Buying Second Turnkey

Rental Property Investor · Brooklyn NY · Member since 2018 · 263 posts · 469 votes

I currently have one SFH located in Little Rock, AR purchased via turnkey. My long-term goal is to build a rental property portfolio that will ultimately exceed my earned income.

I understand turnkey properties come with a premium. Based on my experience from the first purchase, the process was pretty streamlined and cash flowing from day one. This worked well for me since I am investing OOS and have limited time due to working full-time and running a side business.

What are your thoughts on buying multiple turnkey properties? Any thoughts would be greatly appreciated.

Thank you.

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Frank Wong

Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes

Every time I read something about turn keys there seems to always be a debate on turn keys not being great for investors. I don't think that is correct. On one hand, I get the argument that buying a turn key does not allow you to do BRRR. But what if the investor is not looking for that?

The investor can be looking for a rental property that can give them a monthly income right away and doesn't have to wait a few months for rehab. The investor also doesn't have the "time" to vet all the contractors, look for finishes, deal with delays, and get it all done within their budget. Maybe the investor is smart to understand that the best use of their time is to do what makes them the most amount of money while allowing the experts in the field to do the labor-intensive work to complete a rehab.

In Jeff's case, they are rehabbing multiple properties. They have economies of scale and will be more efficient. They are probably getting things done cheaper than a new investor. There is also no free lunch in this world. Why can't a turn key operator turn a profit? You are paying them to save yourself time.

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Hadar OrkibiPro Member
Rental Property Investor · USA / NZ · Member since 2016 · 1k+ posts · 812 votes
7y
@Account Closed my issue with turn key is that you put the money in (the down payment) and will not get it out for long time. ie. you cant re finance and pull the money out.
there is no value add, the property is already stabilized.
In away its almost the same as investing in Stock / Bonds. you pay retail and get a cash-flow return. appreciation is only bonus.
7 Reply
Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
7y
I've bought multiple turnkeys. I bought them turnkey for the exact advantages you mention.
I disagree with the previous poster about buying turnkeys is the same as buying stock and appreciation is the only bonus. Anytime you own real property, there are several streams of advantage over stocks. Yes, the turnkey property has no room for value add and is already stabilized, but that doesn't mean you can't profit from them. All of my turnkeys are profitable. I was fortunate to buy them when the market was down so they've all appreciated a ton, which wouldn't likely be the case right now, but there's no reason to say a turnkey can't be profitable.
As far as thoughts as to whether to do it or not (buy multiple turnkeys), it totally depends on your situation. If the first one worked for you, do it again. Why not? If you want to try to add value to something or take on more work, go for it. There's no right or wrong. You can buy as many turnkeys as you want (or don't want) and switch to value-add anytime.
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Account Closed
Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
7y
@Hadar Orkibi I was wondering if you had seen the chart below and if it is similar in NZ
Australia Warned To Prepare For "Severe Housing Collapse" And "Banking Crisis"
0 Reply
Hadar OrkibiPro Member
Rental Property Investor · USA / NZ · Member since 2016 · 1k+ posts · 812 votes
7y
@Account Closed parts of NZ are still booming, while Auckland and Chch slowed down significantly. There is a slow pick now, over the Spring / Summer but my guess is that it would be slow growth to stagnate in some areas for 2-3 years Max.
you can find more details here:
https://www.corelogic.co.nz/research-news
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Hadar OrkibiPro Member
Rental Property Investor · USA / NZ · Member since 2016 · 1k+ posts · 812 votes
7y
@Account Closed Melbourne and Sydney both are very unaffordable (even with 5%-10% price correction), there are some issues with the banking system but i doubt there is going to be a "Severe Housing Collapse".
5% or 10% Drop in prices is not Sever.... 20% -30% is.
0 Reply
Jeff Schechter
Developer · Nashville, TN · Member since 2016 · 484 posts · 406 votes
7y
I am not seeing how charts about a possible slowdown half a world away helps an investor who is asking about turnkey in the US.
I also do not agree with the "premium" model. It may be true of some turnkeys, but not us. Our profits are made by doing things more efficiently than the investor can do themselves. Happy to answer questions if you want to PM me.
8 Reply
Frank Wong
Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
7y
Every time I read something about turn keys there seems to always be a debate on turn keys not being great for investors. I don't think that is correct. On one hand, I get the argument that buying a turn key does not allow you to do BRRR. But what if the investor is not looking for that?
The investor can be looking for a rental property that can give them a monthly income right away and doesn't have to wait a few months for rehab. The investor also doesn't have the "time" to vet all the contractors, look for finishes, deal with delays, and get it all done within their budget. Maybe the investor is smart to understand that the best use of their time is to do what makes them the most amount of money while allowing the experts in the field to do the labor-intensive work to complete a rehab.
In Jeff's case, they are rehabbing multiple properties. They have economies of scale and will be more efficient. They are probably getting things done cheaper than a new investor. There is also no free lunch in this world. Why can't a turn key operator turn a profit? You are paying them to save yourself time.
12 Reply
James Scholz
Investor · Auckland, Auckland · Member since 2015 · 35 posts · 9 votes
7y
Originally posted by @Frank Wong:

Every time I read something about turn keys there seems to always be a debate on turn keys not being great for investors. I don't think that is correct. On one hand, I get the argument that buying a turn key does not allow you to do BRRR. But what if the investor is not looking for that?
The investor can be looking for a rental property that can give them a monthly income right away and doesn't have to wait a few months for rehab. The investor also doesn't have the "time" to vet all the contractors, look for finishes, deal with delays, and get it all done within their budget. Maybe the investor is smart to understand that the best use of their time is to do what makes them the most amount of money while allowing the experts in the field to do the labor-intensive work to complete a rehab.
In Jeff's case, they are rehabbing multiple properties. They have economies of scale and will be more efficient. They are probably getting things done cheaper than a new investor. There is also no free lunch in this world. Why can't a turn key operator turn a profit? You are paying them to save yourself time.
Yea its just down to the individuals strategy. For some getting a smaller piece of the profit and spending much less time is better, for others putting in a lot of work to rehab and getting more profit is better. To each his own
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Account Closed
OP
Rental Property Investor · Brooklyn NY · Member since 2018 · 263 posts · 469 votes
7y
Thank you all for the responses.
@Frank Wong
@Frank Wong, you are correct. I am looking for monthly income right away and do not have time to vet contractors, look for finishes, etc. It seems like the best use of my time at the moment is to work and build up down payments. In reality, without the cash I would not be in RE.
2 Reply
Marisa R.
Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes
7y
@Hadar Orkibi
The Australian property market downturn is Australia wide not just in Melbourne and Sydney
This is due to credit squeeze, google APRA
If you can not source finance more stock comes on the market, then there is oversupply, hence boom/bust cycle, what is haopening in Australia
0 Reply
Hadar OrkibiPro Member
Rental Property Investor · USA / NZ · Member since 2016 · 1k+ posts · 812 votes
7y
Hardly a correction so far @Marisa R.
We have the same strategy implemented by the reserve bank in New Zealand....
It does cool the market, but its not the end of the world... and we are at the downside of the cycle so SOFTER MARKET is expected. GOOD TIME TO BUY!
https://www.theguardian.com/australia-news/2018/de...
The Australian Banks are exposed to a lot of "Off the plan" development sales, real estate transactions that were secured against deposits that were paid by overseas investors (mainly from Asia). many of these investors ended up walking away from their commitments leaving the developers and banks exposed.
Time would tel how deep this softening in the market would be, who knows...
1 Reply
Marisa R.
Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes
7y
@Hadar Orkibi
Call it a correction, bust cycle but its the beginning of the downturn in Australian property market, this is fact, and impacting on all States. It started around Dec 2016.
Investors can not source finance, we are seeing more supply come to market. Markets are all about supply and demand, we now have oversupply
Its like catching a falling knife. No one can predict how far it will fall, time will tell
All to their own, I prefer to buy in rising markets, easiest way to make money
0 Reply
Dean Letfus
Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes
7y
You're quite wrong @Marisa R., Oz has always boomed and bust like it is now. It's largely driven by their laws surrounding foreign ownership which created a completely artificial market for off the plans and new apartments at inflated rates. Also due to the mining boom OZ virtually missed the GFC completely so there had to be a correction at some point. Their market is completely different to the USA though, like New Zealand, it is unlikely to ever really collapse as you guys did. Both countries have very predictable and stellar growth curves providing you avoid the sheep mentality.
1 Reply
Patrick Fraire
Flipper/Rehabber · Long Beach, CA · Member since 2017 · 155 posts · 118 votes
7y
@Aaron Wade How much did your first turnkey cash flow?
0 Reply
Account Closed
OP
Rental Property Investor · Brooklyn NY · Member since 2018 · 263 posts · 469 votes
7y
@Patrick Fraire: ~ $250/mo.
3 Reply
Patrick Fraire
Flipper/Rehabber · Long Beach, CA · Member since 2017 · 155 posts · 118 votes
7y
@Aaron Wade Damn that’s pretty good. I personally have been looking into getting my first turnkey. How much down? And which turnkey provider did you go with?
0 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
7y
Originally posted by @Patrick Fraire:
@Aaron Wade
Damn that’s pretty good. I personally have been looking into getting my first turnkey. How much down? And which turnkey provider did you go with?
You're typically looking at 25% down whenever you buy a non owner occupied property with between 1-4 units.
0 Reply
Marisa R.
Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes
7y
@Dean Letfus
I am an Australian investor, also playing in US since 2011. I know Australian market intimately. Been investing and developing property in Sydney, Melb and Perth for over 16 years.
The markets in Australia are cyclic correct and they boom at different times. In 2013 we had booming markets in Perth, Sydney and Melbourne, 2016 Tasmania. There are also various indicators that have driven various markets, for example Melbourne boomed due to immigration, similar to Sydney.
What you have stated is correct in part but this alone is not what killed the boom cycle today in particular Sydney and Melbourne markets, the largest in Australia.
I am 100% correct it is APRA that put the final nail in the coffin. Lenders tightening criteria has significantly changed which in turn has put the brakes on lending. If you can not finance deals you can not buy. First Home Buyers (FHB) can not soak up the oversupply, and investors are now out of the markets. This with negative market sentiment has put the brakes on property markets around Australia
Please read posts on this forum to further understand what is happening in Australia today.
https://www.propertychat.com.au/community/threads/how-apra-may-force-you-to-deleverage-your-portfolio.27958/#post-504037
0 Reply
Marisa R.
Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes
7y
@Dean Letfus
I am an Australian investor and know this market intimately. Been investing and developing property in Sydney, Melb and Perth
I come from experience.
What you have stated is correct in part but it is not the full picture
This downturn is all about APRA, this was the final nail in the coffin. Please google this.
For further information suggest you read threads from
Propertychat
0 Reply
Dean Letfus
Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes
7y
@Marisa R., we'll just have to agree to disagree then! I've worked for developers in Queensland and NSW. I think the collapses are initiated by stupid noobs investing in mining towns, and the falsely valued apartment markets. Financial regulation of course has an impact but investors always find ways around that.
What you can't recover from is buying a 250K house in a mining town for 850K and then having it go back to 250K value. The fallout from that sort of activity is what is driving the financial regulation as the banks take away your umbrella as the rain falls. Happy to lend to you in inflated appraisals but when you need our help we pull all the prawns off the barbie.
I've watched naivety destroy countless "investors" at the hands of developers in OZ. Fortunately we have better regulations in NZ so this doesn't exist as a real problem.
I've had Michael Yardney and others speak at my events so I know what the experts say about OZ. If you take Michael, Steve and even Brad a few years ago, they all see the market through different coloured lenses. I have always seen OZ as much higher risk than NZ. But the lending will always find a way to allow another round of inexperienced newbies feel some pain :-).
0 Reply
Marisa R.
Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes
7y
@Dean Letfus
Yes, agree to disagree
Certainly going to be some pain in Oz markets.
We are now seeing interest only loans revert to interest and principal. Tack 40% on top of loan repayments. That is going to kill investors... ouch
Anyway back to topic I guess
Don’t you love the US markets
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Marisa R.:

@Dean Letfus
Yes, agree to disagree
Certainly going to be some pain in Oz markets.
We are now seeing interest only loans revert to interest and principal. Tack 40% on top of loan repayments. That is going to kill investors... ouch
Anyway back to topic I guess
Don’t you love the US markets
as it relates to US market I remember when I was posting on the property forum over there. and talked to many AU investors ( who frankly bought dog meat US properties and lost a ton of money) not as smart as you !!! but many were using their equity in the run up borrowing against that in OZ and then coming to the US to pay cash and hopefully cash flow on rentals here.. the other issue I saw with AU investors was always talking about gross rents.. not net.. for whatever reason.. your move to ATL as I have said was quite timely.
there was another lady cant remember her name but she put a lot of AU investors into Vegas back then and I am SURE they did very well.
Podcast Guest on Show #222
JLH Capital Partners51 Review
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Dean Letfus
Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes
7y
@Jay Hinrichs, there is carnage everywhere from that mate. The whole self directed superannuation rules in OZ are just stupid. I know of countless people lost their money in the USA. And the stupid thing is they were all working so didn't need the cashflow. If they had stayed in OZ or come to NZ they'd all be laughing.
But as you and I know any market can be good if you're careful. I am forever warning people about Memphis but at the same time it has been very good to me thanks to some sound mentoring early on and actually living in the city for a year!
@Marisa R., we had all your banks go P and I on us in NZ a while ago. Only new investors are in trouble most of us were OK. At least rates are low, in NZ there are specials under 4% again :-).
0 Reply
Marisa R.
Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes
7y
@Jay Hinrichs
Hi Jay
I believe that was Emma, she now lives in the Bahamas, she did very well
Yes, interesting Aussies calculate gross rental yields only and they call this cash flowing, not even close.
@Dean
@Dean Letfus
In terms of Interest only loans reverting back to Principal and Interest loans, as you can see from this article/link loans are now reverting and according to Reserve Bank of Australia will impact investors from 2018-2022 when many are due, as I said imagine tacking 40% onto your loans. We know Aussie properties are in the main negatively geared.
With the APRA changes many investors will not be able to refinance, and perhaps worse dependent on where their property is located and the product the values may not stack up.
https://www.abc.net.au/news/2018-02-20/rba-warns-o...
1 Reply
Marisa R.
Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes
7y
Originally posted by @Dean Letfus:
@Marisa R.,
I've had Michael Yardney and others speak at my events so I know what the experts say about OZ. If you take Michael, Steve and even Brad a few years ago, they all see the market through different coloured lenses. I have always seen OZ as much higher risk than NZ. But the lending will always find a way to allow another round of inexperienced newbies feel some pain :-).
Hi Dean
I don't know Brad? But certainly know of Michael Y and Steve McKnight. They implement different strategies but they have the same views regarding Australian property market, stats don't lie... ie auction clearance rates, sales volume etc.
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