Just Sold my Memphis Turn-Key Rental!
I just sold my Memphis turnkey rental! Since buying rentals from turnkey providers is a hot topic, I decided to post about my experience. Hopefully this post can help a few people in their real estate journeys!
I purchased this single family home for $90,000 in late 2015 from Curt David (BuyMemphisNow). I put 20% down ($18,000 down). It had a tenant in place before we closed on a 2 year lease. The tenant resigned another 2 year lease back in 2017. So there has been no vacancy in the three years we held it. There were two repairs. We had to remove a rotting tree and fix a plumbing issue. Other than that, things could not have been any smoother.
Our actual monthly cashflow over the three years was about $250 ($3,000 per year). This is an annual cash on cash return of 16% ($3,000 / $18,000). I’m ignoring closing costs in this post due to immateriality.
In addition to the cashflow, about $100 of each mortgage payment went toward reducing my debt, and increasing my equity. This adds up to $1,200 a year for a 6% annual return.
A couple months ago I realized I had to sell the property for health reasons. I needed the cash. I was a little worried about what I’d be able to sell it for since I’ve heard horror stories about people not being able to sell for what they purchased the property for. I knew I bought it a good area, so I was hoping I’d be able to get out without losing too much.
I ended up selling the house for $110,000! That’s $20,000 MORE than I purchased it for! I did have to pay commissions and closing costs of around $7,000, so my net gain from appreciation was $13,000. That’s around $4,800 per year ($13,000 / 2.7 years) for an annual return of 27%!
My total annual return on this investment was 49% ANNUALLY (16% COC + 6% debt paydown + 27% appreciation).
My advice for anyone who is considering to buy from a turnkey provider is to first, make sure you go with someone who is very reputable. Second, buy a NICE property in a NICE area! Houses that sell for $50K are likely not going to do well. The house I bought from Curt did NOT have the absolute best numbers when looking at the COC calculations. But I'm so glad I went with the nicer house in a more desirable area because I got VERY RELIABLE tenants who never missed a payment and my property went up in value a pretty nice amount!
Overall, I’m very happy with my turnkey experience. I know that making a 49% return without doing much work is not the norm, but I wanted to post this to show that you CAN make good money from turnkey if you are wise in what you buy and who you buy the property from. You’ll likely make more doing it yourself, but there’s a learning curve and WILL take a significant amount of time to catch on to things. For those people who make good money at their day jobs and can’t afford to put time into real estate, I think turnkey is a great option. At least it was for me!