Turnkey or not in IN, FL? ...the right PM...

11 Replies

GOAL: Purchase a sub 100k single or multi-family turn key property in IN, or FL for long term cash flow, (appreciation is a cherry on top) before Dec. 31st 2019. (this will be my first rental property and I could finance or purchase the property. I’m considering both). 

CURRENT PLAN: I was recommended to a turnkey provider who builds and BRRRs properties in IN, and FL (and other south markets). He has an excel sheet with all his properties, all the numbers for my returns outlined, financing (if needed), contractos, etc., and said I won’t have to pay his PM dues if the property is vacant (incentivizing them to make sure my property always has a renter).


CONCERNS: 
1. How do I qualify a turnkey provider? 
2. How to find other turn key providers to compare differences? 

3. What “other things” should I be considering that are typically outside of a turn key solution. 


Thank you for your help, I am excited to hear from the community and dive deeper into the insights and recommendations.

Cheers, 

Is that turnkey provider you're referring to selling the property turnkey or are you funding it all for him to do the work? There's a major difference in those two models, and it sounds like you're talking about the latter which is much riskier than normal turnkeys. And this one provider does that work in that many different markets? That's a little strange (can explain why if you need me to).
For your questions:
1. That's a really long answer and hard to put into a forum post
2. There are a lot of turnkey providers on BP, I've been working with turnkey providers since 2011 so I can recommend some, etc.
3. Depends on your goals, budget, interests and resources. There are a million ways to invest in REI.

@Neal Stanfield Here are some of the to look out for in a turn key company. 

You should avoid any that: 

  • Don't allow financing or a finance contingency (it can be a good indication they are selling above market value)
  • Don't allow for your own independent property inspection
  • Are not realistic with their pro forma's (i.e. they don't include vacancy or maintenance projections or use unrealistically low vacancy factors)
  • Require you to pay for any renovation upfront
  • Sell only in cheap. low end neighborhoods
  • Don't accurately represent the neighborhood/property classification
  • Don't have consistent rehab standards for all properties
  • Don't provide a scope of work for the property
  • Can't provide references of repeat investors
  • Require you to close before a tenant is in place



Originally posted by @Neal Stanfield :

GOAL: Purchase a sub 100k single or multi-family turn key property in IN, or FL for long term cash flow, (appreciation is a cherry on top) before Dec. 31st 2019. (this will be my first rental property and I could finance or purchase the property. I’m considering both). 

CURRENT PLAN: I was recommended to a turnkey provider who builds and BRRRs properties in IN, and FL (and other south markets). He has an excel sheet with all his properties, all the numbers for my returns outlined, financing (if needed), contractos, etc., and said I won’t have to pay his PM dues if the property is vacant (incentivizing them to make sure my property always has a renter).

CONCERNS: 
1. How do I qualify a turnkey provider? 
2. How to find other turn key providers to compare differences? 

3. What “other things” should I be considering that are typically outside of a turn key solution. 

Thank you for your help, I am excited to hear from the community and dive deeper into the insights and recommendations.

Cheers, 

Tons of turnkey markets out there, not just Florida and Indiana. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets so you'll have a ton of options as to which market and which provider to use and invest in. In no particular order I have listed some of the most popular markets for out of state investors

  • Cleveland, Ohio
  • Dayton, Ohio
  • Toledo, Ohio
  • Youngstown, Ohio
  • Cincinnati, Ohio
  • Memphis, Tennessee
  • Birmingham, Alabama
  • Kansas City, Missouri
  • Saint Louis, Missouri
  • Indianapolis, Indiana
  • Detroit, Michigan
  • Erie, Pennsylvania
  • Louisville, Kentucky
  • Milwaukee, Wisconsin
  • Jackson, Mississippi

Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.

One thing to note when looking at the individual markets, you can make or loose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

  • Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
  • Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
  • Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
  • Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
  • Make sure your property manager is a licensed real estate brokerage.
  • Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estate
  • Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.

Thank you for your insight. I appreciate it. 

@Ali Boone - thank you, can you send me a few options? I have been saving for the last 6 years and am just doing my due diligence now. 

@Mike D'Arrigo - thank you, I'll look at comparing those points to the different options 

@James Wise - thank you, I'll check out setting up alerts! I love the idea. 

@James Wise - I read about Clayton Morris Invest story. It’s going to help me avoid some risks and some things to validate.

The PM company I’m looking at is Invictus. Do you have any thoughts about using the same company for both TK and PM if they offer both services?

https://www.invictuspropmanagement.com/contact-us/

Originally posted by @Neal Stanfield :

@James Wise - I read about Clayton Morris Invest story. It’s going to help me avoid some risks and some things to validate.

The PM company I’m looking at is Invictus. Do you have any thoughts about using the same company for both TK and PM if they offer both services?

https://www.invictuspropmanagement.com/contact-us/

 I've never heard of Invictus but the company handling the sale and the PM being the same is always nice. Shows that they've taken the time to build up their infrastructure.

I'm purchasing my first OOS turnkey property in northern Indiana by the spring of 2020. Besides the many factors the above investors have mentioned, a couple things that stood out to me during my research was to:

1. Ensure that you do you own due diligence on your target property as you would with any other property. (obvious) Do not go in blindly trusting all the data the turnkey provider is telling you. There are sleazy providers out there that will sell anything as long as there are buyers.

2. Research, interview, and vet over 20 turnkey providers before making your final decision. Not all providers are built the same.

3. Do not do business with turnkey providers that own the PM company and/or mandate that you use their PM company throughout the ownership of the property. If things go left with the PM company, you want to have freedom to rid of the old and choose your own new property management team.

4. Do not do business with turnkey providers that make you sell the property back to the company if or when you decide to sell the property. As mentioned before, you want to have freedom to sell whoever you want.

I gained great value from this Youtube video when doing my research. Check it out.


https://www.youtube.com/watch?v=JjZJs9xcXuM