Turn Key Rental Properties.
Real Estate Agent · Fort Worth, TX · Member since 2015 · 48 posts · 12 votes
Turn Key Rental Properties.
Most Popular Reply
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
10yDon't over complicate this.
For whatever reason people on this forum give the impression that there are only two options.
1. A full blown gut job rehab.
2. A freshly renovated turnkey house.
This is just not true, there are more options.
A house is a house, is a house.
Hookup with a Realtor and find an area that you are comfortable with. Look at some houses that are well priced and make some offers. Houses that were owned by little old ladies are great finds. They are usually in great shape but priced well because of how outdated they are. We have been very successful targeting properties that are decently price because they just need minor "love" to get them up to snuff.
59 Replies
- Real Estate Broker · Indianapolis, IN · Member since 2009 · 575 posts · 496 votes10y
Also, one thing that seems to be completely underrated in the whole cashflow / turnkey game is equity. People always talk about cashflow vs. appreciation but I very seldom do I here people talk about buying with equity. Well.. maybe not seldom, but not often enough I guess.
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes10y
@Steven Gesis, it looks to me like you need to embrace the word "middleman" as definitely applying to "Smartland" (or ANY Turnkey Operator)! But like @Ryan Mullin suggested, Investors should ask: is this Middleman adding better value to my investment dollar than if I didn't go with them? Cheers...
- Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes10y
Originally posted by @Ryan Mullin:
Interesting thread! Love a good turnkey thread...
I think @James Wise said it best. A house is a house. How you acquire it and have it managed doesn't make it apples vs. oranges. Its just a house.
The point of the thread is there is more than 1 way to skin a cat.
Acquisition, rehab, leasing and managing and exit. All ways you can create value and make money... OR screw up and lose money.
The labels "turnkey" "wholesale" etc... mean very little in this industry today. Although I do like some of the things that @Account Closed has said. Its like a purists approach to turnkey which is a philosophy I have been preaching for years (with very few listening or caring LOL).
As far as the Middleman debate... I think its just a matter of "does this person or entity add value to my investment or take value out of my investment???"
LOL... yes, these TK threads can be fun, you are correct there is more than (1) way to skin a cat.
Yes, risk in real estate is very real, the question is how do you mitigate it and force the large issues.
I think there is some systematic efficiencies that can be applied to acquisition and management. However, it is dependent on your goals at the end of the day. If you are investing local, acquiring a few homes a year, you can self manage, but at one point you will want a simpler solution. As you build wealth and portfolio, you enhance your capacity for sophistication and refinement. Just like anything else you need to be able to evolve as you develop and be better and more efficient. This is my view on Turnkey, it has been very successful to date and I respect others views and approaches.
I think you hit right on the head - everyone cut weigh this thought "does this person or entity add value to my investment or take value out of my investment???" - RESPECT! :)
At the end of the day a house is a house, but you may not want ot just own a house or just any house, be wise, pragmatic and systematic, as you embrace implementation of systems the soother and more effective your ROI.
Happy investing!
- Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes10y
Originally posted by @Brent Coombs:
@Steven Gesis, it looks to me like you need to embrace the word "middleman" as definitely applying to "Smartland" (or ANY Turnkey Operator)! But like @Ryan Mullin suggested, Investors should ask: is this Middleman adding better value to my investment dollar than if I didn't go with them? Cheers...
Brent, I appreciate your continued effort to paint the middleman position, however, I still think big difference between my organization the value being brought direct to the table and "middleman", we are a direct source, you enhance your positions with ready to go cash flowing assets with no premium, in-fact most properties are priced below ARV, you gain on capacity, volume and systems, its simple...... but, you are correct it is very important tor recognize how much value you gain, no matter whom you are doing business with. This is the purpose for doing all this at the end of the day, building wealth, finding value, gaining an edge on your personal aspirations. Appreciate the follow-up... cheers!
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes10y
@Steven Gesis, the ONLY "direct source" is the BUYER/OWNER!
EVERYONE else are Middlemen! (I must insist). EMBRACE it - and drop the "no middlemen" part of your marketing blurb, please. Thank You.
- Investor · Sierra Madre, CA · Member since 2015 · 12 posts · 4 votes10y
There are some great posts on this subject. My properties that are close enough to me, I have purchased them cheap (few years ago...), oversaw the rehab and manage them myself as long term rentals.
My out of state properties I purchased TK for a few reasons. Obviously the distance and time come into play (since I have a unrelated full time job), but also when you purchase TK, you can amortize the purchase price and rehab costs. As well, you don't have holding costs to cover while you complete the rehab.
Both ways have advantages, and I try to utilize both depending on my situation.
I hope this helps you in your decision.
- Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes10y
Originally posted by @Brent Coombs:
@Steven Gesis, the ONLY "direct source" is the BUYER/OWNER!
EVERYONE else are Middlemen! (I must insist). EMBRACE it - and drop the "no middlemen" part of your marketing blurb, please. Thank You.
Brent, I do not intend to ruffle feathers, however, we are the direct source, we OWN every single asset we offer, hence we are a direct source. We do not offer an opportunity to buy a home on the market or form someone and then assist with construction and then manage it, NO, we OWN the actual asset, we do not engage in the aforementioned process nor do we have any offerings of the sort. There is no middleman, we own it and you buy it direct......not sure how this is not a direct option for individuals. Sure, there are folks that perceive they are not middlemen because they bring you to the asset and the assist you in purchasing and then tag Turnkey to it, this is a middleman. We are a direct source, we own the physical asset, its really simple, any owner/buyer and get a operational asset direct off of our shelf, its that simple, this is not a promise or a possible opportunity, it is an immediate access to a home that is physically owned and can be sold/transferred to the Buyer/Owner.
- Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes10y
Originally posted by @John C.:
There are some great posts on this subject. My properties that are close enough to me, I have purchased them cheap (few years ago...), oversaw the rehab and manage them myself as long term rentals.
My out of state properties I purchased TK for a few reasons. Obviously the distance and time come into play (since I have a unrelated full time job), but also when you purchase TK, you can amortize the purchase price and rehab costs. As well, you don't have holding costs to cover while you complete the rehab.
Both ways have advantages, and I try to utilize both depending on my situation.
I hope this helps you in your decision.
John, point, point, point,very good well said and always enjoy hearing about great TK & self manage experiences.
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes10y
@Steven Gesis, I put it to you: as soon as your end-Buyer comes along and pays you for the property, you are NO LONGER the "direct source"! THEY are!
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
lets put it in this context... I build new homes to sell to homeowners.. I own the lot I get the contstruction loan my subs build the home and I sell it to my new homebuyers for a price that I certainly hope is more than my all in costs.. IE I made a profit.. ( most times this happens sometimes not or not so well)... then there are those that buy heavy duty rehabbers rehab them put them on the market ( usually through MLS just like I sell my new construction on MLS) and they are sold to new homeowners and hopefully there is a profit not always but usually. And the bigger the better right ?
Now you have companies that their model is to not sell to home owners but to sell to investors.. they buy rehab resell and hopefully make a profit.. I suspect they do better than we do on retail .. because they have less unknowns.. I imagine they get a bummer now and again but probably not to often.. because the inventory they go for is rental income and the competition is not homeowners its those backing into a rental property and a return.
So it stands to Reason that that if someone wants to buy a lot and build their own home they cut us builder developers out and get a better deal... It happens a lot but it takes a certain individual who wants to do that and frankly 99% of folks don't want to do that.. as they can't get a construction loan .. it takes another level of qualification for that scenario.
@Account Closed So now you take the marketing companies.. I suspect they only work in these areas that are dominated by rental SFR's.. I doubt they are selling properties here in Oregon or SEattle or SF bay area.. even though they could offer those services but those services they offer are probably not needed as the Real estate community handles it just fine.. So you have rental property developers across the country.. who are not good at marketing and who rely on marketing companies to sell their product.. And the marketing companies are really just RE brokers is really all they are.. they are bringing a seller and buyer together and earning a fee.. its up to the buyer to see if their brokerage services are of value.. and for them to check the market and make sure that the broker is just not marking up the same asset that can be bought on the general market or direct from the developer ( in this case turn key to coin a phrase)...
Some people want representation.. I am closing on a new build that I did in PDX this month I built 6 homes and one was on a busy street.. so I was having a hard time selling it for my price and I did not want to ruin the comps on the other 5 I built so I rented it for a year as I sold the others off... well I approached my tenant and said hey I will give you a smoking deal on this house.. we negotiated a price.. next thing I know their agent is calling me.. remember I have not listed it.. my wife and I are both Orygun brokers. but he wanted his own representation.. So I honored my price and he is paying this person out of pocket .. for the life of me I have no clue as to what he brought to the party.. I mean they lived in the home a year and it was brand new.. but they wanted someone to help them. So it does happen.
Many of the turnkey companies ( rental home developers) are getting better at marketing their own props.. at least I do see that.. and its up to the buyers to decide which way to go.
- Redwood City, CA · Member since 2014 · 83 posts · 19 votes10y
@Jay Hinrichs I'm not sure why you're directing a statement about marketing companies at me. As I've stated earlier in this thread, HomeUnion offers a soup-to-nuts, end-to-end service. We are in no way shape or form a marketing company. I cannot speak for them, nor do I know a lot about the value they add. You could call us a turn-key provider, but we don't operate the way most turn-key providers. We're different...and yes, it's definitely up to the investor to decide what value each type of company adds.
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Account Closed really so if we looked in all the markets you work and looked up homeunion we would find your properties on the tax roles like other turn key providers?
that's not what I have heard form others in the industry that currently work with you and or your company has pitched to rep the properties.. so that is why I mentioned that.
- Redwood City, CA · Member since 2014 · 83 posts · 19 votes10y
Originally posted by @Jay Hinrichs:
@Account Closed really so if we looked in all the markets you work and looked up homeunion we would find your properties on the tax roles like other turn key providers?
that's not what I have heard form others in the industry that currently work with you and or your company has pitched to rep the properties.. so that is why I mentioned that.
Just because we don't take ownership of the properties we recommend for our clients doesn't mean we're a marketing company. Like I said, we are not a typical turn key provider. We operate differently.
We do however offer an end-to-end solution. We get an understanding of our clients investment needs, find and vet properties (from a multiple of sources, the MLS, typical turn-key property providers, private owners, funds, etc), recommend only the cream of the crop properties that best meet each individual clients investment goals, assist them with financing (when needed), do all the legwork to acquire the property on their behalf, manage the rehab on the property (when needed), market rental to get good tenants, perform all the day-to-day management on properties and then, when our client is ready, help them sell it.
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Account Closed Sounds like what a competent RE broker would do.
glad you clarified that you are not the owner.. then your a broker or a marketing company or a hybrid.. I get it .. no problem there.. like I said if folks want to pay for a service who are we to say they can't or its not worth it.. everyone is different.
- Professional Property Investor · Brisbane, Queensland · Member since 2015 · 165 posts · 160 votes10y
This is an interesting discussion. On the one hand we have a company that operate basically as a "Buyers Agent" for their client by sourcing a property, handling the improvements and rental and making recommendations based on their experience and market knowledge. Sounds like a good service to me. A service that any novice or out of town buyer or even just a busy person could use provided they want to pay the price for the service.
The other alternative is a company that buys its own stock, rehabs, finds tenants and sells a finished product. A product it owns and is making a profit on.
The second company is really not obliged to disclose its margins, just like any other business, whereas the first company would no doubt have to disclose it's fees in order to be able to operate. Ergo a buyer choosing between either one has a choice of knowing the costs associated directly with one company but not with the other. However, does it really matter? If the total cost of any deals secured from either company was the same end price, who cares how much one makes and what difference does it make knowing that?
If I buy a property from company "A" at $200,000.00 with a potential real value of greater than $200,000.00 or the same property from company "B" at the same price what difference does it make? None!
So, in this regard what I think @Brent Coombs is saying is that they are both middlemen of a sort. On the one hand we have a company that buys their own property and sells their own property. i.e. If a buyer had found the property before this company then they could have no doubt bought the property in need of a rehab and for less money. They would then need to do the rehab etc and find a tenant. No middleman getting in first and making the improvements etc for a profit. Whereas they can use the other company and acknowledge a fee for service to do the job for them. Is this a middleman? I guess you could call them that or simply acknowledge they are a service provider just as your mortgage broker or your solicitor etc. All just service providers.
In regards to profitability, which is the only real reason we should be investing at all, it stands to reason that adding value in any way is a good thing as Brent mentioned above. The question therefore becomes is the added value great enough to warrant a client using either company's services? Only a buyer can answer that one.
If you are selling your own property, a property you own directly, then you are not a service provider, you are a retail seller of your property. If you are offering a shopping service for a fee then you are a service provider. Simple really. Don't know what all the fuss is about!
- Davenport, IA · Member since 2016 · 78 posts · 6 votes10yJames Wise what type of marketing strategies do you use?
- Investor · Detroit, MI · Member since 2016 · 18 posts · 4 votes10y
I would love to get some help with my turn key rentals
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes10y
@David Nolan, I believe you understood me. I have already inferred that the Seller of your property "A" is NOT a middleman (but a Buying AGENT is).
It seems like days ago that I wrote to @Steven Gesis: "if you mean: any property that is sold at market ARV, already tenanted, is called a "turnkey property", then I agree. No middlemen needed".
But apparently, it was only a few hours ago...
- Professional Property Investor · Brisbane, Queensland · Member since 2015 · 165 posts · 160 votes10y
@Brent Coombs LOL I know what you mean about time slipping by. I did understand you clearly, perhaps I did not express myself as well as I might have done. Neither of the company's are middlemen. One is selling their own stock and the other is a hired contractor hired to do a job. Either way these two guys are at logger heads over semantics with neither really calling themselves what they really are. A retail seller and a service provider. In Australia we do not have such things as "Turn Key Providers". We do however have retail sellers and buyers' agents. But hey, what's in a name?
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes10y
@David Nolan, I already realized my "almost understood" comment wasn't right, so I edited it (hoping you hadn't seen it, but...). Cheers.
- Professional Property Investor · Brisbane, Queensland · Member since 2015 · 165 posts · 160 votes10y
@Brent Coombs no problem Brent. I was having a coffee break at the time otherwise I would probably not have seen it. In fact, I think I'm still having the same coffee break...LOL
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes10y
@David Nolan, yeah, I find guessing my time of the week a BIT easier if there's only MINUTES between posts! Ha!
- Real Estate Agent · Austell, GA · Member since 2014 · 232 posts · 74 votes10y
I'm not in a position where I can afford to invest without adding significant value. If you are, that's great. Buying turnkey saves a lot of time and energy. Personally though, I have to increase the value of my properties significantly in order to acquire funds for the next deal.
- Wholesaler · Richmond, TX · Member since 2016 · 1 post · 0 votes10y
Both strategies can used successfully. The answer depends on your overall investment strategy, goals, and access to cash. You will typically produce greater returns on buy-fix-rent properties. However, the cash investment will be significantly higher that purchasing turnkey. What's most important is that you purchase properties that fit your buying criteria.
- Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes10y
Originally posted by @Jay Hinrichs:
lets put it in this context... I build new homes to sell to homeowners.. I own the lot I get the contstruction loan my subs build the home and I sell it to my new homebuyers for a price that I certainly hope is more than my all in costs.. IE I made a profit.. ( most times this happens sometimes not or not so well)... then there are those that buy heavy duty rehabbers rehab them put them on the market ( usually through MLS just like I sell my new construction on MLS) and they are sold to new homeowners and hopefully there is a profit not always but usually. And the bigger the better right ?
Now you have companies that their model is to not sell to home owners but to sell to investors.. they buy rehab resell and hopefully make a profit.. I suspect they do better than we do on retail .. because they have less unknowns.. I imagine they get a bummer now and again but probably not to often.. because the inventory they go for is rental income and the competition is not homeowners its those backing into a rental property and a return.
So it stands to Reason that that if someone wants to buy a lot and build their own home they cut us builder developers out and get a better deal... It happens a lot but it takes a certain individual who wants to do that and frankly 99% of folks don't want to do that.. as they can't get a construction loan .. it takes another level of qualification for that scenario.
@Account Closed So now you take the marketing companies.. I suspect they only work in these areas that are dominated by rental SFR's.. I doubt they are selling properties here in Oregon or SEattle or SF bay area.. even though they could offer those services but those services they offer are probably not needed as the Real estate community handles it just fine.. So you have rental property developers across the country.. who are not good at marketing and who rely on marketing companies to sell their product.. And the marketing companies are really just RE brokers is really all they are.. they are bringing a seller and buyer together and earning a fee.. its up to the buyer to see if their brokerage services are of value.. and for them to check the market and make sure that the broker is just not marking up the same asset that can be bought on the general market or direct from the developer ( in this case turn key to coin a phrase)...
Some people want representation.. I am closing on a new build that I did in PDX this month I built 6 homes and one was on a busy street.. so I was having a hard time selling it for my price and I did not want to ruin the comps on the other 5 I built so I rented it for a year as I sold the others off... well I approached my tenant and said hey I will give you a smoking deal on this house.. we negotiated a price.. next thing I know their agent is calling me.. remember I have not listed it.. my wife and I are both Orygun brokers. but he wanted his own representation.. So I honored my price and he is paying this person out of pocket .. for the life of me I have no clue as to what he brought to the party.. I mean they lived in the home a year and it was brand new.. but they wanted someone to help them. So it does happen.
Many of the turnkey companies ( rental home developers) are getting better at marketing their own props.. at least I do see that.. and its up to the buyers to decide which way to go.
Jay, I always enjoy your input and view on these subject matters, you are great!
Yes, this is a good perspective and spin, some people need this service and others do not.
Nice way to summarize it!
Join the conversationCreate a free account to reply, vote on answers and follow this thread.