Alternatives to Turnkey Investing?

Rob Hoffman

Oakland, CA · Member since 2016 · 104 posts · 47 votes

10y

That's definitely a great question, and one I've been asking lately.

@Haim Mamane Palman. Anything to add?

Constance Mitchell

Sioux Falls, SD · Member since 2016 · 8 posts · 1 vote

10y

Hi Cailyn! Yes there is such a thing! I really appreciate you asking this question. I work with a group of investors that have developed a service to those who want to invest in real estate but do not have the know how or time to fix n flip or simply do not want to buy and hold just to put up with the hassles of being a landlord. This option has everything to do with riding the investment, not the property.

To explain it briefly, instead of buying multiple buy and hold or fix n flip properties, take the cost of just one of those properties, apply that money, one time towards a Real Estate Wealth Building Program. Let the money sit and accrue compound interest at a fixed rate, multiple times per year. When you apply the numbers, you can compare the financial benefits between a program like this verses a traditional buy and hold property or fixer upper. With this type of Real Estate Investment there are no tenants, no upkeep cost, and no worries about if the market is going to be up or down in 20 - 40 years from now. We all know that Real Estate Investing is profitable but it is not always this simple until now. We work with U.S. and International Investors around the world. To compare apples to apples, numbers to numbers, feel free to contact me. I'm always happy to help!

Thanks, Connie!

Melinda Vandergeugten

Los Angeles - Tujunga, CA · Member since 2016 · 29 posts · 11 votes

10y

I'm so glad you asked this question. I have been looking at turnkey also but sure would like a way to benefit from the rehab myself and not only cash flow. I saw a site that was interesting last night and might be sort of what you're looking for. Let me see if I can find it again.

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Brie SchmidtBusiness Member

Moderator

Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes

10y

Originally posted by @Cailyn Aune:

Are there ALTERNATIVES to TURNKEY INVESTING? You know... somewhere an out-of-state investor (or local investor) could find a "team" of people already in place to find/buy deals.... and then they have a trusted PM to recommend?? (PLEASE no FOR or AGAINST arguments for turnkey.... I've read thousands of posts on everyone's thoughts... just wondering what OTHER options are out there for investors like myself...)

I've have been crunching numbers like crazy. And I just can't get the turnkey returns that I was hoping for. I haven't ruled it out yet, but I know in the back of my head, if I didn't go through a turnkey company, I'm sure I could improve my numbers.

Of course the appeal of turnkey... I'm paying someone to spend the TIME getting a house rent ready, I have no history of fixing homes/rehabbing them, I want homes with a trusted PM (not easy to find though), and it opens up markets across the country.

So my question..... is it a dumb one? Is the alternative to turnkey investing something that even exists?? Or is it non-existent? I guess I don't maybe know the right verbiage to use ...

Find a local partner who does it on their own, get into note investing, invest in a syndication deal....

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Melinda Vandergeugten

Los Angeles - Tujunga, CA · Member since 2016 · 29 posts · 11 votes

10y

I found it in the marketplace. The post was by James Wise of Holton-Wise property group. I'm not sure where you want to invest but they are in the Cleveland are.

Leslie Pappas

Professional · San Francisco, CA · Member since 2014 · 876 posts · 301 votes

10y

Hi Cailyn- Syndicated investing solves this problem. If you'd like to learn more,please let me know.

Best-Leslie

Matt R.

Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes

10y

@Cailyn AuneOne might consider reits as an alternative. They are truely hands off and passive. The tax rate is half and there are some really good ones that work in highly profitable REI niches. One I am in does the NNN for longterm senior facilties. Pays 7% and has equity growth. I think this is a better fit for at least half the TK buyers out there actually. I would prefer the publically traded reits to private as well.

Good luck!

Charles Moore

Investor · Lake Forest Park, WA · Member since 2015 · 108 posts · 35 votes

10y

not an expert on these alternatives, but some sound similar to REITs - one-time investment into a fund that is a portfolio of different property types that pays dividends quarterly. Great for my paper investment portfolio, so long as it's in a tax shelter like a Roth IRA, but not very tax efficient outside a tax shelter.

Kevin Darrell

NY · Member since 2015 · 101 posts · 43 votes

10y

@Douglas Skipworth

Douglas SkipworthBusiness Member

Rental Property Investor · Memphis, TN · Member since 2014 · 1k+ posts · 1k+ votes

10y

Thanks, @Kevin Darrell!

Hi, @Cailyn Aune.

Yes, there are alternatives to the turnkey model that operate exactly as you described above.

Which market(s) are you most interested in?

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Cailyn AunePro Member

OP

Tacoma, WA · Member since 2015 · 176 posts · 88 votes

10y

Douglas Skipworth - well, I've been doing a lot of research in the last weeks and have a giant spreadsheet comparing markets. Obviously there is a ton of variation within each market- but thought it would at least give me a broad stroke picture. With that being said... The markets that looked good but not too pricey thus far... Tacoma (my home town), Indianapolis, Columbus, Nashville, and potentially Atlanta (and we have family there)- some people I talked to felt like that "ship had sailed" already. I was recommended both Memphis and Birmingham, but on paper, stats don't look great. Las Vegas looked pretty good on my "sheet" as well actually. And I'm not opposed to the Seattle area (where I live close by), but it gets expensive real quick. Again- I understand it's not all stats that matter. Okay- poke holes. :) Douglas Skipworth - I see you're in Memphis. :)

Cailyn AunePro Member

OP

Tacoma, WA · Member since 2015 · 176 posts · 88 votes

10y

So another question.... Would you the alternatives be superior to the turnkey model... Based on what I'm asking in the top post?

Steven Gesis

Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes

10y

Originally posted by @Cailyn Aune:

Are there ALTERNATIVES to TURNKEY INVESTING? You know... somewhere an out-of-state investor (or local investor) could find a "team" of people already in place to find/buy deals.... and then they have a trusted PM to recommend?? (PLEASE no FOR or AGAINST arguments for turnkey.... I've read thousands of posts on everyone's thoughts... just wondering what OTHER options are out there for investors like myself...)

I've have been crunching numbers like crazy. And I just can't get the turnkey returns that I was hoping for. I haven't ruled it out yet, but I know in the back of my head, if I didn't go through a turnkey company, I'm sure I could improve my numbers.

Of course the appeal of turnkey... I'm paying someone to spend the TIME getting a house rent ready, I have no history of fixing homes/rehabbing them, I want homes with a trusted PM (not easy to find though), and it opens up markets across the country.

So my question..... is it a dumb one? Is the alternative to turnkey investing something that even exists?? Or is it non-existent? I guess I don't maybe know the right verbiage to use ...

Cailyn-

Great question, having a turnkey provider in place that is the direct source, gives you all the services in one shop is the ultimate turnkey, otherwise you have to be totally hand-on. It just depends on the amount of time and effort you are willing and interested in placing in each home. If you do not mind me asking, what kind of numbers are you seeking, are your expectations attainable?

A good turnkey provider can enhance your time to market, essentially increasing the return on your money as the downtime to purchase, renovate and manage is reduced by a substantial amount at minimum you save 90-120 days. Just consider the time-value of money.

Lastly, having experience in this entire space, the piecemeal approach is more hands-on, you have a higher likely hood of incurring construction over runs "unforeseen" - lets face it most contractors are a tough breed of people to work with, so timelines are not always certain.

Anyhow, yes, it can exist, but it requires a ton more work, your time, more room for error, and the pure time cost of money is substantially greater.

Just a thought, much luck, great question!

Cailyn AunePro Member

OP

Tacoma, WA · Member since 2015 · 176 posts · 88 votes

10y

@Steven Gesis- Thanks for all those considerations... you are right... it's a different beast entirely, and many facets to consider. I appreciate it!

Alex CraigBusiness Member

Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes

10y

@Cailyn Aune The alternative is working with an Realtor who has connections to get your home rehabbed. If you want to get financing, the foreclosure route may not be possible as lenders will require the home to be rehabbed. If you go the non-turnkey route, I would certainly pick a Realtor who owns rental properties and/or manages rental properties. Otherwise they may not understand this niche in Real Estate. Douglas Skipworth would be a great contact for that and he manages homes too. You may want to consider doing both; buying turnkey and non-turnkey. See which you like better, but if you went that route, I would do it in the same market in case on of the methods did not go as planned, at least you have another property manager as back up. Another thought is to go turnkey and then self manage. That way you are paying for a home that is renovated to the business model of being a landlord and not sacrificing the cash flow you could have saved by going non-turnkey. I would certainly suggest building a list of vendors and an eviction attorney before you even think of going this route.

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Michael Lauther

Investor · Hampton Bays, NY · Member since 2009 · 907 posts · 258 votes

10y

@Cailyn

@Cailyn Aune I have invested in Dayton OH from NY and FL residence and would suggest that if you invest out of state you either find a reliable trusted partner or vet your property management company extensively.

I am able to purchase and rehab properties for less money than turn key it does cost my time and attention.

The single biggest obstacle is being able to manage people long distance. You will have to manage either your own contractors or a property manager so you must vet them in any case.

I have an operation that does well on paper but devil is in the details. a bad tenant or an incompetent contractor can cost you a years profit in a flash.

If I had to do it over I would look to a local market or one where you have a trusted partner.

Be aware that once you commit to one of these types of investment the end strategy is limited. Selling to another investor will most likely not recoup your equity and most markets where rental income provides a good return are not great retail markets.

feel free to contact me if you would like any details. I have tried property managers, realtors and went on my own and am now once again going to look for a property manager because even managing 5 properties from a distance can become a constant source of stress.

It is not worth it if you go to sleep at night thinking about your rentals and wake up in the morning anticipating the next problem.

Douglas SkipworthBusiness Member

Rental Property Investor · Memphis, TN · Member since 2014 · 1k+ posts · 1k+ votes

10y

@Cailyn Aune,

Memphis is an awesome cash flow market because of the rent-to-price ratio. I know many investors who have had great success here, myself included.

That said, the most successful investors I know are not turnkey investors.

One thing I have never seen from the turnkey providers on this site is a discussion about the number of units their clients own.

The turnkey alternative firm I am most familiar with averages 6.7 houses per investor for their 350 investor clients.

My guess is that the average turnkey investor owns less than 3 houses. Personally, I don't think that's a compelling long-term investment strategy.

My question to the turnkey providers out there is, "What is the average number of properties owned by your turnkey investors?"

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Curt DavisBusiness Member

Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes

10y

I would say somewhere in the 2-4 range on average. Some of our investors invest in other markets and some only with us. I agree that only owning a few units is not a great long term plan. I personally own I think 19 SFR here and the idea once they are paid off I will average around $950 per month per home before taxes, insurance, mgnt fee, etc...

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Don KonipolBusiness Member

Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes

10y

1. Syndicated equity investments now with significant transparency and available on equity real estate crowd funding sites. Yields 5 to 20% annualized

2. Same as above except mortgage debt investments. Yields 8 to 14% annualized

3. Publically traded REITs, equity or mortgage

4. Private REITs, equity or mortgage

5. Condotels

6. Condos, which require significantly less individual maintenance and supervision as compared to a SFR (as long as higher end). I own 5 higher end high and midrise units in the Phoenix area, and live 6 months in New York and 6 months in Texas.

7. Branded hotels under contract to a management company

8. Apt complex large enough to support an on site manager

9. NNN commercial property

10. Land leases

11. Farm land with shared crop arrangement, or leased outright

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David Faulkner

Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes

10y

You could buy a "turnkey" rental home for retail right off the MLS, going through a realtor and not a turnkey operator. As part of your due diligence you could ask to see tax returns for the last year to validate income, expenses, and therefore your return. Better yet, if you find a good one where the validated numbers look good and it is under a PM, you may have found your local PM too. Staying local is still better IMO, but if you have your heart set on passive out of state, there's an alternative.

3 Reply

Steve Vaughan

Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes

10y

Agree with David. Just buy a house already rented that's not a dump. Tacoma should be a great market for that. CL ad- "Landlords! I'm looking to buy your occupied rental no one else is bothering with." (They are notoriously hard to sell)

Or you could try and rehab a place 18 states away and wonder why it didn't work later. An alternative for investors like yourself? Maybe a little hint of what that is? Most TK folks are looking for shortcuts IMO. What does an investor like yourself mean @Cailyn?

Ed B.

Real Estate Investor · Sacramento, CA · Member since 2010 · 292 posts · 103 votes

10y

Contance Mitchell, I'm calling you on the carpet for your ignorant statement: "We all know that Real Estate Investing is profitable."

Really?? Were you around from 2008-2012 when tons of investors lost money? I hate it when I see people say such stupid things. Real estate can be profitable, if your timing is good and if you make intelligent decisions, but there are also so many ways to lose money if you're not careful.

Alex Franks

Rock Hill, SC · Member since 2015 · 1k+ posts · 597 votes

10y

Originally posted by @Cailyn Aune:

Are there ALTERNATIVES to TURNKEY INVESTING? You know... somewhere an out-of-state investor (or local investor) could find a "team" of people already in place to find/buy deals.... and then they have a trusted PM to recommend?? (PLEASE no FOR or AGAINST arguments for turnkey.... I've read thousands of posts on everyone's thoughts... just wondering what OTHER options are out there for investors like myself...)

I've have been crunching numbers like crazy. And I just can't get the turnkey returns that I was hoping for. I haven't ruled it out yet, but I know in the back of my head, if I didn't go through a turnkey company, I'm sure I could improve my numbers.

Of course the appeal of turnkey... I'm paying someone to spend the TIME getting a house rent ready, I have no history of fixing homes/rehabbing them, I want homes with a trusted PM (not easy to find though), and it opens up markets across the country.

So my question..... is it a dumb one? Is the alternative to turnkey investing something that even exists?? Or is it non-existent? I guess I don't maybe know the right verbiage to use

Cailyn

Two ways of looking at this first and foremost, I don't have anything to sell. So that helps with my opinion. I was turnkey guy back in 2010-2013. Sure this is possible to achieve by yourself just demands a lot more time and knowledge of creating your own team.

Turn key is exactly that, a cash flowing asset from day one. You are paying a company to take care of that for you. On the flip side, you will have to do this all with your team that you are creating if you do things yourself. A lot of moving parts at one time.

Building a decent team, which I have seen many folks do from out of state. Starting first with a very knowledgeable real estate agent. I want one of the best in that market, but one who understands investing (and owns investment properties). Keeping in mind everyone who works in this business is trying to make a living. So what can you offer that agent. They are going to be the one who brings you deals. They most likely will have some contacts for good reliable contactors.

Next is find that property management company.You will need to always interview at least three. This is a major hurdle for most investors. Trust me this is a big one, being they will take care of your assets.

Next is to build a team of local contractors, handyman, and general labor guys. Lawyers, appraisers, and inspectors will also be needed. Again a solid real estate agent , who has a decent team. Will have all your needs. They are just not going to run your job for you. Their job is to sell homes. So that responsibility will fall on you.

Again, I see this done quite often but just demands a lot of detail and well thought out planning.

Funny thing, is all this can be achieved by flying into local markets and attend a few local meeting. Most of the folks are more than willing to share this information. Slowly building relationships with the people you choose to work with.

Now on the flipside, education is the key, understanding the markets, and what is happening. If I could add on price of advice do not touch low end investments because of price point being attractive.

Alex

Cailyn AunePro Member

OP

Tacoma, WA · Member since 2015 · 176 posts · 88 votes

10y

Steve Vaughan David Faulkner - you make that sound so easy. :) Maybe it is a lot more simple than it feels. Here's where I get stuck with buying a house in Tacoma that's "not a dump"- I cannot get the numbers to work on houses that aren't dumps. It seems everything in decent shape is too much to get any sort of cashflow. And then if it IS a dump, I'm back to the BRRR strategy, figuring out contractors and a whole bunch of stuff I have no clue about. (Not that I'm not willing to learn!) You can obviously see the appeal of turnkey... :) Not that it's the answer, but you know what I mean. Would either of you be willing to analyze a deal if I could find one that works? When you're starting out, you don't know anything... Ha! Try and remember what that feels like. :) Okay- so a Craigslist ad. I like that idea. Are landlords seriously on Craigslist looking for ads like that?? Do you know people who have used this strategy?? Sounds too easy. I guess I'm still thinking I will run into the same issue... The house will be crummy and will still need work. And if it doesn't- the numbers don't seem to work for cashflow. So poke some holes in my thinking please! :)