How to have a positive Turnkey investment experience

19 Replies

I repeatedly read negative comments about investing in Turnkey properties and I would like to hear from those that have had positive experiences and what you did to tip the odds in your favor of having your investment be successful. I am a busy professional and simply do not have the time to put in the necessary amount of time in order to extract maximum profit from a buy and hold BRRR-type strategy and yet I still want a piece of the real estate action. Assuming I go the turnkey route, without espousing how poor of a decision it is, I would like to hear how I can make the most of the situation, and yes, I am aware that I will still need to dedicate time to that process as well.

Haha...I love this Kelly! Being pro-turnkey myself, I love that you are asking specifically for the good things about it. Most people ask 'should I go turnkey?' and then you only get the negatives in response. All the while, lots of people are having great turnkey experiences but they just aren't yelling about it on the forums.

So, okay, to answer your question. I started buying turnkeys in 2011. I've certainly had "learning experiences" over the years with them, I've had major wins with them...you name it. So in thinking of how to make the most of it and what you can do to tip the odds in your favor:

  • The more people you have behind you, the better and the stronger your position. If you just show up at a direct provider's door and buy one property, you aren't bringing a lot of buying power. So the more people you know, the more people who will have your back, the more [unofficial] incentive for someone not to take you out to pasture because they would be risking ticking off a lot of people.
  • Find out which TK providers people have had good experiences with and start there. The downside on that one is, at least from I've noticed, as soon as people have good TK experiences they are no longer really on these forums because now they know what they are doing and they aren't looking for more education or research. So they don't  often respond to forums that ask "who's had a good TK experience and who'd you use?". 
  • Work through aTK promoter rather than a direct TK provider. I can think of a couple TK providers right off the bat that I would feel confident in someone going at it alone, but a turnkey promoter will work with several TK providers in different markets, so they can give you less biased advice about which market to invest and who to work with based on your own personal situation. Different markets and different buying opportunities are better for different people and goals. They can also add a tremendous amount of customer service for you (TK providers are rarely known for their customer service skills), and they add that 'power in numbers' factor that I mentioned in the first bullet. A TK provider would be stupid to mess with you if you are part of a larger buying power.
  • Vet the PM that comes with the TK property as if you were shopping for PMs on your own. Turnkey providers are excellent at finding deals, rehabbing, all that stuff, but the reality is the PM side is just something they need to create to put with the offering. PMs = customer service = not TK's jam. They aren't all bad, but don't just trust them with your first-born child because they come with the property.
  • Most importantly, don't go with the assumption turnkeys are 100% hands-off. They aren't, and they shouldn't be. You are responsible for due diligence and managing the management, so to speak. I've seen so many people just go to sleep on their property and then being irritated if something slacks off. Even with the best TKs and PMs....we are still talking rental properties here. They aren't always necessarily perfect, things can go wrong, and ultimately you are the boss so you might need to make decisions occasionally.

Hope that helps? Great question and maybe I'll come up with more. Reach out anytime if I can be of any help!

How to have a positive turnkey experience?

Sell turnkey properties.  😜

I kid.

(Slightly.)

Originally posted by @Ali Boone :

Haha...I love this Kelly! Being pro-turnkey myself, I love that you are asking specifically for the good things about it. Most people ask 'should I go turnkey?' and then you only get the negatives in response. All the while, lots of people are having great turnkey experiences but they just aren't yelling about it on the forums.

So, okay, to answer your question. I started buying turnkeys in 2011. I've certainly had "learning experiences" over the years with them, I've had major wins with them...you name it. So in thinking of how to make the most of it and what you can do to tip the odds in your favor:

  • The more people you have behind you, the better and the stronger your position. If you just show up at a direct provider's door and buy one property, you aren't bringing a lot of buying power. So the more people you know, the more people who will have your back, the more [unofficial] incentive for someone not to take you out to pasture because they would be risking ticking off a lot of people.
  • Find out which TK providers people have had good experiences with and start there. The downside on that one is, at least from I've noticed, as soon as people have good TK experiences they are no longer really on these forums because now they know what they are doing and they aren't looking for more education or research. So they don't  often respond to forums that ask "who's had a good TK experience and who'd you use?". 
  • Work through aTK promoter rather than a direct TK provider. I can think of a couple TK providers right off the bat that I would feel confident in someone going at it alone, but a turnkey promoter will work with several TK providers in different markets, so they can give you less biased advice about which market to invest and who to work with based on your own personal situation. Different markets and different buying opportunities are better for different people and goals. They can also add a tremendous amount of customer service for you (TK providers are rarely known for their customer service skills), and they add that 'power in numbers' factor that I mentioned in the first bullet. A TK provider would be stupid to mess with you if you are part of a larger buying power.
  • Vet the PM that comes with the TK property as if you were shopping for PMs on your own. Turnkey providers are excellent at finding deals, rehabbing, all that stuff, but the reality is the PM side is just something they need to create to put with the offering. PMs = customer service = not TK's jam. They aren't all bad, but don't just trust them with your first-born child because they come with the property.
  • Most importantly, don't go with the assumption turnkeys are 100% hands-off. They aren't, and they shouldn't be. You are responsible for due diligence and managing the management, so to speak. I've seen so many people just go to sleep on their property and then being irritated if something slacks off. Even with the best TKs and PMs....we are still talking rental properties here. They aren't always necessarily perfect, things can go wrong, and ultimately you are the boss so you might need to make decisions occasionally.

Hope that helps? Great question and maybe I'll come up with more. Reach out anytime if I can be of any help!

 I have never heard of a turnkey promoter.  How do you find those?

Originally posted by @Kelly M. :

I repeatedly read negative comments about investing in Turnkey properties and I would like to hear from those that have had positive experiences and what you did to tip the odds in your favor of having your investment be successful. I am a busy professional and simply do not have the time to put in the necessary amount of time in order to extract maximum profit from a buy and hold BRRR-type strategy and yet I still want a piece of the real estate action. Assuming I go the turnkey route, without espousing how poor of a decision it is, I would like to hear how I can make the most of the situation, and yes, I am aware that I will still need to dedicate time to that process as well.

 Some things to do when buying a turnkey property.

  • Get a 3rd party inspection.
  • Get an appraisal.
  • Use Financing. (Leverage / OPM is the most important reason to buy a rental property)
  • Do not buy the lowest quality assett. Aim for a B-Class area if possible.
  • Make sure the company you are buying from is a licensed Real Estate Brokerage.
Originally posted by @Kelly M. :
Originally posted by @Ali Boone:

Haha...I love this Kelly! Being pro-turnkey myself, I love that you are asking specifically for the good things about it. Most people ask 'should I go turnkey?' and then you only get the negatives in response. All the while, lots of people are having great turnkey experiences but they just aren't yelling about it on the forums.

So, okay, to answer your question. I started buying turnkeys in 2011. I've certainly had "learning experiences" over the years with them, I've had major wins with them...you name it. So in thinking of how to make the most of it and what you can do to tip the odds in your favor:

  • The more people you have behind you, the better and the stronger your position. If you just show up at a direct provider's door and buy one property, you aren't bringing a lot of buying power. So the more people you know, the more people who will have your back, the more [unofficial] incentive for someone not to take you out to pasture because they would be risking ticking off a lot of people.
  • Find out which TK providers people have had good experiences with and start there. The downside on that one is, at least from I've noticed, as soon as people have good TK experiences they are no longer really on these forums because now they know what they are doing and they aren't looking for more education or research. So they don't  often respond to forums that ask "who's had a good TK experience and who'd you use?". 
  • Work through aTK promoter rather than a direct TK provider. I can think of a couple TK providers right off the bat that I would feel confident in someone going at it alone, but a turnkey promoter will work with several TK providers in different markets, so they can give you less biased advice about which market to invest and who to work with based on your own personal situation. Different markets and different buying opportunities are better for different people and goals. They can also add a tremendous amount of customer service for you (TK providers are rarely known for their customer service skills), and they add that 'power in numbers' factor that I mentioned in the first bullet. A TK provider would be stupid to mess with you if you are part of a larger buying power.
  • Vet the PM that comes with the TK property as if you were shopping for PMs on your own. Turnkey providers are excellent at finding deals, rehabbing, all that stuff, but the reality is the PM side is just something they need to create to put with the offering. PMs = customer service = not TK's jam. They aren't all bad, but don't just trust them with your first-born child because they come with the property.
  • Most importantly, don't go with the assumption turnkeys are 100% hands-off. They aren't, and they shouldn't be. You are responsible for due diligence and managing the management, so to speak. I've seen so many people just go to sleep on their property and then being irritated if something slacks off. Even with the best TKs and PMs....we are still talking rental properties here. They aren't always necessarily perfect, things can go wrong, and ultimately you are the boss so you might need to make decisions occasionally.

Hope that helps? Great question and maybe I'll come up with more. Reach out anytime if I can be of any help!

 I have never heard of a turnkey promoter.  How do you find those?

 Simply post a question about Turnkey. :D

There are a few on here that advertise themselves and I work with some myself. Feel free to message anytime and I can give some names.

To add to the great comments in this post, I recommend in house property management as well. Everything under one roof makes for seamless transitions.

Best of luck!

Originally posted by @Kelly M. :

I repeatedly read negative comments about investing in Turnkey properties and I would like to hear from those that have had positive experiences and what you did to tip the odds in your favor of having your investment be successful. I am a busy professional and simply do not have the time to put in the necessary amount of time in order to extract maximum profit from a buy and hold BRRR-type strategy and yet I still want a piece of the real estate action. Assuming I go the turnkey route, without espousing how poor of a decision it is, I would like to hear how I can make the most of the situation, and yes, I am aware that I will still need to dedicate time to that process as well.

A great place to start is by doing what you are doing. RESEARCH! Once you find a market you want to get into, I would suggest looking for a TRUE Turnkey provider in that area. Be careful, some people just use that word to describe a property they think looks good from the MLS. A True Turnkey Provider will own, renovate, and manage the property all in house. They will not use any third parties. The only time a third party should be used is when doing a home inspection.

Some turnkey companies just try to sell you a property and earn a commission. You want to make sure they are in it for the long game like you are.

Try looking at:

The Best Types of Markets for Profitable Turnkey Properties

and

What to Ask When Working With a Turnkey Provider

turnkey promotors:

1. Maverick

2. Hartman

3. Norada

4. Real wealth Network

5. Hipster

6. larry Fried

7. Roofstock

and I am sure i am missing a few others.. but you get the drift..  all of these companies basically operate in a real estate brokerage capacity... just like hiring a good broker.. they can help you navigate the sale etc.. many will vette the TK provider and not represent one's they don't like...  Many turn key operators have enough organic business that they do not have to use brokers like the above... Just depends on your desires.. but at the end of the a house is a house is a house.

no mystery to it.. you want to buy one that has had a quality rehab you double check that by hiring YOUR OWN INSPECTOR. but remember these are used houses inspections will have major items that should be addressed but all homes are going to have honey do items.. you cannot reasonably expect a home to be 100% perfect none are.

And then the grand daddy of them all is PM  PM will make or break.. most of the guys and gals in the business have it in house or a very close affiliation with the PM either way is OK as long as the company is still engaged.

lastly use common sense... think about what price points work.. if you go super low end cheapest homes on the market in the given MSA those will look best on paper but be the most difficult over time to manage for many... buying at the Median or just below of an MSA is usually a safe bet.

Kelly analyze your current income, liquidity, and net worth ratios. Make a plan with goals and work the solutions backwards on steps needed to achieve it.

You mentioned in a post you do not have time to maximize cash flow.

Is cash flow even the top priority for you?

If you already make great annual income then tax depreciation and equity growth long term might be higher on the list then cash flow. Buy in the best areas you can preferably local to where you live especially residential investing. Other types of assets it can become less important.

I believe in the value of the dirt first and then the structure with asset type. If you have high demand dirt then exit options can be many down the line for multiple uses.

If you are an accredited investor you might be able to buy a smaller slice with a pool of investors of much higher quality properties. Lot's of turn key stuff bought 5 to 6 years ago was at the bottom and B locations. A lot of residential stuff now is C to D areas that become F areas in a down turn being sold at  a premium. Those turn key owners if they do not have adequate reserves will lose the properties with defaults and get mopped up on the next down cycle by heavy cash reserve investors buying at a discount.

Focus less on the price to purchase and more on the quality of the location and property long term especially if you already have cash today but limited time to deal with headaches.

Example a doctor buying a C or D area turnkey just because it is cheap for 100 a month cash flow when they make 300k or more a year and be inundated with problems and requests from lower income tenants just does not make sense to do. Now if someone makes 50k a year and is younger and trying to quit that J-O-B and will deal with a headache for perceived higher cash flow that is a different situation. 

It's all where you are currently at and where you want to go. Today's risk/reward ratio for turn key residential is out of whack with the market cycle.  

Good Luck

     

@Kelly M. I’ve bought turnkey and I’ve bought non turnkey. I’d recommend visiting any provider you want to work with and speaking to past buyers about their experiences before buying. Also use your own numbers and not just the pro forma.

Right now I’d say you can get 150-200 cash flow per property and your ROI is 8-10 percent long term.

Also make sure it’s true turnkey meaning it’s owned by the people who are selling it, the rehab is of good quality and they have their own PM company. PM company is key, a good one will make or break your investment.

Feel free to PM me if you want to talk more.

Thank you all for the great feedback and next action items for me to use to help in my decision-making process.  I appreciate it very much.

@Kelly M.

The best advice I can give to you about investing in TK is NOT to do it. Based on my over all experience, I would stay away from researching companies that provide this service. 

What I would tell you to do is to build up your own team, if you are going to take the time to research a company...take the time to research people, network, connect and find common ground with others on this site. Build your own TK company in essence. 

Some of the people that posted here are heavily invested in the TK process, not just with owning companies, but with promoting them for a fee, running websites on reviews and posting on here often in the defense of the TK process as a whole. 

I don't doubt that these people are great, informed and people of integrity. However, everyone is in the TK game to make a buck...and they rely on outside money...money from places where people can not invest because the market does not allow. 

You will be buying a property in a place where the TK provider will recommend everything from the bank, inspector, insurance person and everyone in between. The work done is usually mediocre at best and the EQUITY is gone the day you buy it. 

I look at it like this...you go into a car lot to buy a brand new vehicle. You pay $25,000 for it, the moment you drive it off the lot, the dealer will never give you that amount for it. The Turnkey game is the same way...it will take you a lot longer to get your money out of it than it should and you will be nickle and dimed so they can still make money off of you. 

Best of luck...just my 2 cents worth

@Kelly M. I have bought turnkey and not.  I have very good experiences and not. To best assure you have a good turnkey experience you need to do a considerably amount of up front due diligence on the provider.  I consider making an onsite visit a critical portion of this- get to know the provider, the neighborhoods, their rehabs and their ethics for operating. And like Jay says, be sure you vet the PM - for this will be a critical component in the long term success.  Find out how things like vacancy & eviction rates, average tenancy length, along with a total accounting of fees.   I also think you need to be realistic about the current market conditions and plan to hold any turnkey purchase for at least 10 years.   Your expectations for cash flow should also be realistic - it is simply not going to be what it was for those who bought turnkey even a couple of years ago in the same markets - good inventory with good providers is tight.  And like Jay says target fairly close to market median prices for homes (and rents) and avoid the cheap stuff that looks good on paper but will almost surely give you headaches you can't even imagine right now.

@Adam Widdicombe   just to set the record straight  I started turn key reviews to give the public a place to rate the operators so that if there were some bad apples like you talk about they could be found out.

TK reviews is basically a public service site.. there is no money being taken other than tiny revenue to keep the site up and running.

I could care less were people buy their homes.. but since TK is a thing and has been for 2 decades we might as well talk about it and take the mystery out of it.

I am a fairly active new home builder doing about 20 million a year in new builds..  ( this i admit i make money at) now all the people that buy new homes from me.. could do it themselves.. they could go find a lot they could vette a builder they could find financing they could over see the project.. But you know how many people actually do that .. I would have to say less than 1 out of a 100 new homes built.. its a lot of work a lot can go wrong and for new home buyers they want it done then move in take all the risk out of it..  And maybe they can do it cheaper and get a better deal than if they buy it from me the new home builder

nothing different than buying rentals... now if people want to take the time find their own homes do all the work and over see rehab etc.. then for sure god bless them ... and carry forth.. the reality is that most locals do it that way most out of area's hire to have it done.. really simple as that. and if they do it right they can get some equity in exchange for all the time and effort they put into it.

I don't care,  what, were or how you buy you pay retail for a home  ( be it a new 450k home from me in Portland or one of my new 600k homes in Charleston) you go to sell it in a year or two you will lose money PROBABLY due to sales cost.  you buy a TK or a home were a flipper has done all the work for you and your paying retail you go to sell and you probably lose money due to sales costs.

In addition no matter how you do it.. in areas with little or no appreciation or areas that are renter dominated and unless its in an area that is showing appreciation like a few markets your going to lose money to sales coats.

And for me for most quite frankly i think debt is better than owning the asset.. but 95% of the investor don't understand notes and the most simple thing to understand in real estate right now is  Buy a home and rent it out.. thats simple.. Notes done right are far safer .. but thats another thread.

@Kelly M. I'm in the final stages of my initial Turnkey Investment process (I just closed last week!). You can read more about it in my Forum post. One thing is for sure, you have a lot of options so the more effort you put in finding the right Turnkey Provider and Investment, the better your returns and experience will be. Passive comes later, first there will be a lot of work on your end to find the right fit for you! Good luck.

@Kelly M. best advise I can give a busy professional like yourself, based on my experience, is to make the time to digest the information on the turnkey process and turnkey promoters and vendors right here on BP by setting a keyword to your profile, check out @Jay Hinrichs turnkey review website, educate yourself on the ins/outs of being a landlord before you jump into OOS rentals. You will save a lot of your hard earned money doing so! Good luck!!

I would really like to do what I repeatedly hear on the BP podcasts and BRRR - I really would. I am not afraid of putting in the work and due diligence in vetting people out. I worked very hard to build my practice to where it is today. As it is, I think it would be better for me to vet out TK providers and acknowledge that the return is simply not going to be what it could be if I would build the team up from scratch.

What I always hear is you need to have a team you can trust and that makes perfect sense, but trust is earned and how do I give all the different players I need to put together the opportunity to demonstrate that trust?  I think that's what it comes down to busy professionals who are buying out of state and why they go the TK route.

@Kelly M. whatever you do don’t buy properties cash with out an appraiser or third party inspection.

A lot of guys are selling properties at 110% retail or 60k junk that supposedly rent for 800.

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