Good Questions to ask Out of state turnkey provider ?
Rental Property Investor · South Jordan, UT · Member since 2019 · 9 posts · 4 votes
Good Questions to ask Out of state turnkey provider ?
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesOriginally posted by @Chris Clothier:
Originally posted by @Srikanth Raj:
What are some good questions that one should be asking when talking to out of state turnkey providers and which parameters should one be looking out for to find out between some good and not so good turnkey providers ?
I do agree with what @AJ Singh asked about your local market. Assuming you are not comfortable investing close to home or more hands-on, here are some questions I have posted in the past for investors to ask. For all intents and purposes, I started as a Turnkey investor back in 2003 before the word took off as a marketing term.
I wrote a book called the Turnkey Revolution and based a lot of it on advise I've given here on BP. I'm happy to give what I think are the best answers to these as well. Again, I made this list based on my own experiences.
Two important things to remember. One, if they don't have time to spend with you and answer your questions in detail and discuss them, in my opinion, move on. Two, a key about asking questions is to ask a mirror question. Many companies have learned how to sell and how to market and certainly how to answer questions like this. Often answers are scripted and your job as an investor is to ask the right questions in the right way to answer for yourself whether you can trust what you re hearing.
It is also important to remember that investors like myself always advise meeting who you're going to do business with. That is important because it allows you to see for yourself if the answers you heard match what you see on the ground. A mirror question is where you ask what is the average vacancy rate each month. Write down the answer. Sometime later in the conversation you ask the mirror question of what is your average occupancy each month. Write that answer down.
A high quality company will be on top of their KPI's and their numbers will match. A 3.5% vacancy number will match a 96.5% occupancy number.
Lastly, after you have their numbers research what you were told. I'll never forget a conversation with an investor who was amazed that a turnkey company had a 1.5% vacancy rate and a 98.5% occupancy. It sounded amazing. He asked how many properties they managed and the answer was roughly 1500. He then went onto their website online and researched their property management online and was shocked. Their website listed 198 properties for rent. They had an ad online for prospective tenants advertising 200+ vacant rentals. Their true vacancy rate was roughly 13% not 1.5%. But they felt like they had to market a low rate to "keep up with the Joneses". So ask your questions, get your data and do your research.
Are you an investor?
Do you own in the exact neighborhoods you are selling?
How many investors do you work with?
Do you own all facets of the operation?
Do you offer rental or maintenance guarantees? If they answer yes, ask them why. Then ask them if they will put the guarantee on year three.
Do you defer maintenance?
How many properties do you manage?
Do you own the properties you sell or are you a promoter simply taking a fee from Turnkey companies to market their companies?
How long have you been in the business?
What is your average vacancy rate?
What percentage of expiring leases will renew their lease each month?
What percentage of signed leases fulfill their full term?
What is the average number of days a property is vacant between tenants, move-out to move-in?
What percentage of billed rent do you collect each month?
What is the cost of an average repair bill after move-out?
What are your management fees?
What percentage of collected rent goes to yearly maintenance on average?
What is your average number-of-months occupancy per property?
What is your average occupancy rate?
What programs do you have in place to keep residents happy?
What customer service programs do you have in place?
Will you call me every month with an update on my portfolio?
How many team members are dedicated solely to providing service to your clients?
What has been your biggest mistake as an investor? How do you protect your clients from making the same mistakes?
That's an exhaustive list Chris I wonder if the new PM software runs all or some of those calcs ??
The one I like though is and I think you and I agree on this.. but buying at or close to the median price point of a given MSA to me is a critical for out of area.. just gives you a leg up on quality assets and generally speaking a mixture of owner occ and rentals in the area instead of 100% rentals or high % rentals.. and of course buying 50% under the Median is inviting high risk for out of state folks..
12 Replies
- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesyour just buying a house.. use the same parameters and due diligence you would if you were buying in your home town .. nothing magical.. the benefit is they specialize in areas were the 1% rule actually works ( which it seems many investors use as their metrics for investing) and the Inventory is generally not on the open market .. although many now a days are short on inventory and you need to get on a waiting list of sorts.. lots of options though for sure.
There are great opportunities in Provo and Springdale. Why would you invest out of state in current real estate market when the yields are so comparable.. Unless you are scaling to five rentals out of state in the next couple of years..
- Rental Property Investor · Green Bay, WI · Member since 2016 · 150 posts · 94 votes5y
Hello @Srikanth Raj I think first off you should determine what you are looking for in a turnkey property as there is a vast difference in what is offered from one turnkey provider to another.
In terms of rehabbing the property, the workflow can range from throwing a coat of paint on a wall or two, to an entire gut of the mechanicals, windows, siding, and flooring. Some providers take the approach that a furnace or water heater with several years of expected life shouldn't be replaced in the rehab, but that the final product should be priced accordingly. That furnace will need to be replaced in the next few years, but just not yet... Any turnkey investor should ask very probing questions of the turnkey provider regarding the condition of all mechanicals, roof and windows prior to entering into a deal. There is nothing wrong with either approach (full rehab vs targeted based on immediate need), but it is important to know which level of rehab has been done on a unit you are considering purchasing. You will find that there is no common definition of a turnkey property, and it can be very risky (and expensive) to make any assumptions.
The ongoing management of the property is another area of vastly different approaches to turnkey investments. Some providers simply sell the property and the investor is left to find a management company, maintenance personnel, snow and lawn care providers, etc. Other providers offer up recommendations for these services, and still other turnkey companies offer these services as part of their overall package. The range of offerings is great, and no assumptions should be made; you need to ask very specific questions regarding who is to do what.
Make sure you check references, and contact other clients that are located remotely to determine if the communication and follow up is adequate.Best of luck to you with your investments!
- 5yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
Originally posted by @Srikanth Raj:
What are some good questions that one should be asking when talking to out of state turnkey providers and which parameters should one be looking out for to find out between some good and not so good turnkey providers ?
I do agree with what @AJ Singh asked about your local market. Assuming you are not comfortable investing close to home or more hands-on, here are some questions I have posted in the past for investors to ask. For all intents and purposes, I started as a Turnkey investor back in 2003 before the word took off as a marketing term.
I wrote a book called the Turnkey Revolution and based a lot of it on advise I've given here on BP. I'm happy to give what I think are the best answers to these as well. Again, I made this list based on my own experiences.
Two important things to remember. One, if they don't have time to spend with you and answer your questions in detail and discuss them, in my opinion, move on. Two, a key about asking questions is to ask a mirror question. Many companies have learned how to sell and how to market and certainly how to answer questions like this. Often answers are scripted and your job as an investor is to ask the right questions in the right way to answer for yourself whether you can trust what you re hearing.
It is also important to remember that investors like myself always advise meeting who you're going to do business with. That is important because it allows you to see for yourself if the answers you heard match what you see on the ground. A mirror question is where you ask what is the average vacancy rate each month. Write down the answer. Sometime later in the conversation you ask the mirror question of what is your average occupancy each month. Write that answer down.
A high quality company will be on top of their KPI's and their numbers will match. A 3.5% vacancy number will match a 96.5% occupancy number.
Lastly, after you have their numbers research what you were told. I'll never forget a conversation with an investor who was amazed that a turnkey company had a 1.5% vacancy rate and a 98.5% occupancy. It sounded amazing. He asked how many properties they managed and the answer was roughly 1500. He then went onto their website online and researched their property management online and was shocked. Their website listed 198 properties for rent. They had an ad online for prospective tenants advertising 200+ vacant rentals. Their true vacancy rate was roughly 13% not 1.5%. But they felt like they had to market a low rate to "keep up with the Joneses". So ask your questions, get your data and do your research.
Are you an investor?
Do you own in the exact neighborhoods you are selling?
How many investors do you work with?
Do you own all facets of the operation?
Do you offer rental or maintenance guarantees? If they answer yes, ask them why. Then ask them if they will put the guarantee on year three.
Do you defer maintenance?
How many properties do you manage?
Do you own the properties you sell or are you a promoter simply taking a fee from Turnkey companies to market their companies?
How long have you been in the business?
What is your average vacancy rate?
What percentage of expiring leases will renew their lease each month?
What percentage of signed leases fulfill their full term?
What is the average number of days a property is vacant between tenants, move-out to move-in?
What percentage of billed rent do you collect each month?
What is the cost of an average repair bill after move-out?
What are your management fees?
What percentage of collected rent goes to yearly maintenance on average?
What is your average number-of-months occupancy per property?
What is your average occupancy rate?
What programs do you have in place to keep residents happy?
What customer service programs do you have in place?
Will you call me every month with an update on my portfolio?
How many team members are dedicated solely to providing service to your clients?
What has been your biggest mistake as an investor? How do you protect your clients from making the same mistakes?
- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Chris Clothier:
Originally posted by @Srikanth Raj:
What are some good questions that one should be asking when talking to out of state turnkey providers and which parameters should one be looking out for to find out between some good and not so good turnkey providers ?
I do agree with what @AJ Singh asked about your local market. Assuming you are not comfortable investing close to home or more hands-on, here are some questions I have posted in the past for investors to ask. For all intents and purposes, I started as a Turnkey investor back in 2003 before the word took off as a marketing term.
I wrote a book called the Turnkey Revolution and based a lot of it on advise I've given here on BP. I'm happy to give what I think are the best answers to these as well. Again, I made this list based on my own experiences.
Two important things to remember. One, if they don't have time to spend with you and answer your questions in detail and discuss them, in my opinion, move on. Two, a key about asking questions is to ask a mirror question. Many companies have learned how to sell and how to market and certainly how to answer questions like this. Often answers are scripted and your job as an investor is to ask the right questions in the right way to answer for yourself whether you can trust what you re hearing.
It is also important to remember that investors like myself always advise meeting who you're going to do business with. That is important because it allows you to see for yourself if the answers you heard match what you see on the ground. A mirror question is where you ask what is the average vacancy rate each month. Write down the answer. Sometime later in the conversation you ask the mirror question of what is your average occupancy each month. Write that answer down.
A high quality company will be on top of their KPI's and their numbers will match. A 3.5% vacancy number will match a 96.5% occupancy number.
Lastly, after you have their numbers research what you were told. I'll never forget a conversation with an investor who was amazed that a turnkey company had a 1.5% vacancy rate and a 98.5% occupancy. It sounded amazing. He asked how many properties they managed and the answer was roughly 1500. He then went onto their website online and researched their property management online and was shocked. Their website listed 198 properties for rent. They had an ad online for prospective tenants advertising 200+ vacant rentals. Their true vacancy rate was roughly 13% not 1.5%. But they felt like they had to market a low rate to "keep up with the Joneses". So ask your questions, get your data and do your research.
Are you an investor?
Do you own in the exact neighborhoods you are selling?
How many investors do you work with?
Do you own all facets of the operation?
Do you offer rental or maintenance guarantees? If they answer yes, ask them why. Then ask them if they will put the guarantee on year three.
Do you defer maintenance?
How many properties do you manage?
Do you own the properties you sell or are you a promoter simply taking a fee from Turnkey companies to market their companies?
How long have you been in the business?
What is your average vacancy rate?
What percentage of expiring leases will renew their lease each month?
What percentage of signed leases fulfill their full term?
What is the average number of days a property is vacant between tenants, move-out to move-in?
What percentage of billed rent do you collect each month?
What is the cost of an average repair bill after move-out?
What are your management fees?
What percentage of collected rent goes to yearly maintenance on average?
What is your average number-of-months occupancy per property?
What is your average occupancy rate?
What programs do you have in place to keep residents happy?
What customer service programs do you have in place?
Will you call me every month with an update on my portfolio?
How many team members are dedicated solely to providing service to your clients?
What has been your biggest mistake as an investor? How do you protect your clients from making the same mistakes?
That's an exhaustive list Chris I wonder if the new PM software runs all or some of those calcs ??
The one I like though is and I think you and I agree on this.. but buying at or close to the median price point of a given MSA to me is a critical for out of area.. just gives you a leg up on quality assets and generally speaking a mixture of owner occ and rentals in the area instead of 100% rentals or high % rentals.. and of course buying 50% under the Median is inviting high risk for out of state folks..
- 5yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
Originally posted by @Jay Hinrichs:
Originally posted by @Chris Clothier:
Originally posted by @Srikanth Raj:
What are some good questions that one should be asking when talking to out of state turnkey providers and which parameters should one be looking out for to find out between some good and not so good turnkey providers ?
I do agree with what @AJ Singh asked about your local market. Assuming you are not comfortable investing close to home or more hands-on, here are some questions I have posted in the past for investors to ask. For all intents and purposes, I started as a Turnkey investor back in 2003 before the word took off as a marketing term.
I wrote a book called the Turnkey Revolution and based a lot of it on advise I've given here on BP. I'm happy to give what I think are the best answers to these as well. Again, I made this list based on my own experiences.
Two important things to remember. One, if they don't have time to spend with you and answer your questions in detail and discuss them, in my opinion, move on. Two, a key about asking questions is to ask a mirror question. Many companies have learned how to sell and how to market and certainly how to answer questions like this. Often answers are scripted and your job as an investor is to ask the right questions in the right way to answer for yourself whether you can trust what you re hearing.
It is also important to remember that investors like myself always advise meeting who you're going to do business with. That is important because it allows you to see for yourself if the answers you heard match what you see on the ground. A mirror question is where you ask what is the average vacancy rate each month. Write down the answer. Sometime later in the conversation you ask the mirror question of what is your average occupancy each month. Write that answer down.
A high quality company will be on top of their KPI's and their numbers will match. A 3.5% vacancy number will match a 96.5% occupancy number.
Lastly, after you have their numbers research what you were told. I'll never forget a conversation with an investor who was amazed that a turnkey company had a 1.5% vacancy rate and a 98.5% occupancy. It sounded amazing. He asked how many properties they managed and the answer was roughly 1500. He then went onto their website online and researched their property management online and was shocked. Their website listed 198 properties for rent. They had an ad online for prospective tenants advertising 200+ vacant rentals. Their true vacancy rate was roughly 13% not 1.5%. But they felt like they had to market a low rate to "keep up with the Joneses". So ask your questions, get your data and do your research.
Are you an investor?
Do you own in the exact neighborhoods you are selling?
How many investors do you work with?
Do you own all facets of the operation?
Do you offer rental or maintenance guarantees? If they answer yes, ask them why. Then ask them if they will put the guarantee on year three.
Do you defer maintenance?
How many properties do you manage?
Do you own the properties you sell or are you a promoter simply taking a fee from Turnkey companies to market their companies?
How long have you been in the business?
What is your average vacancy rate?
What percentage of expiring leases will renew their lease each month?
What percentage of signed leases fulfill their full term?
What is the average number of days a property is vacant between tenants, move-out to move-in?
What percentage of billed rent do you collect each month?
What is the cost of an average repair bill after move-out?
What are your management fees?
What percentage of collected rent goes to yearly maintenance on average?
What is your average number-of-months occupancy per property?
What is your average occupancy rate?
What programs do you have in place to keep residents happy?
What customer service programs do you have in place?
Will you call me every month with an update on my portfolio?
How many team members are dedicated solely to providing service to your clients?
What has been your biggest mistake as an investor? How do you protect your clients from making the same mistakes?
That's an exhaustive list Chris I wonder if the new PM software runs all or some of those calcs ??
The one I like though is and I think you and I agree on this.. but buying at or close to the median price point of a given MSA to me is a critical for out of area.. just gives you a leg up on quality assets and generally speaking a mixture of owner occ and rentals in the area instead of 100% rentals or high % rentals.. and of course buying 50% under the Median is inviting high risk for out of state folks..
You're right, it is a long list, but the reality is that if a provider will spend some time with you and answer your questions with a serious demeanor, then you just may have the start of a great relationship. If they won't give you the time or clearly don't care about your questions and their answers reflect that, then it is easy to move on, in my opinion. Even if they answer half of these, they will be a top tier company. The bar is unfortunately very low as most simply are not on top of their data or they don't care. They are poor business operators. As an investor, you cannot afford to hire a poor business operator. There are too many good companies to there that will handle these questions with ease to waste time on any companies that can't.
This also helps to avoid the added expense of working with a promotional company that doesn't actually buy or sell properties, but acquires and sells qualified investors to TK companies. This helps separate actual providers.
- Rental Property Investor · South Jordan, UT · Member since 2019 · 9 posts · 4 votes5y
- Rental Property Investor · South Jordan, UT · Member since 2019 · 9 posts · 4 votes5y
Originally posted by @Chris Clothier:
Originally posted by @Srikanth Raj:
What are some good questions that one should be asking when talking to out of state turnkey providers and which parameters should one be looking out for to find out between some good and not so good turnkey providers ?
I do agree with what @AJ Singh asked about your local market. Assuming you are not comfortable investing close to home or more hands-on, here are some questions I have posted in the past for investors to ask. For all intents and purposes, I started as a Turnkey investor back in 2003 before the word took off as a marketing term.
I wrote a book called the Turnkey Revolution and based a lot of it on advise I've given here on BP. I'm happy to give what I think are the best answers to these as well. Again, I made this list based on my own experiences.
Two important things to remember. One, if they don't have time to spend with you and answer your questions in detail and discuss them, in my opinion, move on. Two, a key about asking questions is to ask a mirror question. Many companies have learned how to sell and how to market and certainly how to answer questions like this. Often answers are scripted and your job as an investor is to ask the right questions in the right way to answer for yourself whether you can trust what you re hearing.
It is also important to remember that investors like myself always advise meeting who you're going to do business with. That is important because it allows you to see for yourself if the answers you heard match what you see on the ground. A mirror question is where you ask what is the average vacancy rate each month. Write down the answer. Sometime later in the conversation you ask the mirror question of what is your average occupancy each month. Write that answer down.
A high quality company will be on top of their KPI's and their numbers will match. A 3.5% vacancy number will match a 96.5% occupancy number.
Lastly, after you have their numbers research what you were told. I'll never forget a conversation with an investor who was amazed that a turnkey company had a 1.5% vacancy rate and a 98.5% occupancy. It sounded amazing. He asked how many properties they managed and the answer was roughly 1500. He then went onto their website online and researched their property management online and was shocked. Their website listed 198 properties for rent. They had an ad online for prospective tenants advertising 200+ vacant rentals. Their true vacancy rate was roughly 13% not 1.5%. But they felt like they had to market a low rate to "keep up with the Joneses". So ask your questions, get your data and do your research.
Are you an investor?
Do you own in the exact neighborhoods you are selling?
How many investors do you work with?
Do you own all facets of the operation?
Do you offer rental or maintenance guarantees? If they answer yes, ask them why. Then ask them if they will put the guarantee on year three.
Do you defer maintenance?
How many properties do you manage?
Do you own the properties you sell or are you a promoter simply taking a fee from Turnkey companies to market their companies?
How long have you been in the business?
What is your average vacancy rate?
What percentage of expiring leases will renew their lease each month?
What percentage of signed leases fulfill their full term?
What is the average number of days a property is vacant between tenants, move-out to move-in?
What percentage of billed rent do you collect each month?
What is the cost of an average repair bill after move-out?
What are your management fees?
What percentage of collected rent goes to yearly maintenance on average?
What is your average number-of-months occupancy per property?
What is your average occupancy rate?
What programs do you have in place to keep residents happy?
What customer service programs do you have in place?
Will you call me every month with an update on my portfolio?
How many team members are dedicated solely to providing service to your clients?
What has been your biggest mistake as an investor? How do you protect your clients from making the same mistakes?
Sorry for the late reply and That is a great question and maybe its my mindset issue. I do agree that my local market is great but I also think that the properties requiring no rehab work in my area is very expensive. Hence I do need to have some form of rehab done in order to meet my price range. But my fear is that I do not know any contractors anywhere and one of the reasons I am going for turnkey is that they already have a well defined team. I also could not find any turnkey companies for Utah market. Hence as a first time investor, I felt that going via a turnkey company would be the best option. I would be curious to know your thoughts.
- Rental Property Investor · South Jordan, UT · Member since 2019 · 9 posts · 4 votes5y
Originally posted by @Jay Hinrichs:
your just buying a house.. use the same parameters and due diligence you would if you were buying in your home town .. nothing magical.. the benefit is they specialize in areas were the 1% rule actually works ( which it seems many investors use as their metrics for investing) and the Inventory is generally not on the open market .. although many now a days are short on inventory and you need to get on a waiting list of sorts.. lots of options though for sure.Thanks Jay!!! Will keep that in mind.
- Rental Property Investor · South Jordan, UT · Member since 2019 · 9 posts · 4 votes5y
Originally posted by @Steve Donovan:
Hello @Srikanth Raj I think first off you should determine what you are looking for in a turnkey property as there is a vast difference in what is offered from one turnkey provider to another.
In terms of rehabbing the property, the workflow can range from throwing a coat of paint on a wall or two, to an entire gut of the mechanicals, windows, siding, and flooring. Some providers take the approach that a furnace or water heater with several years of expected life shouldn't be replaced in the rehab, but that the final product should be priced accordingly. That furnace will need to be replaced in the next few years, but just not yet... Any turnkey investor should ask very probing questions of the turnkey provider regarding the condition of all mechanicals, roof and windows prior to entering into a deal. There is nothing wrong with either approach (full rehab vs targeted based on immediate need), but it is important to know which level of rehab has been done on a unit you are considering purchasing. You will find that there is no common definition of a turnkey property, and it can be very risky (and expensive) to make any assumptions.
The ongoing management of the property is another area of vastly different approaches to turnkey investments. Some providers simply sell the property and the investor is left to find a management company, maintenance personnel, snow and lawn care providers, etc. Other providers offer up recommendations for these services, and still other turnkey companies offer these services as part of their overall package. The range of offerings is great, and no assumptions should be made; you need to ask very specific questions regarding who is to do what.
Make sure you check references, and contact other clients that are located remotely to determine if the communication and follow up is adequate.Best of luck to you with your investments!
Thanks Steve!!! That is very insightful.
- Investor · Las Vegas, NV · Member since 2019 · 499 posts · 259 votes5y
As a turnkey investor myself, I found it more important to focus on the deal. I am sure you read about some turnkey companies you should avoid. But most are legit and aren't out just to scam you. But every turnkey company will have their share of unhappy investors. And it's usually because they didn't do their due diligence and didn't quite understand what/where they were investing in. Due diligence is not just about running numbers and verifying the condition of property. It also involves researching the neighborhood. Look up demographics, income ranges, crime, etc. Try to understand what your tenant pool is like. I see many investors buying up cheap properties in D neighborhoods expecting to be smooth sailing.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes5y
Originally posted by @Srikanth Raj:
What are some good questions that one should be asking when talking to out of state turnkey providers and which parameters should one be looking out for to find out between some good and not so good turnkey providers ?
At the end of the day you're getting two things.......A property and a property manager. Is the property a good deal? Is the property manager licensed? If you've got a yes to both of those you should be fine. If you want to swap PM's down the line, you can. You can't go back in time and get a good deal on the property though.
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