What kind of cashflow can I expect from turnkey rentals?

26 Replies

I'm considering my options, as I sit on close to 1.4 mil in equity currently. One option is to cash out refi and invest in an apartment complex.

Another is to cash out refi and put some money into out of state turnkey rentals. 

I'm not looking to take all of it out, but just enough that I can get some more cash flow, while keeping my appreciating single family homes in the Seattle area.

So what am I looking at for:

1) Cost to purchase from a reputable place.

2) Cashflow after ALL expenses including PM.

3) Opportunity cost since these types of investments don't really appreciate.

@Jack B. - I have 7 Tk's in Indianapolis and 1 in Charlotte with the same company over a 4 year period. My year end returns last year, including all maintenance, vacancy, property management, taxes and insurance was 7.2% and estimated 16% appreciation on my total investment. I just bought 2 more this year, one for $56K and one for $64K. The company I use typically sells 50 per month across the four markets they serve. Not sure what you're looking for from an opportunity cost. probably not this, but the owner lets investors who have multiple properties with him to invest in flips. I've done a few with him and have seen 20-45% ROI.

Originally posted by @Hank Keller :

@Jack B. - I have 7 Tk's in Indianapolis and 1 in Charlotte with the same company over a 4 year period. My year end returns last year, including all maintenance, vacancy, property management, taxes and insurance was 7.2% and estimated 16% appreciation on my total investment. I just bought 2 more this year, one for $56K and one for $64K. The company I use typically sells 50 per month across the four markets they serve. Not sure what you're looking for from an opportunity cost. probably not this, but the owner lets investors who have multiple properties with him to invest in flips. I've done a few with him and have seen 20-45% ROI.

 Not to get to far off topic but do you use the cashflow from lets say 6 of the TK's to pay down the 7th one quicker? 

Originally posted by @Hank Keller :

@Jack B. - I have 7 Tk's in Indianapolis and 1 in Charlotte with the same company over a 4 year period. My year end returns last year, including all maintenance, vacancy, property management, taxes and insurance was 7.2% and estimated 16% appreciation on my total investment. I just bought 2 more this year, one for $56K and one for $64K. The company I use typically sells 50 per month across the four markets they serve. Not sure what you're looking for from an opportunity cost. probably not this, but the owner lets investors who have multiple properties with him to invest in flips. I've done a few with him and have seen 20-45% ROI.

Surprised you're seeing that kind of appreciation, that's what I was referring to as far as opportunity cost. Care to share what company you're using in Indianapolis?

@Doug Woodville - All my houses were paid through IRA. This year, 1 of the 2 I bought was with Rent from the others. With the 8 I have now, monthly rent creates enough income to buy 1 house a year.

@Jack B. Here's an example of 1 of my Indy Homes:

Rent $650
Prop Mgt - $65
Taxes - $31
Ins - $23

Op Income = $531

Originally posted by @Doug Woodville :

@Jack B. From all the ones I've analyzed I've yet to see a SFH cashflow for more than $200/mo. In fact I think the highest I've seen is around $175/mo. I generally look at SFH's around the $90k purchase price.

 What markets were you looking in? That seems really low.

@Jack B. the appreciation is because of the market: properties bought 4 years ago - in 2012-13 definitely get appreciated. It was Great Recession back then. Doesn't mean it's going to appreciate at all if you buy it now

ps cash flow is not bad though - it's like 10% NOI, must be B-C+ neigbourhood

Originally posted by @Irina Belkofer :

@Jack B. the appreciation is because of the market: properties bought 4 years ago - in 2012-13 definitely get appreciated. It was Great Recession back then. Doesn't mean it's going to appreciate at all if you buy it now

ps cash flow is not bad though - it's like 10% NOI, must be B-C+ neigbourhood

Thanks for clarifying Irina!

@Irina Belkofer - Absolutely correct in that some of that appreciation is market. I do have two houses that were bought prior to the city dumping millions into the area for revitalization (because the TK owner is knowledgeable on city plans). Those are much higher!

I've had similar experiences as @Doug Woodville , most properties in the ~100k range are cash flowing for about $200 a month. Thats taking in to account 10% for capex, 10% repairs, 8% vacancy, etc. Cash on Cash is just over 10%. These properties are usually in B - C+ neighborhoods. 


I think the reason why a lot of people post they got better deals through turnkey is that they bought it 3-4 years ago, when we were still recovering from the recession. I think it's a way harder market now to find deals like that.

@Jack B.

Considering that you have all that equity, I would look for some apartment complexes.  Turnkeys can be great but I think they are better to start out when you don't have much equity.  To me, apartments are the stepping stone AFTER turnkeys, but you have enough equity to jump right into apartments.

Or maybe you could consider investing in some syndications, since you're accredited.

Originally posted by @Jack B. :

I'm considering my options, as I sit on close to 1.4 mil in equity currently. One option is to cash out refi and invest in an apartment complex.

Another is to cash out refi and put some money into out of state turnkey rentals. 

I'm not looking to take all of it out, but just enough that I can get some more cash flow, while keeping my appreciating single family homes in the Seattle area.

So what am I looking at for:

1) Cost to purchase from a reputable place.

2) Cashflow after ALL expenses including PM.

3) Opportunity cost since these types of investments don't really appreciate.

It depends. Are you looking only in your market, or in others? Other states with have markets with different prices and could get you a great ROI!

Originally posted by @Khemaro N. :

Are the variable cost i.e. Vacancy, CapX, Maintenance etc deducted from the rent by the turnkey company every month?

It doesn't look like it. Most of them don't factor that into the deal from what I've seen to make it look like a better investment to inexperienced investors. I've also read that many of those TK deals are 15-20% above market.

I agree with @Kyle M. With that amount of equity I would put it in an apartment complex. It's easier to scale up with an apartment complex than to scale up with turnkey. You can't do much to increase cash flow with turnkey, but you can with apartment complex. Increase rent by $20 on one turnkey, you get $20 extra a month. Increase rent by $20 on a 20 unit apartment, you get $400.
Originally posted by @Jack B. :

I'm considering my options, as I sit on close to 1.4 mil in equity currently. One option is to cash out refi and invest in an apartment complex.

Another is to cash out refi and put some money into out of state turnkey rentals. 

I'm not looking to take all of it out, but just enough that I can get some more cash flow, while keeping my appreciating single family homes in the Seattle area.

So what am I looking at for:

1) Cost to purchase from a reputable place.

2) Cashflow after ALL expenses including PM.

3) Opportunity cost since these types of investments don't really appreciate.

 I run an 800 unit portfolio and the truest thing I can tell you is that at all times there are an unlimited amount of variables at play which will effect your return. Your return on every single property will be different. The same property will perform differently from year to year. Sometimes month to month.

Generally speaking if your buying realistically decent assets a large portfolio will over the long term average out to an operating expense that is roughly half of the rents you are collecting.

Originally posted by @Account Closed :
Originally posted by @Hank Keller:

@Doug Woodville - All my houses were paid through IRA. This year, 1 of the 2 I bought was with Rent from the others. With the 8 I have now, monthly rent creates enough income to buy 1 house a year.

@Jack B. Here's an example of 1 of my Indy Homes:

Rent $650
Prop Mgt - $65
Taxes - $31
Ins - $23

Op Income = $531

 Did you foregt some Expenses....................................lol.

No expenses that I've paid out Billy, but we have accrued for Maintenance & Vacancy. What were you expecting?

Originally posted by @Jia Liu :
I agree with @Kyle M. With that amount of equity I would put it in an apartment complex. It's easier to scale up with an apartment complex than to scale up with turnkey. You can't do much to increase cash flow with turnkey, but you can with apartment complex. Increase rent by $20 on one turnkey, you get $20 extra a month. Increase rent by $20 on a 20 unit apartment, you get $400.

But in your example you're comparing only one TK property...I could also buy 23 TK properties and do the same, given my budget...