@Charles Lemelle repectully disagree with your statement that PM's Lenders and home warrenty companies give kick backs.
PM's in a turn key setting are generally owned by the turn key provider. and if there is any concession its usually a concession to the Buyer ... not kick back to provider.
Lenders would lose their licenses giving kick backs.. ( it could happen but usually just a beer or lunch).. no lender who Cherishes their NMLS license would risk it by giving kick backs on these small loans or any loans... Same with realtors.. there is customs to give little gifts but not kickbacks.
And home warranties are in the 300 to 450 range not much room there to give a kick back that would be meaningful or steer business.
Having been in the space since about the inception of the turn key business 2001.
Here is the list of who gets what in my experience.
1. original home owner gets paid.. be it bank , homeowner etc.
2. wholesaler may be in the deal and make a wholesale fee.. I see this a lot in certain markets not at all in others.
3. Contractor who does the rehab.. ( or if company is large enough they have in house crews).
4. HML private money lender or bank gets paid to provide acquisition and rehab loans or capital ( this is what I have done to the tune of 2500 plus times LOL) This can very greatly. I have not seem many in the turn key space that can get True Bank loans Like I get on my new construction in ORegon and Charleston IE 1/2 to 1 point and 5 to 6% apr and only pay interest on drawn funds. Cost of capital is generally in the 12 to 20% or higher APR range.. and they can easily pay that because the loan amounts are low. I suspect a few have internal cash but I don't know a one of them that has enough to fund a virguous turn key company.. I think when I was talking with Chris at Memphis invest to keep them in inventory and they are one of the top 5 providers that I know of .. its a 10 to 15 million dollar cash need at all times. so lots of money and lots of risk in that regard.
5. Now you go to sales and marketing... some sell most if not all through internal channels. IE They do their own webinars etc. Although as you pointed out with Norada Hipster, Maverick Home union etc.. those are companies that generally broker turn key companies properties for a brokerage fee IE they are Real Estate brokers bringing buyer and seller together and earning a fee.
Now in some settings this was quite high I have seen some charge as much as a 10k flat fee on 70k turn keys.... ( remember I see the HUDS LOL) . OR they get paid after the fact and not on the HUD there are some licensing issues here that are kind of foggy but its an accepted practice..
so if we can think that if there is a marketing company between you and the turn key provider they are making a fee I have seen as small at 3k and as stated as high as 10k..
So lets run the numbers:
if we have a wholesaler they made 2 to 5k generally
contractor is going to make 2 to 5k profit ( you pay this even if you were doing it yourself)
HML or funder is going to make 3 to 6k depending on the size of the deal and it could be more if the projects takes a long time as time is money.. and with investors using loans again closing get delayed for lender reasons so holding cost go up.
Marketing fee 3 to 10k lets use 5k as average I think that fair.
Now turn key company putting this all together for you wants to make a fair profit so say 7 to15k and some do quite a bit higher I have seen it up to 25k and more.
But today I see 7 to 15k which you MUST make other wise why be in the business.. I mean I build new homes and I am not going to do it take all the risk and we want to make 15% of gross as profit.. turn key does a little better but I am selling 400k homes so 15% is 60k per home and we close 30 plus a year... so it adds up.
3k ( wholesaler) contractor ( 4K) finaincing ( 5K) marketing 5K turnkey profit 15k
3 + 4 +5 + 15 = 27k added to actual costs.. and this would be minimum so if property is bought in its as in condition for 40k and 20 to 25k rehab... + 27k your at 87k for the turn key product.
this is generally how it goes..
And remember turn key folks that sell direct have to pay for marketing advertising travel to west coast etc to attend shows like realty 411 and other venues.
OR DIY and you can be in the home for less but whats your time worth do you have the cash to pull it off and the time.
