Best markets for turnkey investing

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After doing countless hours of research on the pros/cons of turnkey investing, I've decided that it is my best option for my first property. (Due to time constraints and living in an area with absurd property value/taxes). I understand there are countless numbers of TK companies across the midwest, and my next question is which market to choose to begin creating my list of companies to interview. I'm looking for B- or better regions, and I'm set out to achieving at least 12% ROI after CapEx, utilities, and everything else. Does anybody have any experience or insight on where I should start? (I've got about $35k for a downpayment and around $10k in reserves). Thanks guys!

@Scott Sherin You want to be investing in markets that is at least seeing job growth, population growth, and reinvesting into the city (development, services, infrastructure, etc). Once you pick a market or two, connect with turnkey providers. I'm sure you read about the importance of vetting the turnkey provider. While that is certainly important, what's just as important is that you do your DD on the property. Just because you like a company doesn't guarantee you a good property. Hope this helps. I invest in turnkeys as well so feel free to reach out to me with any questions!

Originally posted by @Scott Sherin :

After doing countless hours of research on the pros/cons of turnkey investing, I've decided that it is my best option for my first property. (Due to time constraints and living in an area with absurd property value/taxes). I understand there are countless numbers of TK companies across the midwest, and my next question is which market to choose to begin creating my list of companies to interview. I'm looking for B- or better regions, and I'm set out to achieving at least 12% ROI after CapEx, utilities, and everything else. Does anybody have any experience or insight on where I should start? (I've got about $35k for a downpayment and around $10k in reserves). Thanks guys!

Many markets available. Cleveland is the one I am most familar with and it's also very popular with investors across the USA so I figured you'd get some value out of reading The Ultimate Guide to Grading Cleveland Neighborhoods. I also have similar guides that you may want to look over for Kansas City, Missouri. & Birmingham, Alabama.

In addition there are tons of other turnkey markets out there besides those listed above. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors

  • Cincinnati, Ohio
  • Dayton, Ohio
  • Toledo, Ohio
  • Youngstown, Ohio
  • Cincinnati, Ohio
  • Memphis, Tennessee
  • 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 lose 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 scam and/or Morris Invest scam 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 averse, real estate, (especially out of state) is not for you.