Turnkey rentals: How to choose, evaluate, and buy them
My market area has a number of turnkey rental providers. Over the last few years I talked with a number of long-distance investors who've been taken advantage of by some unscrupulous or simply incompetent turnkey companies.
While some just needed to find a better property manager or a reliable contractor, others have paid a lot of money for a house that was never actually rehabbed, never tenanted, and should never have even been considered as a potential rental house given the awful, abandoned neighborhood in which it sits. Often, even for performing properties, the returns are nowhere near the fluffed-up numbers quoted by the turnkey company (no vacancy/maintenance expenses or reserves).
Recently I came across the webinar linked below which does a good job of getting a potential turnkey investor up to speed on how to make an investment they won't quickly regret. Disclaimer: I don't have any tie to Vena Jones-Cox, the investor/"guru" (she doesn't like that term applied to her) who produced the webinar. I don't sell turnkeys. There's nothing being pitched in the webinar. I just think it's good advice that hopefully will keep someone from getting burned.
Webinar description from Vena Jones-Cox:
"Every time I hear a turnkey rental buyer complain
the their investment hasn't worked out the way they
hoped it would, I think to myself, "It's too bad you
didn't know how to evaluate that property and the
deal BEFORE you got into a mess that's going to
be expensive and stressful to get out of."
So this week, we'll talk about:
- The various turnkey rental "deals"--buying for cash, buying with financing, the sale/leaseback, and being and equity partner, and the pros and cons of each
- How to analyze a pro-forma on a turnkey rental to get to the REAL return, not the stated return, which is rarely realistic
- Speaking of which, what a reasonable return on a quality turnkey rental actually is, and how the neighborhood affects what you should expect to get
- How to do real due diligence on things like property value and condition despite being miles or even states away from the property"
http://www.regoddess.com/pages/passiveinvestment/passiveinvestmentseriesweek2.php