Real Estate Investor · Louisville, KY · Member since 2017 · 56 posts · 39 votes
I am just starting to explore the turnkey option of investing, and right away, I am having serious doubts, because it doesnt make sense. It sounds too good ....
If a turnkey outfit buys a distressed property at a discount, puts money into it, rents it, and manages the property, exactly how and why are they going to sell it to me at a price that allows me to make a profit?
Why wouldnt they just hold the property, and all the equity and cashflow with it. What am I missing?
There was a post a few days ago, and someone was talking about $20K instant equity, because the turnkey company was selling the property below market? How does that even make sense?
Real Estate Broker · Redwood City, CA · Member since 2014 · 679 posts · 888 votes
8y
The TK provider flip the house to OOS investors, to get a higher profit. They sell the TK at higher prices than on open market to local people.
This is a scam targeting OOS, especially CA people. You lose money at the time of buying.
Investor · Northbrook, IL · Member since 2017 · 352 posts · 295 votes
8y
I appreciate the thread, and the comments from @Chris Clothier, @Jeff Schechter, and @Andrew Johnson. Disclosure appears to be a main concern in the thread. Full disclosure, I am not involved with TK. However, I do know many investors who provide TK as well as many whom have purchase TK investments. That being said, I do study the TK model as it is an investment strategy that is readily compared to our model (self storage).
I appreciated the comments above, because there are people who are doing it well and perhaps others not so well. From an outsider perspective, the common thread that TK provides its investors is, as Chris Clothier states, - passive income. It is the quickest way to generate passive income compared to MF or self storage. Whether or not "instant equity" is generated, there is typically no or very little discussion on appreciation (both income as well as property value) as well as depreciation. It is very hard to generate significant appreciation beyond inflation with a TK investment. In addition, one typically has either 0% vacancy or 100%. Obviously, more units alters this within a portfolio. Neither of these factors do not make it either good or bad, rather a basis for determining your investment strategy.
Can "instant equity" be generate - I would certainly hope so. When we evaluate a real estate income opportunity we consider: 1. demographics 2. the property location in the market 3. price point of acquisition, 4. hard costs to improve 5. gross potential income 6. discounted income 7. expenses, 8. NOI 9. cap rate and 10. exit strategy.
We have had investors in everyone of our projects over the last 20 years - 90% of them we would consider "turn key investors" who are seeking an investment without any involvement. Prior to us even going under contract on a property, we MUST consider and approve all 10 criteria above. We have all 10 so we can insure we can generate:
1. equity upon completion
2. cash flow, and
3. appreciation
Through out the investment our investors receive tax benefits of depreciation and losses during the construction. That is the benefit of how the IRS has set up the tax codes. I think where most TK investors get in trouble is they only consider 2 or 3 of the 10 criteria we discussed - specifically #3 and #8. I believe if you are going to thrive in real estate, and specifically TK, then one should really need to consider all 10 criteria.
Investor · Fort Thomas, KY · Member since 2015 · 2 posts · 0 votes
8y
Check out Kathy Fetke from the Real Wealth Network, she was on a BP podcast, free to join their website and get access to their TK webinars, all the numbers are in the webinars for you to see if it is a good investment or not. The webinars are from TK providers all over the Country. RWN is based in California, but i dont hold that against them, they have a lot of good info there.
Registered Nurse (ICU) · San Jose, CA · Member since 2014 · 496 posts · 332 votes
8y
Typical turnkey thread with all the typical turnkey guys posing as investors and offering advice. So hard to get a true unbiased opinion from an actual investor with no ties to any companies and/or no hidden agenda. 3 years into this I see the same people preaching the same stuff word for word on every thread.