Long-term Turnkey investment numbers
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes@Diane G. I first started financing turn key operators in 2002... so I am probably the oldest on BP in that regard or have the most time at it... MI came a few years later.
virtually all the turnkey companies went out of business in 08 to 2010 or had to reorg.
You ask WHY.. well I can tell U why since you asked.
1. turnkey in the day was the BRRR strategy... I know those on BP think it was invented here in the last 3 to 5 years but not so.
2. I was the BRRR.. I was the HML loaning to the CA. investor to buy the mid west rental.. then they would get a rate and term refi and cash me out. BRRR
3. in those days and I started in all Places Detroit.... buyer would buy 4 homes at once usually get about 5 to 8k CASH BACK at close.. so I would get cashed out and the investor would get 20 to 30k cash deferred in their jeans.. plus in those days. 100 a month cash flow was the goal..
4. Why 100 a month because they got all this cash at close..
5. 08 hit and I was basically put out of business I could not make loans because no one could refi and I ended up owning over 200 homes scattered throughout the mid west.. IE west coast investors walked on my HML leaving me holding the assets.
6. Those companies that reorged did so by targeting SIDRA ( need to sell for cash only) and foreigners.. TK companies started going to AU and other countries with their cash buyers and making big presentations there.. Kathy Fehtke and many others.
Now that lending has come back in you have many that jumped into the fray in the last 10 years.. and you have the turnkey marketing companies.. which many are on BP... who market these for the local guys..
I think @Andrey Y. would need to talk to Local investors who have portfolios to see how they have done then you can back out management if they self manage.. Remember most folks only hold real estate 5 to 7 years .. and turnkey is no different lives change .. markets go up and down.. people realize they don't like landlording and exit all sorts of reasons.. I know many local investors in many of the turn key cities who live on their rentals and lived through the tough times and continue to grow their portfolios... but they are DIY all in house.
33 Replies
- Investor · North Charleston, SC · Member since 2017 · 277 posts · 91 votes9y
@Andrey Y., I confess I have only read a few of the concerns about long term cost of Turn Key rentals, but in my mind if you see the roof is recent and the rest of the property is reasonable... You run your numbers with reserves for rent, repairs, and capex; and they show a good return, I'd say you have a good deal. Perhaps your research might show differently so I am happy to follow. Cheers, Buddy
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes9y
Originally posted by @Buddy Holmes:
@Andrey Y., I confess I have only read a few of the concerns about long term cost of Turn Key rentals, but in my mind if you see the roof is recent and the rest of the property is reasonable... You run your numbers with reserves for rent, repairs, and capex; and they show a good return, I'd say you have a good deal. Perhaps your research might show differently so I am happy to follow. Cheers, Buddy
Thanks for your comment. What you mention should work, in theory. Trying to elucidate how it actually plays out in the real world.
- Investor · North Charleston, SC · Member since 2017 · 277 posts · 91 votes9y
I will be following the thread.
- Monterey Park, CA · Member since 2014 · 157 posts · 80 votes9yAndrey Y. I'm only 5 yrs into my RE investment so I will be following this thread to see how others have done. Be mindful that like S&P 500 (and stocks) it all depends on when people buy / sell the property so performance will vary. The only good thing about RE is that you can't sell quickly so there is no panic selling or machine trading like flash crash. :) Diane G. I think Memphis Invest has been around for more than 8 years but I don't think those owners are active on BP. Thanks. Henry
- CA · Member since 2016 · 1k+ posts · 1k+ votes9yI know of someone who held 2 properties in Austin for about 10 years now... he said that no real price appreciation over that 10 years... cash flow about $150 per door per month... Said that was his biggest regret to buy OOS.... All his friends/family who bought local are hundreds of thousands into equity now, is not million...
- Investor · Los Angeles, CA · Member since 2016 · 577 posts · 240 votes9ylove this post! following!
- Investor · Seattle, WA · Member since 2016 · 15 posts · 8 votes9yDiane G. "No real appreciation" in Austin?!!? Over a 10-year period?!?? ...I can't even fathom that.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Diane G. I first started financing turn key operators in 2002... so I am probably the oldest on BP in that regard or have the most time at it... MI came a few years later.
virtually all the turnkey companies went out of business in 08 to 2010 or had to reorg.
You ask WHY.. well I can tell U why since you asked.
1. turnkey in the day was the BRRR strategy... I know those on BP think it was invented here in the last 3 to 5 years but not so.
2. I was the BRRR.. I was the HML loaning to the CA. investor to buy the mid west rental.. then they would get a rate and term refi and cash me out. BRRR
3. in those days and I started in all Places Detroit.... buyer would buy 4 homes at once usually get about 5 to 8k CASH BACK at close.. so I would get cashed out and the investor would get 20 to 30k cash deferred in their jeans.. plus in those days. 100 a month cash flow was the goal..
4. Why 100 a month because they got all this cash at close..
5. 08 hit and I was basically put out of business I could not make loans because no one could refi and I ended up owning over 200 homes scattered throughout the mid west.. IE west coast investors walked on my HML leaving me holding the assets.
6. Those companies that reorged did so by targeting SIDRA ( need to sell for cash only) and foreigners.. TK companies started going to AU and other countries with their cash buyers and making big presentations there.. Kathy Fehtke and many others.
Now that lending has come back in you have many that jumped into the fray in the last 10 years.. and you have the turnkey marketing companies.. which many are on BP... who market these for the local guys..
I think @Andrey Y. would need to talk to Local investors who have portfolios to see how they have done then you can back out management if they self manage.. Remember most folks only hold real estate 5 to 7 years .. and turnkey is no different lives change .. markets go up and down.. people realize they don't like landlording and exit all sorts of reasons.. I know many local investors in many of the turn key cities who live on their rentals and lived through the tough times and continue to grow their portfolios... but they are DIY all in house.
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes9y
Originally posted by @Diane G.:
I know of someone who held 2 properties in Austin for about 10 years now... he said that no real price appreciation over that 10 years... cash flow about $150 per door per month...
Said that was his biggest regret to buy OOS.... All his friends/family who bought local are hundreds of thousands into equity now, is not million...
I am positive several large turnkey outfits were established more than 10-12 years ago.
I also would like to know how this person purchased 2 properties in Austin, and managed to not realize ANY appreciation. Something seems off there.
I chose 8-10 years to get a solid sense of long term viability, because CapEx or any other large maintenance issues would have transpired by this point.
- Investor · San Jose, CA · Member since 2017 · 343 posts · 102 votes9y
@Andrey Y. - You have choice to form your opinion about TK or Non TK. The important point is your REI education. Please read the following link from longest investor I have known with TK experience. The most notable would be to ask when and how the properties went down hill.
https://www.biggerpockets.com/forums/311/topics/22...
Good Luck Investing
Vivek
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes9y
Originally posted by @Vivek Khoche:
@Andrey Y. - You have choice to form your opinion about TK or Non TK. The important point is your REI education. Please read the following link from longest investor I have known with TK experience. The most notable would be to ask when and how the properties went down hill.
https://www.biggerpockets.com/forums/311/topics/22...
Good Luck Investing
Vivek
Totally. Currently, I have less than 5% of my equity in turnkey (just 1 property). I guess, my mind is not made up either way since I've only had half a year ownership in Turnkey. I consider is a low-cost education either way :) If I recall correctly, I have come across several folks on here with long term properties that were purchased from a turnkey outfit.
- Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes9y
Originally posted by @Andrey Y.:
Happy 4th everyone!
Given the extremely varied opinions about investing in Turnkey properties on this forum - specifically, on whether they are actually profitable long term. I kindly request if you have owned your Turnkey properties for 8-10 years or more, please post actual (annual cash on cash return, pre-tax cash flow, and IRR) data. I think this would serve both the data junkies out there as well those of us a bit skeptical or at least curious if Turnkey properties are a viable long-term investment.
One of the most important things is to make sure you go with a TRUE turnkey company. Sometimes agents just use the word "turnkey" to see you a property. You want an actual provider who owns, renovates, and manages the property all in house.
I would suggest looking at:
How to Find the Right Turnkey Real Estate Investment Company for You
and
- 9yJames WachobBusiness MemberReal Estate Broker · Memphis, TN · Member since 2015 · 1k+ posts · 888 votes
@Andrey Y. you should connect with @Sean Tagge and @Mark Hart The key is to find a great team! Ideally you would find a company that has everything under one roof. Acquisitions team, renovation crews (fully licensed and insured), Property Management, and a Real Estate Investment Brokerage in case you ever decide to sell.
By teaming up with a solid firm you can mitigate your risk and have some "boots on the ground" that have your best interest in mind.
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes9y
I appreciate the links and referrals. It is absolutely true that you need to find a competent team with integrity when purchasing a property, especially out of state. This is true with any business venture. Hopefully, you might be able to assist with what I had mentioned in my original post.
- Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes9y
I am sure there has to be someone with decent returns over the last decade or so. Now if some compared those returns to some Reits over the same timeframe many might see a difference of hundreds of percentage points favoring reits. I know one I am in has had 300% returns in that same time period. You would need to bump up to the multi space to get closer and really how much profit can an average retail priced SFH produce? It is just not on average a designed investment like multis or Reits which are exclusively designed for investors returns.
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes9y
Originally posted by @Matt R.:
I am sure there has to be someone with decent returns over the last decade or so. Now if some compared those returns to some Reits over the same timeframe many might see a difference of hundreds of percentage points favoring reits. I know one I am in has had 300% returns in that same time period. You would need to bump up to the multi space to get closer and really how much profit can an average retail priced SFH produce? It is just not on average a designed investment like multis or Reits which are exclusively designed for investors returns.
That's interesting. I think of REITs producing 5-6% annualized returns, similar to a moderate risk mutual fund. Of course, an accredited offering in a multifamily syndication would produce higher returns on the order of 10-12%.
- Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes9y
Right on. My personal reit returns are running closer to 10%+ with reinvested dividends.
Side note: Consider partnering up on some flips. A guy with your know how and resources could easily make an extra six figures annually with a couple well thought out ones. For sure more risk and could lose six figures with the wrong peeps too.
- Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes9y
Hi Andrey. I bought my first turnkeys 6 years ago, and I don't have exact numbers to offer you for returns annually on them but I can tell you that I'm in the positive with them.
As far as why no one is actually answering your initial question- all of the turnkey buyers I know (which is a lot) really aren't on BP anymore. Once they learned what they needed to get started and they bought their properties, they don't have much of a need to be on these types of forums. These forums are generally geared towards learning, and they are past that phase. So I don't expect a lot of people to respond, mostly for that reason, but also because it is true that "turnkey" didn't become such a noted strategy until [less than] 10 years ago. Yes, the concept existed, but it wasn't as known or known in the same way as it is now. Turnkeys became popular with the crash, because that's when turnkeys popped up everywhere like crazy. So when people bring up turnkeys, they are referring to the more recent and more known concept of them.
I would offer you one major consideration in terms of getting your question more thoroughly answered. I would revise it to ask about returns on rental properties, in comparison to the initial characteristics of the properties. Reason being- once you buy a turnkey, it's the same as owning any other rental property. "Turnkey" is only a method of buying, not of owning. So once you own the property, there's nothing different with it.
So if you bought a random property, rent-ready, with similar projected cash flow and market characteristics as a comparable turnkey- how did it perform over the long-haul? That's what you are really asking.
It may not help to revise the question, and it may seem like a mild difference, but it the real underlying question really isn't about whether turnkeys perform, it's whether rent-ready properties with comparable projected cash flow pan out or not.
If that makes sense.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Ali Boone not to argue with you.. but turn key was just as big if not bigger pre crash as it is now. I was common for me to fund 4 to 5 turn key companies in one city.. today we are lucky to have one. So that is not a correct statement.. refer to my post above about what really happened LOL
- Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes9y
- Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes9y
Originally posted by @Ali Boone:
Hi Andrey. I bought my first turnkeys 6 years ago, and I don't have exact numbers to offer you for returns annually on them but I can tell you that I'm in the positive with them.
As far as why no one is actually answering your initial question- all of the turnkey buyers I know (which is a lot) really aren't on BP anymore. Once they learned what they needed to get started and they bought their properties, they don't have much of a need to be on these types of forums. These forums are generally geared towards learning, and they are past that phase. So I don't expect a lot of people to respond, mostly for that reason, but also because it is true that "turnkey" didn't become such a noted strategy until [less than] 10 years ago. Yes, the concept existed, but it wasn't as known or known in the same way as it is now. Turnkeys became popular with the crash, because that's when turnkeys popped up everywhere like crazy. So when people bring up turnkeys, they are referring to the more recent and more known concept of them.
I would offer you one major consideration in terms of getting your question more thoroughly answered. I would revise it to ask about returns on rental properties, in comparison to the initial characteristics of the properties. Reason being- once you buy a turnkey, it's the same as owning any other rental property. "Turnkey" is only a method of buying, not of owning. So once you own the property, there's nothing different with it.
So if you bought a random property, rent-ready, with similar projected cash flow and market characteristics as a comparable turnkey- how did it perform over the long-haul? That's what you are really asking.
It may not help to revise the question, and it may seem like a mild difference, but it the real underlying question really isn't about whether turnkeys perform, it's whether rent-ready properties with comparable projected cash flow pan out or not.
If that makes sense.
I hear you totally. But, in the large majority of cases, folks buying "Turnkey" are out of state buyers. If the folks are local, chances are good one would be a fool to buy turnkey.. since they would have local market knowledge, and would develop a niche that would make their investing more profitable. I do this within 6 months of moving to a new place organically.
The reason I didn't just ask for "out of state SFH numbers long term" is because THEORETICALLY, buying through a Turnkey company would produce better and more reliable returns for the out of state investor.. both implicitly and explicitly.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.