Any turnkey providers helping with BRRR Strategy?

Buying & Selling Real Estate
9yFollow

Any turnkey providers helping with BRRR Strategy?

James Denon
Investor · Westbrook, CT · Member since 2016 · 79 posts · 27 votes

I am checking turnkey properties. Seems like all of them are charging above retail prices if you compare them with local comps. This makes the exit strategy difficult for the investor. If you hold the turnkey property 5-6 years and it is in a slow appreciating market like Indiana, you may lose money overall selling the house despite the $200/month cashflow you made because you paid too much buying it.

Are there reputable turnkey service providers out there who will wholesale you the property, charge you reasonable amount for rehab and manage the property for you? Essentially helping you do a BRRR in a good market like Memphis, Florida, Atlanta, Texas etc. and maybe indiana or chicago. I would imagine not, since they probably make most of their money with the markup they sell the property after rehab. So charging "reasonable rehab costs" would not fit into their business model. Thoughts?

I am interested in turnkey markets which are likely to keep up with inflation with their appreciation. So that would be 3% appreciation per year. I live in Connecticut and it really sucks because good cash flowing B- properties are hard to come by. Anything that cashflows well is a war zone. Also the appreciation is low in areas that make sense to invest for cashflow.

1Reply
55 views

Most Popular Reply

Rick SantasierePro Member
Real Estate Broker · Granby, CT · Member since 2015 · 694 posts · 317 votes
9y

@James Denon, there are markets that exist in CT where the cash flow can far exceed the prospect of what any future appreciation can give you. Filipe mentioned his scenario, which was a great one. His property "appraised" for almost 10% less than what he paid for it, however, the property ended up creating a nearly 40% Cash on Cash rate of return. It is virtually impossible to find everything you want in a property, and I find that sometimes we (analytical investors) can paralyze ourselves if we try to put too many stipulations on what we need in an investment property. With that said, patience is key, as well as the understanding that you need to adjust your views based on the property. Be open to different situations that could change your perspective from a prior deal you may have analyzed. You had mentioned a property that most likely required a full gut rehab a few days ago in an area that is considered to be a potential "war zone." Discussing the turn-key options is certainly another way to think about value (in terms of your time spent). Your return will be much less on a turn key investment (someone else does all the work and drops the "performing asset" in your lap to manage), but will afford you more "time." Time is the most important commodity that this world offers us, because you never get it back, ever. With that said, there are investors who make a business out of buying non-performing assets (like the one you mentioned in that bad spot), then spend a great deal of time, effort and energy getting it occupied, then they re-finance and do it all over again, or sell to an investor who doesn't who want the asset to be performing right out of the gate. Decide what is most important to you. Mike's comments above about creating "value add" is by far the best way to invest and repeat, and most of us thrive in that area. IF we have "time." If you are working 40-50 hours per week, time may not be in decent supply for you, or it might due to your level of passion towards REI. Either way, keep on analyzing, and reach out to some investor friendly brokers like myself, or agents like @Michael Noto who can help you hone in on your prize.

6Reply
See this reply in the discussion

38 Replies

Jump to latestLatest
  • Jennifer Slaughter
    Real Estate Agent · Fort Collins, CO · Member since 2016 · 246 posts · 142 votes
    9y

    @James Denon, do you want to invest with a turnkey provider and make money from appreciation or cash flow? Historically, real estate appreciation is greater than inflation but I understand your concern with certain markets that are slow to recover from downturns. When we were researching turnkey providers, our desire was to profit from cash flow since the high appreciating market we lived in was driving up prices which made it much harder to find good deals. If you want both appreciation and cash flow, I would go with a turnkey provider who has the flexibility to do a BRRRR. In a market where the cost of entry is low AND you get the forced appreciation from the rehab, you can get great returns. We have worked with @James Wachob and @Scott King in Memphis and we first got into the market by doing a BRRR- and now we are at the last "R"- Repeat, Repeat, Repeat.

    1Reply
  • James Denon
    OP
    Investor · Westbrook, CT · Member since 2016 · 79 posts · 27 votes
    9y

    @Jennifer Slaughter That is exactly what I am trying to do.. finding a turnkey provider who has the flexibility to do BRRRR.

    @Scott King @James WachobHow does it work? Do I buy the property from Auction.com and you do the rehab and manage it? Do you also help find the right market and property?

    1Reply
  • James WachobBusiness Member
    Real Estate Broker · Memphis, TN · Member since 2015 · 1k+ posts · 890 votes
    9y

    @James Denon lets speak about my model, offline. I will explain the BRRR strategy that is working for my friends who are investing in Memphis.

    0Reply
  • Scott Steffek
    Flipper/Rehabber · Crown Point, IN · Member since 2009 · 482 posts · 216 votes
    9y

    David Faulkner,

    I'm curious as to how you can make a blanket statement, that anything that cash flows well is in a "war zone". I'm also interested in what percent of CCR you feel is "cash flowing well."

    0Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    9y
    Originally posted by @James Denon:

    I am checking turnkey properties. Seems like all of them are charging above retail prices if you compare them with local comps. This makes the exit strategy difficult for the investor. If you hold the turnkey property 5-6 years and it is in a slow appreciating market like Indiana, you may lose money overall selling the house despite the $200/month cashflow you made because you paid too much buying it.

    Are there reputable turnkey service providers out there who will wholesale you the property, charge you reasonable amount for rehab and manage the property for you? Essentially helping you do a BRRR in a good market like Memphis, Florida, Atlanta, Texas etc. and maybe indiana or chicago. I would imagine not, since they probably make most of their money with the markup they sell the property after rehab. So charging "reasonable rehab costs" would not fit into their business model. Thoughts?

    I am interested in turnkey markets which are likely to keep up with inflation with their appreciation. So that would be 3% appreciation per year. I live in Connecticut and it really sucks because good cash flowing B- properties are hard to come by. Anything that cashflows well is a war zone. Also the appreciation is low in areas that make sense to invest for cashflow.

    Perhaps check with bp member Jay Hinrichs. I read he knows of TKs that have locations in improving faster type hoods. This might be a few steps ahead location wise and possibly offer much higher profits/exits than most TKs available when compared. Good luck!

    0Reply
  • Lee Smith
    Residential Real Estate Broker · Indianapolis, IN · Member since 2009 · 477 posts · 304 votes
    9y

    @James Denon  I believe I am doing what you are speaking of here in Indianapolis.

    I generally help investors with the purchase, manage the rehab, handle the property management, and help with the sales on the back side. We can do any part or piece of that puzzle as well..

    It's a pretty involved process, but happy to discuss with you over the phone.. You get a pretty good savings in the process over traditional turnkey providers. 

    0Reply
  • Craig Bellot
    Property Manager · CT · Member since 2014 · 687 posts · 329 votes
    9y

    I would partner up with someone who has some experience doing this and has lenders lined up. 

    Once you find a deal your partner can bring in funding and rehab team. 

    0Reply
  • Steve Rayo
    Brooklyn, NY · Member since 2016 · 6 posts · 0 votes
    7y

    Reviving this thread... I've been talking to Turnkey Property Pro in Philly who essentially does this. Anyone else identified other companies with a track record on doing BRRRR end to end?

    0Reply
  • Joe R.
    Developer · Chicago · Member since 2019 · 16 posts · 4 votes
    7y

    @Steve Rayo I'm glad you revived this. We are actually working with couple investors on this strategy now as it's becoming more and more popular due to the elevated level of returns. 

    Here's the blurb I had on the other post: "Being on the project management/development side, I would highlight the importance of having a quality team in the area you are looking to invest in. There's a lot that goes into doing the BRRRR turnkey deal correctly. There will be service agreements, escrow accounts for construction holdbacks, POA (in certain instances), and more. Additionally, you have to be mindful of how the rehab and project management costs are treated so they are included in the cost basis upon refinancing." Make sure you discuss all of this upfront. 

    @Scott King In your initial post you noted the concern with the level of rehabs the providers might be doing. The level and quality of rehab should not change, regardless the type of strategy you are looking to utilize and always ask for upfront equity compared to the comps. It's important to have these conversations up front with the provider you are working with. We mainly work in the value-add space so we will go in and replace the bones of the property including, plumbing, electrical, furnace, ac, and anything else that is at the tail end of life cycle. 

    0Reply
  • Corby GoadeBusiness Member
    Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
    7y

    Most turnkey companies make their money by draining all of the equity out of a property and selling it above retail with a tenant already in place. That's exactly the reason I don't like that model- it cuts an investor off at the knees from day one. If you want to scale and grow a portfolio, that up front equity is absolutely vital or you will be stuck with one or two properties and no where to go. 

    Not to say there isn't a time and place for the model- it can be totally passive, but for most newbies, that education and involvement in the BRRRR process is important to your growth and negotiation strategies.

    Surely there is a better way...

    Best of luck out there!

    0Reply
  • Whitney HuttenPro Member
    Investor · Boulder, CO · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    @Steve Rayo I speak about this exact model on episode 340 on how I build to 20 properties.  However, I don't go through the turnkey provider, rather the property manager to get the rehab done.  I have greater control of the rehab budget and can work with my manager to produce a product that will mitigate my capex and be appealing to a tenant. Also, I can keep my costs down that way as the mark up won't be nearly as high.  Most turnkey providers who I've talked to about this strategy are looking for $6,500+ for this service.  It's a valuable service, however, I generally can't underwrite that into my numbers.

    Podcast Guest on Show How to Build Generational Wealth Without Losing it Along the Way
    0Reply
  • Nicole F.
    Member since 2019 · 9 posts · 0 votes
    7y

    @Whitney Hutten  I listened to your podcast episode and it was super inspiring!  I have one question, and apologies if you already answered it on the episode, but what type of fee structure did you arrange with your property managers for this project management service they provided on your rehabs?  Did you just negotiate a flat fee before each project based on the estimated level of effort? 

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free