Oregon Coast.

It was everything I could do not t bust out laughing.. its a nice oceanview 2k sq ft with upper end finishs 435k and they are cash buyer so I am nursing it through the knot hole. If it was in Portland proper were I could sell it in probably a bidding war I would not be as congenial.

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David Krulac

Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes

11y

@Jay Hinrichs

In contrast I've only built one house and that was a custom house built to TENANT'S specs.

Yes, I built a custom house for a tenant, that they are still renting 15 years later.

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Account Closed

Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes

11y

Originally posted by :

Have some properties for sale now that I rented for 2 to 12 years, and now are selling retail, kind of a hybred of fix and flip AND buy and hold, not sure if there is a name for that, but I like it.

Buy. Hold and rent. Then fix and sell. Value add. Appreciation. I think that's called investing in real estate.

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David Krulac

Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes

11y

@K. marie

That part I got, but shouldn't there be a term for that like

BRRRR

Buy, Renovate, Rent, Renovate, Retail

I'm chilled with goose bumps!

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Jeremiah H.

Investor · Tavares, FL · Member since 2015 · 110 posts · 24 votes

11y

This is my first post on BP so take it for what you will.

I own 6 Turnkey properties and to this point they fit my lifestyle very well. I'm a small business owner and make 250k+ yearly. I have no issues with the 20-45k that I have to put down per home and I keep my houses rented at roughly a 95% rate via Facebook groups. It's a very easy process for me and my wife. We don't want to spend the time and money rehabbing homes. We typically buy a house and have a renter scheduled to move in within the first 5 days of closing. We fix very little, have had very little out of pocket cost due to the houses being TK. The renters are normally very happy with the house, they are extremely easy to rent, and the renters have been staying a reasonable amount of years to this point. We believe that's because we put them in a great house to start of with.

We understand this isn't the most profitable venture in real estate but it fits our lifestyle and still provides incredible returns compared to other standard investing.

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Jay HinrichsBusiness Member

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

11y

@Jeremiah H.

just curious as an accredited investor have you considered a little diversification.. perhaps with short term debt deals that the top crowd funding sites like Realty Shares and Realty Mogul do?

Have you considered being a private lender or JV ing fix and flips that if successful would give you yields 3 to 5 times what a rental home will in the short term

would be interested in your perspective.

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Registered Nurse (ICU) · San Jose, CA · Member since 2014 · 496 posts · 332 votes

11y

@Jay Hinrichs hey Jay. Can you please elaborate on what exactly crowd funding is. What it would take to be a private lender. And what exactly JV ing fix and flips means? I'm curious to know and definitely interested in diversifying.

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Jeremiah H.

Investor · Tavares, FL · Member since 2015 · 110 posts · 24 votes

11y

@Jay Hinrichs

No sir, I haven't looked into those sites. Between my business, rental homes, and stock market I'm comfortable with my diversification and have a home for my money. I've also never entered into partnerships. I realize this limits me to projects I can fund and manage myself but it also eliminates any partner issues that could arise. It's what works for me and my personality.

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Keith Anderson

Investor · Cambridge, MA · Member since 2014 · 92 posts · 87 votes

11y

Originally posted by @Jay Hinrichs:

@Jeremiah H.

just curious as an accredited investor have you considered a little diversification.. perhaps with short term debt deals that the top crowd funding sites like Realty Shares and Realty Mogul do?

Have you considered being a private lender or JV ing fix and flips that if successful would give you yields 3 to 5 times what a rental home will in the short term

would be interested in your perspective.

I'm accredited and not enamored with the crowdfunding models (so far). My interest in real estate is in the long-term benefits (equity build, cash flow, depreciation, etc), and all of the real estate crowdfunding platforms seem oriented to 12-36 month debt investments.

Considering that I can loan money on platforms like Lending Club in increments as low as $25, diffusing the risk over hundreds or thousands of micro-loans, I don't yet see anything compelling about putting larger sums into individual projects.

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Jay HinrichsBusiness Member

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

11y

@Keith Anderson

I am curious as to the default rate of the lending club type deals I have never done one .. as trying to move micro amounts of money for me is not a good use of my time.

I wonder over time if this type of lending will have a default rate akin to credit card paper.

what I see with the top crowd funders debt deals is a 98 or 99% pay rate.. Now the equity deals those are still up in the air as they have not ripened yet.. but on the quick flip debt loans I think well I know those two shops I mentioned have a pretty stellar record.

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Keith Anderson

Investor · Cambridge, MA · Member since 2014 · 92 posts · 87 votes

11y

Originally posted by @Jay Hinrichs:

@Keith Anderson

I am curious as to the default rate of the lending club type deals I have never done one .. as trying to move micro amounts of money for me is not a good use of my time.

I wonder over time if this type of lending will have a default rate akin to credit card paper.

what I see with the top crowd funders debt deals is a 98 or 99% pay rate.. Now the equity deals those are still up in the air as they have not ripened yet.. but on the quick flip debt loans I think well I know those two shops I mentioned have a pretty stellar record.

I think the default rate is probably going to be reasonably high, but even with a high default rate the returns are looking pretty good. We'll have to see though... both Lending Club and Prosper emerged during the economic recovery and there isn't good historical precedent for how they'll perform during harder times (unless you look at credit card paper, as you suggested).

I use a service that automates loan selection, so it's a fully passive investment for me. It's still not a big part of my portfolio but seems like the path of least resistance to private lending.

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Reed Starkey

Investor · Belleville, MI · Member since 2015 · 131 posts · 40 votes

11y

@Jay Hinrichs I put $1,000 into lending club maybe a couple years ago, and lost most of it. I am sure some of it is my fault, as I went for the high yield, bad credit score loans. I think I cashed out because I got locked out for some reason due to regulations. Either way, it was just a curiosity thing for me, and I didn't care for it much. I would rather spend more time and money on less deals. Then I could spend more time with due diligence.

Those are my 2 cents.

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Does Anyone Own ALL turnkey??

Does Anyone Own ALL turnkey??

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