Who has built a portfolio mostly from turn key opportunities?

29 Replies

As I’m looking for my first deal I keep going back to turn key opportunities as an option. I’m curious if anyone has built their portfolio mostly or completely with turn key properties?

@Chris Clothier   posted his stats  on their company.. maybe you can find that post.

Majority own 4 or less ( mortgage slots) however many own more than that.

One of my vendors in another market has one client that bought 60 plus homes from them.. although he is fully engaged

last time I was on a vendor trip and in their office this guy was there working with maintenance teams and PMs.. 

usually financing is the hold back to larger portfolios.

Originally posted by @Michael McManus :

As I’m looking for my first deal I keep going back to turn key opportunities as an option. I’m curious if anyone has built their portfolio mostly or completely with turn key properties?

 There are plenty of investors out there who only own TK properties. It mainly just depends on what you are looking for. Some people have a 9-5 and have NO time to be a landlord or project manager. It can be easier to have a portfolio that is 100% passive for you. 

Tom Ott, Real Estate Agent in OH (#2016003865)
440-749-4043

Hey @Jay Hinrichs , thanks!  I'll look for it!  Is there a particular company that you've had experience with and would recommend? Same question to you @Ali Boone & @Tom Ott .

The reason I'm drawn to TK is because most of the work is done for you.  While I can give some time to building a portfolio myself, I do run a few businesses with my wife and have children we love spending time with, haha.

@Michael McManus   simply go to Turn key reviews virtually every turn key company in the US is represented there.. you can see actual turn keys .. you can compare numbers.. and best of all no squeeze page or getting hounded by salemen.. simply good information.. if you choose to contact a company then you can engage.

you have actual companies and you have turnkey sales agents that act as brokers.. you have had one of each respond to this thread.

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@Michael McManus A lot of people have built sizeable portfolios through turn key, For some people, that's the only way to do it. The main reasons some people buy turn-key are:

  • They have busy lives with family, work and personal interests and don't have time to deal with real estate full time.
  • They are investing outside of their local market. It is extremely difficult and risky to manage a renovation and work with contractors long distance.
  • They don't have the knowledge or skills to manage a renovation. You don't need to know how to swing a hammer but you do need some level of understanding of basic construction and how to speak a contractors language. If not, it's very easy to get taken advantage of. 
  • Financing. The primary way of forcing equity is to buy a distressed property and renovate it. This is what turn key companies do, however, in order to force equity, the property usually has to be pretty well distressed otherwise you can't buy it cheap enough. You'll never force equity with a simple cosmetic rehab. The problem with this is that is usually requires a cash purchase or hard money because banks don't lend on distressed properties. 

People will go the DIY route with the expectation of holding on to some equity but here are some reasons that for the average individual, that doesn't happen:

  • Turn key companies have much lower acquisition costs because they are buying further up stream . They are usually buying at courthouse auctions, tax sales and direct from distressed owners which the individual usually doesn't have access to. Keep in mind, in real estate, you make your money going in. 
  • An individual will never have the control of a construction crew that a turn key company does. hey are never going to the same construction costs that a turn key company does and they are going to be low on the contractors priority list.
  • Turn key companies can rehab a property for far less than an individual--sometimes as much as 50% less. Because of economies of scale, they are buying materials much cheaper and for big ticket items like HVAC, they are not walking in to big box stores and paying retail. A turn key company can generally replace a furnace, AC and roof for about half what an individual doing it on their own could do it for. 

Unless you are trying to scale your real estate business and build a larger portfolio, the time, risk and commitment involved in doing it yourself is usually not worth it, especially for just a few properties.

Originally posted by @Michael McManus :

As I’m looking for my first deal I keep going back to turn key opportunities as an option. I’m curious if anyone has built their portfolio mostly or completely with turn key properties?

 It absolutely can be done. It's a product that is geared towards those who want to or have to spend their time focusing on other ventures or MUST use a complete provider as they are not located in a geographic area that allows them to buy cash flow producing real estate (IE expensive markets such as California or New York)

James Wise, Real Estate Agent in OH (#2015001161)
216-661-6633

I think a good mixture of turnkey and non turnkey rentals could be a good idea. All turnkey though could open yourself to problems if the market turns

The thing people don’t seem to discuss with turnkeys is you need to hold 7-10 years before you could sell, and that’s assuming the market doesn’t tank a lot either.

If you buy a turnkey and turn around and sell it two years later you will likely lose money due to the selling costs

@Caleb Heimsoth   unless your doing major value add that's pretty much a true statement with any real estate.. I know when I sell my new construction homes.. if someone has to sell in one to two years they are probably going to lose out on sales costs.. nothing unique in turn key in that regard

@Jay Hinrichs  thanks for the shoutout.  Yes I’d agree with you on that, unless you’re getting it at a 25 plus percent discount.

On an unrelated note if you’re ever near Raleigh, NC I’d love to take you out for a meal.  Loved the podcast.  

@Michael McManus this is an interesting question as I usually notice people on BP mentioning they bought 1 turnkey rental or maybe a few but not a larger portfolio .

Would be interesting to see how people with decent sized turnkey portfolios do longer term .
Can't tell too much from a year or two .

Originally posted by @Michael McManus :

As I’m looking for my first deal I keep going back to turn key opportunities as an option. I’m curious if anyone has built their portfolio mostly or completely with turn key properties?

 Memphis Invest " Chris Clothier" has over 4000 turnkey doors under management. He is also in Dallas, Houston + more as well ( he is a machine). Of those near 1400 investors, 200+ish own 5 or more turnkeys so around 15% have what lenders consider a portfolio. 

There is a company in LA that does turnkeys. They have around 250 newly built turnkey plexes, btw these cash flow over 1% and non rent controlled. Since one quad grosses near 10k a month the investor "portfolios ratios" could be less and the cash flow totals higher with less properties. 

Perhaps the number of properties means less than the total cash flow per property. 

Good luck! 

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@Matt R. that's interesting about the L.A turnkey company . What is the name of the company ? What area are the properties in? 

Originally posted by @Joseph M. :

@Matt R. that's interesting about the L.A turnkey company . What is the name of the company ? What area are the properties in? 

 Ocean Development, looks like they are doing new SFRs now too. 

Originally posted by @Joseph M. :

@Matt R., thanks. Took a look at their site and also found a couple recent articles/press releases

Apparently they are the second largest residential builder in L.A 

Interesting in that they focus only in South L.A ..looks like they've been at it over 20 years. 

https://globenewswire.com/news-release/2017/04/10/...

https://globenewswire.com/news-release/2017/05/08/...

 Yeah, they go the section 8 route, so $2400 x4. Section 8 LA has idk 100,000 deep waiting list. Probably South LA is the major place they can pull this off. They may get fast tracked with city too idk. 

@Michael McManus

Make sure no matter what property you buy to run the number, perhaps using the BP calculator, and post it on Bigger Pockets before buying so you can get advice from experienced investors.

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