First time RE investor, how should I purchase a turnkey?

4 Replies

Hi there!

I'm a first-time real estate investor. I've read all the books, listened to most of the BP podcasts, and have spent considerable time doing research online.

2 years ago I purchased my primary residence where I live in California and now I'm trying to purchase my first rental. I have family in Indianapolis, so I'm trying to purchase there. My understanding of the market there is that it is strong for the midwest: reasonable population growth, good jobs, solid neighborhoods, good cap rates, etc.

Because I'm quite busy, I don't have the time (or willpower, to be honest) to hunt for deals myself, find contractors to renovate, and do all that work myself. Instead, I figured that due to my time constraints I think going with a turnkey provider is my best best. Purchase something already renovated with a renter and property management setup, and aim for a little bit of cash flow.

I found a neat turn key provider called Pinnacle (http://www.investwithpinnacle.com), spoke to the owner, and also read through some of their BP posts. They seem really great.

Here's my question: for those of you living out of state who purchase turnkey rentals, what do you look for, exactly? I can view stats about cost of the place, how much it rents for, etc., but I can't see inside the place, what it looks like, what the renovation quality is like, etc.

I'm a bit afraid of just committing to a purchase without seeing it myself, and from what I understand many of these turnkey units sell immediately after being listed, so timing is sort of important.

Initially, I thought I'd ask my family who lives in the area to go check the places out for me, then make a purchasing decision, do inspections, etc. I'm beginning to feel like that likely won't be possible, however.

I'd love to hear stores or talk to those of you from out of state who've gone this route and purchased turnkey units. What was your experience like? Any advice is appreciated.

If you can't even get pictures of the interior that should raise red flags.  A common practice for some turnkey providers is to list a cap rate that is superior to CA returns but well below average for the area.  You may not have the willpower to do the research and find a deal on your own but at least becoming familiar with returns in the area and the area itself before giving your money to a stranger may be a wise move.

@Randall Degges hi neighbor, I live in Walnut Creek. I have a rental in Idaho. Last month I had major needing to evict tenants and do a major cleanup and fix several items after they trashed my place in less then 2 years. It happens. I didn’t put that tenant in place and think it would have been avoided if I had. However, after that ordeal I decided I should probably stick to investing with in a days drive or a quick flight. I had been looking farther east until my experience. I’m curious to see how it works out for you! I also have a friend in Idaho for emergencies.

Thanks for the responses!

I'm going to do a bit more research before diving in. Going to check out the Indianapolis market a bit, get comfortable with prices and cap rates, etc.

Thank you all for the advice! And Sheri -- I'm going to send you a message! Would love to meetup sometime and hear more about your experiences.

@Randall Degges - I bought my very first turnkey (towhome) back in mid 2015 in KCMO and that property has perfomed exceptionally well. I still have the same tenant in fact in there. I bought 6 more rentals since then but I bought those on my own and not through a turnkey as I wanted to learn the business and wanted to be hands on but thats not the case with you and there is nothing wrong with buying turnkeys. I think its an excellent resource for busy working professionals Having said that working with a good turnkey provider is absolutely critical. There are hundreds of turnkey providers all over the country so please make sure to buy it from a good vendor. Also with the fact that its your first rental i would recommend investing only in B/B+/A- type of a deal There was a website that someone on BP had recommended a while back. I havent used it much myself but might be helpful for you http://turnkey-reviews.com/directory/reviews/ Good Luck