Turnkey Investment - Good? Bad? Ugly?

Question

Hi everyone. I am in the process of making my first real estate investment. In San Antonio, I'm thinking about doing a 3 unit or 4 unit, with some LTR and some STR.

Wanted to hear about experiences from anyone who has invested and bought a "turnkey" property. What is the good, bad, and ugly?

I appreciate your transparency and any tips/ guidance you can share!

Drew Sygit · Answer

The biggest challenge with buying "Turnkey" is verifying EVERYTHING!

Especially in today's market.

5-10 years ago, prices were so low that Turnkey companies could make a decent profit AND provide owners with a decent rate of return.

Now, prices are up, it's MUCH harder for Turnkey companies to find deals and so their margins are getting squeezed - leading to more and more questionable Turnkeys and corners being cut.

You should verify:

1) The Class of the Neighborhood2) The Class of the Property3) The Class of the Tenant pool4) What was specifically rehabbed5) How good is the quality of the work6) What was NOT rehabbed7) How well was the tenant screened8) How well has the tenant actually been performing

It's often in the best interest of the Turneky company to be vague or even hide all of the above - to get the highest sales price possible:(

So, have everything above verified by an independent 3rd party, NOT someone recommended by the Turnkey company or anyone connected to them (agents, etc.).

It's often better for YOU to find a rehab, have it rehabbed and then place your own tenant - or YOU to screen & hire those you outsource to.

BTW this is all regarding LTRs.

MTR's & STR's Turnkeys are even MORE suspect!!!

Drew Sygit · Answer

Hey, you know there's this little "Vote" button you can also use :)

Kate Luna · Answer

I'm looking at some STR turnkey websites and I've been wondering if what I'm reading is too good to be true...

Thank you for the tips! I'll make sure I properly investigate before moving forward with a deal.

Caleb Brown · Answer

Turnkey meaning through a company where they place a renter, do the rehab, etc. or turnkey meaning rent ready?

Kate Luna · Answer

Great advice! Thank you! I see due diligence is something that will be extremely important before I move forward with my investment.

Caleb Brown · Answer

Got it. That can be nice but there is a few things I'd verify. First do inspections, have your own inspector check the property and test the mechanicals. Make sure you walk the property or have someone to verify they did the rehab correctly. I would also verify the rents. Look at the lease and make sure it's within the market range. Some turnkey companies will fill it above market with an unqualified tenant to boost the price. Last verify the price, comps and the area class. Turnkey properties can be nice but you need to verify so you aren't stuck with a overpriced property and a horrible tenant

Kate Luna · Answer

Turnkey meaning the property is listed already renovated and with tenants in place and with a property management company in place.

Essentially, the property listing is already an up-and-running business operation.

Turnkey Investment - Good? Bad? Ugly?

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