Is there such thing as turnkey apartment?

Question

Hello, I'm just curious if there is any "turnkey" apartment in B/B+ neighborhood in the 750k-1M range? What does the actual number look like (no pro forma please)? Or is there such thing as turnkey apartment at all? If there isn't, what do I need to do upfront other than due diligence?

Basically I'm looking at investment that requires little ongoing attention. And I'm comparing purchasing 10-15 turnkey SFHs or one turnkey apartment, both for long term buy&hold. What's the pros and cons for each? My goal is 10%+ CoC return with 25% down, 6% interest, 30yr.

Thank you!

Leslie Pappas · Answer

Hi Hanbin Y., if you are an accredited investor, you can buy into institutional grade $50-125M projects with as little as $100,000 and diversify. Professionals with decades of experience and very impressive track records do all the heavy lifting for you. You get potential cash flow, tax shelter and appreciation. Loans are non-recourse. This is the world of Delaware Statutory Trusts. I wrote a book on this that was released in January called Cashing In Tax Free.  If this interests you, you can start to learn more at my website. Please let me know if I can help. Leslie

David Thompson · Answer

Lane, my thoughts exactly. Become a GP with others willing to do the work. Your role is to provide capital in exchange for being part of the GP.  This entails a higher degree of risk as you may be on the loan but also opportunity for higher returns.

Or, even more passive, invest in a syndicate deal and be completely hands off. Im involved in deals as a syndicate and review deals where 10% CoC is very achievable and IRRs north of 20% are common.  As a limited partner, your risk of loss is just your investment, not personal assets.

Hanbin Y. · Answer

Account Closed Thanks for your comment! I was trying to do it myself, then I found the time and energy needed won't fit my current situation. So, what would be a realistic CoC goal for turnkey with 25% down?

Account Closed · Answer

Hanbin,

When something is turnkey, the value has already been extracted by the provider in general. What you see on the offering memorandum is usually not realistic.  It's the seller's or listing agent's job to dress up the numbers as as nicely as possible to give the property the highest NOI possible, thus higher wishing/selling price.

Let's put yourself in the seller's shoes.  If you own something that's turnkey and produces 10%+ CoCR, would you sell it?  If not, what makes you think someone would want to sell an income minting asset like that?

If you want something that's turnkey and produces your desired yield, I'm afraid you'd have to roll up your sleeves and do it yourself.  Sacrifice a couple years of your life to get the desired results for years to come seems like good trade to me.

Just a warning.  When you get into CRE, you're swimming with sharks.  Just be sure not to get eaten.  If you can get into the inner circle, watch your net worth explode.

Best of luck.

Hanbin Y. · Answer

Lane Kawaoka So do you think it's better for me to spend 1M in 10 SFH or a 15 unit (estimated number)? Assuming both are just renovated and both a solid b-class. Provided that I will purchase SFH off turnkey provider, or multi from MLS. Both are paid a market price (may pay more for the Multi). Which do you think it's best for me to start out with? Thanks.

John Casmon · Answer

Hanbin Y. on investing in a syndication deal or as a passive general partner. In theory, you could find something turnkey, but a turnkey apartment with your criteria will be hard to find and probably snatched up before you even have a chance to know about it. If you just want the returns, let someone else do all the work to find and vet deals. You vet the person and confirm the numbers on the deal.

Alex Franks · Answer

@Hanbin Ying

First ,what are you trying to accomplish? Second what are your goals? Third you know I'm more of a fan of multifamily even as I build turn key. My thought process is always do I want to own 15 homes or one 15 unit. 15 unit seems to be easier to control and less headache. Then again management on both is the key.

You are going to get a lot of answers but to me diversifying a portfoilio is what I like. Then using leverage to  buy and then diversify what Im doing to help pay down the debt. Keeping assets long term and little to no debt paying off as soon as possible. This way I don't have to worry about the market if it goes up or down or the word market correction comes in to play.

So on the left I build turn key then on the right side I use those funds to buy or build Apartments to keep for long term wealth .  I want these put those assets in family trust to be kept in the family for ever.

So I again every one is different and each has a different approach just depends on what you  are trying to accomplish.

Alex

Alex Franks · Answer

@Hanbin Ying Sorry I disagree with most here. This is not something you are going to find from whole salers or others. This is going to require work and a lot of it. Most of the sophisticated investors move on from single family into multifamily deals. So this is not some thing that will be on the MLS or shared at your local meeting. Here in both NC and SC very hard to find any Multifamily.

As for the mind set yes why own 100 homes when you can buy 100 unit apartment.

Food for thought  and  look forward to speaking sunday

Alex

Is there such thing as turnkey apartment?

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