Turnkey homes through investment companies

Buying & Selling Real Estate
9yFollow

Turnkey homes through investment companies

Dave Whittaker
Rental Property Investor 路 Kennett Square, PA 路 Member since 2017 路 6 posts 路 2 votes

Does anyone have any positive or negative experiences purchasing homes from an investment company which they rehab, screen tenants and property manage in another state?  These homes go for 40-45k after rehabbed which would be cash purchases.  

0Reply
28 views

Most Popular Reply

Tom Ott
Equity Raiser and Turnkey Provider 路 Cleveland, OH 路 Member since 2016 路 4k+ posts 路 1k+ votes
9y
Originally posted by @Dave Whittaker:

Does anyone have any positive or negative experiences purchasing homes from an investment company which they rehab, screen tenants and property manage in another state?  These homes go for 40-45k after rehabbed which would be cash purchases.  

$40k-$50k AFTER rehab??? Which market are you looking into? We are no longer living in 2008. You might want to check out the neighborhood. Just because a property is super cheap, does not mean it will be a great investment. You have to wonder what kind of tenants you will be getting. Are they really the kind that will stay the length of the lease and pay on time without going to eviction court???

Try looking at:

The Best Types of Markets for Profitable Turnkey Properties

and

What to Ask When Working With a Turnkey Provider

3Reply
See this reply in the discussion

16 Replies

Jump to latestLatest
  • Ali Boone
    Real Estate Coach 路 Venice Beach, CA 路 Member since 2012 路 6k+ posts 路 3k+ votes
    9y

    Is that from one company in particular? What market are they in? $40-45k after rehab is extremely cheap, especially for a fully-rehabbed tenanted property, and that cheap of property usually comes with a lot of risk.

    I've always bought my properties from companies who do all of that....turnkey companies...and it can work great if you are buying through the right company and buying the right properties, and in the right markets.

    But wait...are you talking about turnkey companies themselves or someone who, as mentioned in the other post, has formed a syndication with turnkey properties?

    1Reply
  • Tom Ott
    Equity Raiser and Turnkey Provider 路 Cleveland, OH 路 Member since 2016 路 4k+ posts 路 1k+ votes
    9y
    Originally posted by @Dave Whittaker:

    Does anyone have any positive or negative experiences purchasing homes from an investment company which they rehab, screen tenants and property manage in another state?  These homes go for 40-45k after rehabbed which would be cash purchases.  

    $40k-$50k AFTER rehab??? Which market are you looking into? We are no longer living in 2008. You might want to check out the neighborhood. Just because a property is super cheap, does not mean it will be a great investment. You have to wonder what kind of tenants you will be getting. Are they really the kind that will stay the length of the lease and pay on time without going to eviction court???

    Try looking at:

    The Best Types of Markets for Profitable Turnkey Properties

    and

    What to Ask When Working With a Turnkey Provider

    3Reply
  • Dave Whittaker
    OP
    Rental Property Investor 路 Kennett Square, PA 路 Member since 2017 路 6 posts 路 2 votes
    9y

    Apparently these homes are in the midwest in blue collar neighborhoods.  This particular company handles the purchase (my money), rehab, tenant screening, property management and I understand they charge 10% of the rent. I have a call scheduled with them to ask many questions but that is all the information I have at this point.

    0Reply
  • Tom Ott
    Equity Raiser and Turnkey Provider 路 Cleveland, OH 路 Member since 2016 路 4k+ posts 路 1k+ votes
    9y
    Originally posted by @Dave Whittaker:

    Apparently these homes are in the midwest in blue collar neighborhoods.  This particular company handles the purchase (my money), rehab, tenant screening, property management and I understand they charge 10% of the rent. I have a call scheduled with them to ask many questions but that is all the information I have at this point.

     I would suggest checking out the specific neighborhood. That seems way too low.

    1Reply
  • Ryan Wilkerson
    Real Estate Agent 路 Hampstead, MD 路 Member since 2017 路 19 posts 路 8 votes
    9y

    @Ali Boone I would be very interested to get your recommendation / feedback on reputable turnkey companies. 

    0Reply
  • Ali Boone
    Real Estate Coach 路 Venice Beach, CA 路 Member since 2012 路 6k+ posts 路 3k+ votes
    9y

    @Ryan Wilkerson Shoot me an email at my email address in my signature and I can send info there.

    0Reply
  • Ali Boone
    Real Estate Coach 路 Venice Beach, CA 路 Member since 2012 路 6k+ posts 路 3k+ votes
    9y

    Dave, I completely agree with @Tom Ott. Ask lots of questions, because those numbers are sketchy. Unless you're buying in bad neighborhoods or bad properties.

    2Reply
  • Larry Fried
    Investor/RE Broker 路 Eugene, OR 路 Member since 2014 路 3k+ posts 路 968 votes
    9y

    @Dave Whittaker That sounds like you might be looking at Morris Invest?  If so, there are extensive threads about the company.  Like others above, I would caution you that buying rehabbed properties in that price range are almost certainly going to not work out for you in the long run when you are investing at a distance.  To invest in better areas you should be looking at properties in cash flowing markets in the $80K range and above, preferably with at least $850-$900 rent IMHO.

    0Reply
  • Dave Whittaker
    OP
    Rental Property Investor 路 Kennett Square, PA 路 Member since 2017 路 6 posts 路 2 votes
    9y

    I appreciate everyone's responses!

    0Reply
  • Edith TenBroek
    Atchison, KS 路 Member since 2014 路 84 posts 路 19 votes
    9y

    I'll add my question to this thread as well.  Presuming we are talking about Morris Invest?  Is there anyone out there who has actually BOUGHT a house from Morris Invest and had a bad experience?  Please share details.

    Thanks!

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant 路 Summerlin, NV 路 Member since 2014 路 45k+ posts 路 66k+ votes
    9y

    @Edith TenBroek  for whatever reason its very difficult to get people to post when they make a major boo boo in investing they just tend to slink off into the sunset and never come back on line..  you may get a PM from someone ..

    The basic concept of a 40k turn key home is being questions because of basic logic.

    there is only so many layers of the profit onion..

    So if your end product is 40k  lets break it down.. not a sales pitch or what you want to hear.

    your turn key company or provider is going to want to make at least 10k.. that's common in the industry.. that leaves 30k to do all this... your contractor putting it all together wants to make 3 to 5k.. so that leaves say 25k to put it all together.

    to have a sustainable rental.. you need New mechanicals new roof.. sewer scoped and replaced if needed up graded plumbing and electrical.. new paint and flooring.. cabinets and appliances and hot water heater.. this all cost at least 15 to 20k.. leaving you to pay 5k for the asset... Now go on line and look were you can buy 5k homes.. and let me know what kind of neighborhoods those are in.. ???

    Or your cutting corners somewhere.. there is a term called lipstick on a pig.. this is what could be happening to get to that price point.. Also don't fall for the I do it in volume pitch... that is not real.. all contractors have contractor prices at the home depo myself included.. you get some discount but nothing over the top that allows a 25k rehab to be 15k  etc.

    AS well as its usually not until year 2 and 3 were these lower end units start to fail.. IE tenants move or don't pay rent houses needs more than usual turn over expenses as tenant base is tough.. etc etc..

    YOu really want 750 and up rents as well you need that much gross income to sustain the unit.. less than that its tough to create enough gross cash flow to properly capitalize the investment.

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    2Reply
  • Andrew Johnson
    Real Estate Investor 路 Encinitas, CA 路 Member since 2016 路 3k+ posts 路 3k+ votes
    9y
    Dave Whittaker I'm in the Jay Hinrichs camp on this one. I will, however, posit this a different way. How many $40K rehabbed homes do you see for sale that aren't being brokered by a turnkey company. I know when I (for fun) mess around in some of those markets what I've seen are "rehabbed homes" for $70K and disasters for sale for $20K. And (tip) you're only selling to investors in those areas, good luck finding an owner occupant. So to get to a $40K rehabbed home they either have to buy it for $5K AND make no margin on the sale or cut a lot of corners during the rehab process. A new coil for an air conditioner would cost $2K-$3K, good luck getting even break/fox plumbing work done under $1K, etc. Google what it costs (labor rate) to install flooring and then look at cost-per-sq-ft materials at Home Depot. You'll figure out pretty quickly what *can* be fixed and what can't if you're looking for a final sale price (including some margin) of $40K. Yes, I know, you can negotiate for labor and there are cheaper places than Home Depot for materials but there are some "order of magnitude" considerations here.
    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant 路 Summerlin, NV 路 Member since 2014 路 45k+ posts 路 66k+ votes
    9y

    @Andrew Johnson  I buy milliions of dollars in materials a year probably in the order of 10 million.. or more.. its such BS that these companies can save HUGE money doing it volume its all a pitch and the folks just don't know what they don't know they are drinking the cool aid.. :)  We get good pricing but you can't take a full 25 to 30k rehab and do it for 10k or 15k.. not possible. unless you simply don't do certain things..

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    2Reply
  • Andrew Johnson
    Real Estate Investor 路 Encinitas, CA 路 Member since 2016 路 3k+ posts 路 3k+ votes
    9y

    @Jay Hinrichs But you CAN hire a really talented photographer and market properties to out-of-state buyers than "never need to visit the property" because of in-house management 馃ぃ

    1Reply
  • Mike D'ArrigoPro Member
    Turn key provider 路 San Jose, CA 路 Member since 2010 路 4k+ posts 路 3k+ votes
    9y
    Originally posted by @Dave Whittaker:

    Apparently these homes are in the midwest in blue collar neighborhoods.  This particular company handles the purchase (my money), rehab, tenant screening, property management and I understand they charge 10% of the rent. I have a call scheduled with them to ask many questions but that is all the information I have at this point.

    $40K properties are NOT in blue collar neighborhoods. If they were, how much would properties in the bad neighborhoods be? I've been involved in the Indianapolis and Kansas City markets, which are two very affordable markets, but I can tell you that nothing in an area that you would want to invest is only $40K, especially with the surge in pricing that those markets have undergone the last few years. Another important point, when you put up your own money for the acquisition and rehab upfront, that is not a turn key property. Turn key means that it is rehabbed, rented and under management BEFORE you close. With the model that you describe, you take on all of the risks of the renovation. What happens if they underestimate the amount of rehab (it happens all the time). Rehab projects rarely come in on budget. What happens if they do a shoddy rehab and you've already paid for it, or even worse, don't finish the work. This business is littered with unsuspecting investors that have gotten taken to the cleaners. Do yourself a favor and buy better class properties that are truly turn key.

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