Is going from turnkey to solo out of state a bad idea?

Question

I'm a fairly new investor in California, and I purchased a turn key rental in Memphis last year.

It has worked out really well, and is cash flow positive. I am planning on buying several more properties over the next few years, and I want to see if I can cut out the middle man to get higher ROI. I am also interested in doing some BRRR deals where I can re-use my down payment to get more properties.

Since I am interested in out of state deals, My plan would be to develop relationships with brokers, property managers, wholesalers, agents, and basically anyone in one specific area (don't know what that is yet) and try to find some deals. I would have to do as much as I could long distance, and fly in very seldom, or else it wouldn't make sense.

I am passionate about REI, but it's still just a side hustle. I want to learn more, and I'm willing to do some legwork, but it can't be more than a few hours per week because I have a business to run.

My question is, is this harder to do than I think? Am I crazy to think I can do this long distance, and part time, and be successful without a turn key company to help?

Thanks!

Account Closed · Answer

Do you want an investment or a business/job? Is REI your best skill and talent? Or is it your day job? Where is it better to spend your time and energy? For me, the answer is clear. I want an investment that has decent returns with minimal time spent. Turnkey works but I put a good amount of effort into it up front. Now I just let the PM do his thing and send me checks. If I wanted a business I may consider the other model but only in the event of not having the day job.

David Faulkner · Answer

In short, yes, I think you are crazy for putting your financial future 100% in the hands of others as you must do with out of state investing as a newbie, be it turnkey or BRRRR or whatever. How is it that you realistically think you think that some random dude from CA is going to beat out all the local investors who live there, intimately know the market, and look for deals every single day. And that's before you even pay profit, commissions, and markups to your entire team to do all that work for you to try to find such deals ... the fact that they are selling such deals to you rather than buying them up for themselves should tell you something IMO. You asked for opinions, and after 15 years of investing both locally and out of state, this one is mine. If you want passive REI that is not local to you, buy a REIT and save yourself the trouble.

Steve Hodgdon · Answer

@Scott Bolinger Lots of OC folks in the out of state niche. OCREIA and FIBI are great places to get in the game. Have you thought about performing notes or creating seller finance instead or being a landlord? I do both depending on whether I think the home will appreciate.

Tom Ott · Answer

It mainly depends on what you have time for. Most properties you find will need to be renovated. If you are not familiar with that area it might take a long time to get contractors who are going to get the job done right and in a timely manner. Also, you have to really know the market in terms of area/type of home. Turnkey providers should do all of this for you. Plus some companies who ONLY property manage are going to rely on fees to make money so watch out for that.

Vivek Khoche · Answer

@Scott Bolinger - If you are happy with your earlier decision then rinse and repeat. However I agree with @David Faulkner and suggest to research BP for details.

Good Luck

Vivek

Will Chamberlin · Answer

@Scott Bolinger, I am doing what you envision and if you have the right approach and mentality it can be worth it. I bought near where my wife & I have family so we are there occasionally to check in on things and can get local recommendations from people on which contractors to use. All of our tenants pay online so we are not chasing rent every month. There are drawbacks for sure and I make sure to analyze properties as if we are paying a management company for future considerations, but overall we have been happy with the strategy. I am eventually looking to have this be my full time early retirement gig and we are slowly making our way there. If it is want you want then go figure out a way to make it happen but understand the risks and rewards.

Ali Boone · Answer

Hey Scott! Well I'm a turnkey advocate all day long, but if you are willing to put the work in and take on the risk, you can certainly do everything yourself. I'd say it's completely dependent on your interest levels. I think owning a turnkey has probably given you a great foundation for knowing what to look for....knowing how to run numbers, what makes for a good property, etc. I think going turnkey is always a great first step to lead into doing it on your own.

If you want to message me, I can offer you an alternative option which combines turnkey and doing it on your own [mostly the re-using your down payment part of it]...so you get the best of both worlds. It requires higher capital, but you can pull most of it back out.

Eric Hyde · Answer

@Elizabeth Wilson I'd love to hear what you have to say on the matter too.  I'm in the identical situation!

Scott Bolinger · Answer

@Lane Kawaoka yes I'm still glad I purchased TK, and it still provides decent returns. I was basically buying as a retirement strategy. My goals have changed a bit recently, I'm considering taking a more active role to speed up my wealth building.

@Elizabeth Wilson thanks, looking forward to chatting!

Elizabeth Wilson · Answer

@Scott Bolinger - Hey Scott!   We are always up to talk with folks about partnering on projects.  I'll message you.

Is going from turnkey to solo out of state a bad idea?

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