Turnkey Real Estate Research question.
Ronkonkoma, NY · Member since 2016 · 63 posts · 24 votes
Turnkey Real Estate Research question.
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Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
9yMy vote when this question comes up is to encourage people not to reinvent the wheel. There are a lot of people out there who have already done the market research and even gone as far as vetting turnkey providers (and their markets). If you start in on internet research, you could find a heck of a lot of numbers and info that you won't necessarily know how to interpret. Numbers are meaningless without the bigger picture, and it's not always easy to get the bigger picture.
So I encourage people to start out, instead, asking everyone where everyone is buying and who they are buying through. You'll start hearing certain markets and turnkey names over and over, so you'll start getting a bigger picture. Once you have that, then the trick is to start vetting the information about both those providers and the markets. Not every city where a lot of people are buying is necessarily a smart city to be investing in. Once you have a stockpile list of cities people are investing in, use your research time to figure out the market fundamentals on those cities and use those to start narrowing your search. Like let's say you keep hearing a lot about Indy, Chicago, Detroit, Cleveland, and Philly. What are the market fundamentals about each of those cities? Hint: some of them are stable growth markets, and some of them are not. Which ones, and why does that matter? Those are the questions that will lead you to the exact information you need to know in order to start making your decisions.
Not sure if this helps, but I wrote this a while back on how to find turnkey markets:
https://www.biggerpockets.com/renewsblog/2015/12/2...
Reach out anytime if I can help anymore!
52 Replies
- Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes9y
I'm interested in this as well as I am thinking of offering turnkey properties
- Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes9y
Originally posted by @Kenneth Lowry:
I want to begin my REI with out of state turnkey real estate. It seems like the best fit for me. From what I have been learning about it, the important things to research are the turnkey companies themselves and the areas to invest, both at the city level (because you want a city with growing employment potential among other things) and at the neighborhood level (because you don't want a high crime rate area, etc). My question is, what are the best sources of information for each of theses? I imagine the area research would be some type of internet information but I also imagine the research on the turnkey companies will not be so straight forward.
I would say internet searches are always best. You want to make sure you also get them on the phone and see how you feel after talking to them. Watch out for people who just throw the word around and are not real providers. True providers will own, manage, and renovate the property all in house. They should not be selling you homes off of the MLS or pushing you off on some management company after the sale.
You should look at:
The Best Types of Markets for Profitable Turnkey Properties
How to Find the Right Turnkey Real Estate Investment Company for You
and
What to Ask When Working With a Turnkey Provider
Good luck!
- 9yClayton MobleyPro MemberBirmingham, AL · Member since 2014 · 875 posts · 947 votes
Hey @Kenneth Lowry and @Michael Plante, great questions! While Tom is definitely correct that reaching out to speak to a provider on your shortlist, or even go out to visit them in person, is a fantastic way to get a feel for the business and the people you would be working with for 10+ years, a lot of the market info you need is definitely available online.
Here are some suggestions:
- For population, GDP, employment and housing stats, use the Bureau of Labor Statistics: https://www.bls.gov/home.htm
- You can navigate using Search or using the Subjects and Data Tools categories near the top.
- The easiest way is probably to just google 'bureau of labor statistics' and the name of the market you're looking at and the specific metric you want. So 'bureau of labor statistics birmingham unemployment' takes us right to: https://www.bls.gov/eag/eag.al_birmingham_msa.htm
- For crime stats, you can go to the FBI: https://ucr.fbi.gov/crime-in-the-u.s/2015/crime-in...
- Bear in mind these are just numbers out of context, so it would take some extra work to make them mean anything
- This is also helpful and more visual: http://www.city-data.com/crime/
- Bear in mind that any city center is going to have higher crime due to the larger population. If you want zero crime, you have to go out to very rural areas, where rental demand is low, so it's a trade off - don't let crime stats be your deciding factor.
- USE GOOGLE EARTH - Especially when you start talking turkey with a provider and they start giving you prop addresses, plug those bad boys into google earth and take a virtual walk around the area! I have seen, personally, some national marketing companies calling themselves Turnkey (they don't own the props themselves, they just advertise props owned by other companies around the country, red flag!) advertising props in Birmingham as A- when they absolutely were C+/B-. If a company tells you a property is B+/A, but google earth shows props in the area with peeling paint, cars on cinderblocks, untended lawns, etc., then you should be working with someone else. Even if the prop they're marketing is done up like christmas, if it's in a C neighborhood, no one will pay B+/A rents to live in that area, regardless of what the house looks like.
Now, all that said, there are some market trends that you can't see in the numbers, which is where having someone who lives and works in the market you're considering is crucial. Statistics are historical, they look backwards, and while they can be great for getting a feel for trends and momentum, they don't tell the whole story.
A great example of this is Birmingham's population. We get a lot of concerned questions about our population being relatively stagnant (actually, it's growing, just slowly). But what that number doesn't tell you is that our average age is actually decreasing as we attract more and more young college-educated millennials (who are totally re-engerizing the small business sector). For now, yes our population growth is small, but the influx of young people bodes very very well for future growth as the 20-30somethings settle down and have families (and buy houses!). For now, it means our rental demand is amazing and our downtown area is hopping! Just an example of why it is important to take stats in as a whole (not focusing on any one single stat in a vacuum) and to have someone on the ground who knows what's going on right now - that info won't show up in BLS stats until next year at the earliest.
Best of luck in your search!
Clayton
- For population, GDP, employment and housing stats, use the Bureau of Labor Statistics: https://www.bls.gov/home.htm
- 9yClayton MobleyPro MemberBirmingham, AL · Member since 2014 · 875 posts · 947 votes
Oh! And for cost of living, I love the Numbeo website. You can compare the cost of living (down to like, the cost of bread, the cost of a bus ticket) for different cities to see how they stack up based on average income and average cost of living. It's super useful: https://www.numbeo.com/cost-of-living/
- Ronkonkoma, NY · Member since 2016 · 63 posts · 24 votes9y
Thank you @Tom Ott. I will definitely utilize the information in your blog posts.
- Ronkonkoma, NY · Member since 2016 · 63 posts · 24 votes9y
Thank you for your detailed answer @Clayton Mobley. Those look like good resources. Do you have rental properties in the Birmingham area?
- Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes9y
My vote when this question comes up is to encourage people not to reinvent the wheel. There are a lot of people out there who have already done the market research and even gone as far as vetting turnkey providers (and their markets). If you start in on internet research, you could find a heck of a lot of numbers and info that you won't necessarily know how to interpret. Numbers are meaningless without the bigger picture, and it's not always easy to get the bigger picture.
So I encourage people to start out, instead, asking everyone where everyone is buying and who they are buying through. You'll start hearing certain markets and turnkey names over and over, so you'll start getting a bigger picture. Once you have that, then the trick is to start vetting the information about both those providers and the markets. Not every city where a lot of people are buying is necessarily a smart city to be investing in. Once you have a stockpile list of cities people are investing in, use your research time to figure out the market fundamentals on those cities and use those to start narrowing your search. Like let's say you keep hearing a lot about Indy, Chicago, Detroit, Cleveland, and Philly. What are the market fundamentals about each of those cities? Hint: some of them are stable growth markets, and some of them are not. Which ones, and why does that matter? Those are the questions that will lead you to the exact information you need to know in order to start making your decisions.
Not sure if this helps, but I wrote this a while back on how to find turnkey markets:
https://www.biggerpockets.com/renewsblog/2015/12/2...
Reach out anytime if I can help anymore!
- 9yClayton MobleyPro MemberBirmingham, AL · Member since 2014 · 875 posts · 947 votes
@Kenneth Lowry I do! I'm the CEO of a full service turnkey company in Bham, which is why I know all the stats off the top of my head ;) Of course, both the business and myself, personally, are invested in this area as well - you shouldn't sell what you aren't willing to buy yourself! There are plenty of great markets around the country, and I think @Ali Boone makes a great point - you're already connected to so many successful investors, use that connection to find out where people are investing and why, and then move from there.
Best of luck!
- Real Estate Consultant · Chicago, IL · Member since 2014 · 720 posts · 439 votes9y
@Kenneth Lowry , personally, I am not very fond of turnkey properties, unless they are in A and B areas. What I've discovered is that most turnkey properties are located in very low-income areas and are sold at prices at the top of the market. Depending on your goals and price point, I will advise you to better buy condo units in up and coming areas in hot markets in newer buildings with low monthly assessments. This way you'll get higher quality tenants, and lower vacancies.
If you have more cash to work with than you can buy 3-4 unit buildings that are fully remodeled and place them with a management company.
- 9yMerv PlankPro MemberInvestor · Birmingham, AL · Member since 2015 · 34 posts · 8 votesWe are a turnkey company in Birmingham. There are 3-4 companies in our area. Get you list of questions and call them all. You will learn a lot and it will help you make a good decision
- Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes9y
Originally posted by @Kenneth Lowry:
I want to begin my REI with out of state turnkey real estate. It seems like the best fit for me. From what I have been learning about it, the important things to research are the turnkey companies themselves and the areas to invest, both at the city level (because you want a city with growing employment potential among other things) and at the neighborhood level (because you don't want a high crime rate area, etc). My question is, what are the best sources of information for each of theses? I imagine the area research would be some type of internet information but I also imagine the research on the turnkey companies will not be so straight forward.
Most the folks who replied here sell turnkeys not that is a horrible thing but we can understand you wanted to cut through the fluff mostly. Although some above had helpful info too like making sure management is inhouse!
The US census office has many useful stats for the markets. Most the turnkey outfits operate in less than hot zip codes or in areas that are cheap to buy and fix so they can easily maximize retail profits. You could have pockets of good things happening in nearly any city and stats to show that but the TK is not in that part of that city normally.
You can also compare some expected management risks numbers for the exact location with rentfaxpro. Some lenders use this to measure management risk known for that address. None of this kind of info would be shared with you by turnkey sellers normally but it is critical.
Then once you narrowed down a couple operators you can visit and see in person before your final decision. By then you might know personally which TK company/management and location is better than the other from your own research. Definitely visit first either way. Don't rush or let anyone rush you into anything!
Good luck!
- Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes9yKenneth Lowry in this sellers market you are going to be getting high single digit cashflow. I would start by connecting with at least 3-5 investors to hear there experiences. If you need help let me know.
- Developer · Nashville, TN · Member since 2016 · 484 posts · 406 votes9y
@Kenneth Lowry. As a partner in a successful TK company, I agree with @Clayton Mobley. Use the connections to poke around, learn some of the stats of the city, etc.
In the end, there are really THREE things that are going to make or break a good TK purchase:
1. A great city with good growth, stability, and price-to-rent ratios.
2. A PROPER Rehab, without cutting corners.
3. Great Management.
Make sure you have these 3 things in place, work with a solid provider, and you'll do great! PM me if you want more info on Indy...that's where we buy our own rentals, and operate our TK biz.
- Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes9y
I cringe when I see broad statements about low you should expect for cash flow
It may just be they are looking in the wrong areas. As we are finding many properties at much higher cash flow in upstate NY and central FL
- Ronkonkoma, NY · Member since 2016 · 63 posts · 24 votes9y
@Lumi Ispas thank you for your advice. I am not ready to abandon this approach just yet but I will do my de diligence before taking action. If I were to follow your advice where would I start learning about the strategy of buying condo units for as rental properties?
- Ronkonkoma, NY · Member since 2016 · 63 posts · 24 votes9y
@Matt R. great advice! Thank you, I will use it going forward.
- Ronkonkoma, NY · Member since 2016 · 63 posts · 24 votes9y
@Ali Boone thank you for this response. It leads to more questions I have but I will read the blog post you listed and if that doesn't answer all my questions I will ask you.
- Ronkonkoma, NY · Member since 2016 · 63 posts · 24 votes9y
@Lane Kawaoka I like your suggestion, but being new I am not sure how to find trustworthy people to believe about their experiences. I would appreciate your help in figuring this out but first, can you explain to me what your role in real estate is? I clicked on the link in your signature but I don't understand what you actually do.
- Ronkonkoma, NY · Member since 2016 · 63 posts · 24 votes9y
@Jeff Schechter thank you for your advice. I have a question I would like to ask you.
1. How long has your company been in business?
2. How long have you been with the company and was it always as a partner?
3. Is your property management in house?
4. Most importantly, You say you have a successful TK company. I have seen some warnings in this thread and elsewhere that TK is actually not a good approach for the investor. If you are a successful company that means you either you do provide good investments for your clients or you have been successful at pushing mediocre or poor investment for years (how many depends on your answer to question 2). What can you tell me to convince me that your success is a result of the success of your clients?
- Ronkonkoma, NY · Member since 2016 · 63 posts · 24 votes9y
@Michael Plante I am not sure what that first sentence of your last reply means, there may have been a typo. can you clarify for me? Also, have you done any turnkey investing? From the second sentence it sounds like you have.
- Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes9y
Originally posted by @Kenneth Lowry:
@Lane Kawaoka I like your suggestion, but being new I am not sure how to find trustworthy people to believe about their experiences. I would appreciate your help in figuring this out but first, can you explain to me what your role in real estate is? I clicked on the link in your signature but I don't understand what you actually do.
Lane's idea is good too. Be aware most tk buyers are pretty clueless about REI ( not Lane). For the first couple years they might have glowing reports. I have seen more than a few change their minds after the realities of their experiences with poor management, vacancies, expenses, turnover costs, grossly over paid original prices and just in general the less than stellar location challenges are realized long haul. There is also a site called turnkey-reviews that might help identify the better turn key options.
Good luck!
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Matt R. @Kenneth Lowry Matt thanks for the plug 30 minutes on TK reviews and you will see 90% of the top turn key companies in the US their inventory and compare their in-house financial projections..
Having been in this industry ( it you can call it that ) longer than most anyone on this site I would humbly submit.
the markets are a lot like Marco at Norada talks about they are inter changeable.. you will have little sections of certain cities that are hot.. LIke in Indy Fountain square and Bates are up and coming but the cash flow numbers don't stack up to other areas of the city .. but I submit cash flow is only one number.. future value increase is just as important if not more.
so all these metrics of a Macro level while important.. IE don't want to invest in a city that is dying.. but its still bottom line your talking about a rental.. and unless rents rise significantly ( which they don't in any mid west market) or values rise significantly ( which they will in some of these hot little pockets of redevelopment in even most of the big cities of the US.. that's whats important those macro numbers of house holds and cost of living that's all just white noise.. people live there they are going to rent for what they rent for and that's about it..
the most money is made on areas that are transforming.. Take Charleston SC no one talks about it.. cash flow with 20% down is break even at best .. but in some areas were I invested my homes went up 100 to 150k in 18 months..
So really depends on what your trying to do... I invest in every single market that is talked about here its all about getting comfortable with the teams in place and what you want long term.. I just stress and always have to buy at the top of the market not the bottom.. bottom feeders for out of state folks usually have a bad day or long term hold.
Most folks wont own a property on average more than 7 years .. that's the important number the macro economics while fun to talk about don't mean anything if in 7 years it cost you money to exit.. and you will exit. We all do.
I am selling all my rentals in MS for example that I have owned that I bought for Gozone in 06 so owned them a little longer than 7 years .. but I can tell U it cost 5 to 15k per House to sell them before sales costs. ( commish etc.) so if they don't appreciate then you can just look at your 7 or 10 years of cash flow and deduct it and your IRR goes to next to nothing or negative if you do not have some price appreciation over time.. so I really don't subscribe to the appreciation is icing on the cake it is the cake you need it when U exit.
- Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes9y
Originally posted by @Kenneth Lowry:
@Michael Plante I am not sure what that first sentence of your last reply means, there may have been a typo. can you clarify for me? Also, have you done any turnkey investing? From the second sentence it sounds like you have.
Well have been doing all sorts of real estate investing for 30 years
I have known anyone personally who invests in real estate
I have never taken a course no read a book about real estate investing.
I guess you could say I come from the school of hard knocks
In my personal experience I always thought less than 15% cash on cash return was pretty bad and something I would never do
I joined bigger pockets a couple days ago and am learning it seems to be true you don't know how good you have until you what others are doing.
My worst deal I made 25% profit on a flip and thought it was a failure.
I never heard the term turn key in relation to Real estate investing untill about three days ago here on bigger pockets
I've actually been toying with the idea of doing turnkey for people seeing as how I started managing my own properties many years ago and have done so in New York State North Carolina and Florida
I'm still easily able to find deals that are Easley double-digit returns in upstate New York in Central Florida
I'm still a little bit in disbelief that I'm actually able to find deals this good i'm still a little bit in disbelief that I'm actually able to find deals this good and so many others seem not to be something else innocent it just doesn't seem right to me for some reason
I've never even gotten a mortgage on the house the one I lived in many years ago
I guess I've been very fortunate to be able to pay cash for everything
Perhaps that why my returns are so high
I basically find the property fix it up and then sell it owner finance holding the mortgage or rent them for the income
Perhaps it's like the guy who lifts weights in his house and after 20 years he goes to the gym and he starts punching 500 pounds and everybody around them is in the shop in disbelief they ask him how he did it and he says well I just never thought that I couldn't do it
- Investor / Broker · Brooklyn, NY · Member since 2016 · 665 posts · 1k+ votes9y
As a multi-Family Real Estate Investor, I'm very curious on the business model of the Turnkey Company.
Let's look at it from my point of view, a Real Estate Investor.
I find properties, renovate them when needed, rent them out, then manage them. In other words, I make them Turnkey for myself.
It seems that the business model for a Turnkey Company would be what I do as a Real Estate Investor, except that the PM would be retained for a new Owner after it is sold.
Sort of like a Flip but with retained PM.
I was thinking that if I were to do that, I would only sell Properties that are subpar to my buy and hold criteria.
In other words, if I find a property which will not meet my Cash Flow, Appreciation AND ease of Management, then I would just flip it and offer management as a turnkey property.
I can see that a great Turnkey Business Model would be creating a portfolio of great properties, but because I have the Acquisition, Renovate and Property Management machine well oiled, HEY! let's sell these properties that don't meet my buy and hold criteria!
A question that pops into my head is, if the property is Turnkey and you are willing to manage it, why would you want to sell it to someone else, other than it doesn't meet your buy and hold criteria?
Is it because there is more money in Managing the property than in holding onto the property itself? That opens up some more questions if that's the case because then I, as the buyer of the turnkey property would start to think, well, if this Turnkey Company isn't owning the Turnkey Property, what's wrong with this Property?
Maybe I'm way over thinking it!
Any thoughts? I'm missing something..... maybe something like the Turnkey Company needs to sell the property in order to build more Capital for other investments?
What's in it for the Turnkey Company so I can understand what they are really doing to make money and maintain their high level of excellence (if there is a high level of excellence)?
- Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes9y
Originally posted by @Llewelyn A.:
As a multi-Family Real Estate Investor, I'm very curious on the business model of the Turnkey Company.
Let's look at it from my point of view, a Real Estate Investor.
I find properties, renovate them when needed, rent them out, then manage them. In other words, I make them Turnkey for myself.
It seems that the business model for a Turnkey Company would be what I do as a Real Estate Investor, except that the PM would be retained for a new Owner after it is sold.
Sort of like a Flip but with retained PM.
I was thinking that if I were to do that, I would only sell Properties that are subpar to my buy and hold criteria.
In other words, if I find a property which will not meet my Cash Flow, Appreciation AND ease of Management, then I would just flip it and offer management as a turnkey property.
I can see that a great Turnkey Business Model would be creating a portfolio of great properties, but because I have the Acquisition, Renovate and Property Management machine well oiled, HEY! let's sell these properties that don't meet my buy and hold criteria!
A question that pops into my head is, if the property is Turnkey and you are willing to manage it, why would you want to sell it to someone else, other than it doesn't meet your buy and hold criteria?
Is it because there is more money in Managing the property than in holding onto the property itself? That opens up some more questions if that's the case because then I, as the buyer of the turnkey property would start to think, well, if this Turnkey Company isn't owning the Turnkey Property, what's wrong with this Property?
Maybe I'm way over thinking it!
Any thoughts?
Thank you that's my question exactly
We are finding the deals buying fixing up and keeping them for the cash flow were selling them for a profit
Why are there so many turn key companies that do that but they sell them off maybe that's why there's so many complaints about turnkey companies ?
And to see people willing to pay money to a turnkey company to make eight or 9% passive income just seems horrible to me
But as they say and you give the customer what they want that's a people want we definitely can do deals like that but I don't know if I'd want to waste my time and less I can make a big chunk of profit right now when I do flips often we double our cash investment can imagine an investor would pay us that kind of money for a turnkey
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