Starting a turnkey provider

10 Replies

Has anyone done this? Any advice?

I was thinking about doing it in a nearby city. BUT - I wouldn't feel "right" marking up my product so much that it wouldn't be passing appraisal (which happens a lot with memphis invest). IMO that's taking advantage of investors who are not in the area.

I have some contacts in my target city. They manage the properties for me. I could go on from there.

What do you think?

Originally posted by @Dr. @Axel Meierhoefer :

Alex Silang How much experience do you have in the work a turnkey provider does?

Not much to be honest. I've been a passive land lord for 3 years. But I do have experience in marketing (website, white paper, social media). I have "insider" knowledge to an extent. Plus I could partner with someone to fill gaps in my skillset, and acquire more skills over time.

@Alex Silang I am not claiming to be an expert but I think your best bet would be to look for a turnkey provider in a place conveniently close to you and see if they would be willing to give you a role in what they do - maybe doing something you are already good at, so they benefit, and in return you see and learn what they do.

I am suggesting this because in my line of work there are many many people with academic and theoretical knowledge but they often haven't ever really applied any of it. Rather than learning everything from scratch and making every mistake in the book, I invite them to learn from someone who applies everyday.

(Full disclosure, I am a leadership and upper management consultant helping organizations with their projects and preparing their up - and coming managers for leadership roles. In universities and libraries are thousands of "gurus" who write about the theory and when you check they never had to do any of the work and be responsible for the results.) I am sure that's not 1x1 transferable to real estate, but for the same reasons I work with turnkey providers rather than trying to do the work myself. I get the theory but I don't have the time to learn or to spend to do it myself. If I wanted to do what you plan on doing, I would learn from the ones that do well already. 

Even if you find Memphis invest to be expensive for investors, one thing is undeniable: They know their stuff and do an excellent job, albeit expensive. 

Originally posted by @Alex Silang :

Has anyone done this? Any advice?

I was thinking about doing it in a nearby city. BUT - I wouldn't feel "right" marking up my product so much that it wouldn't be passing appraisal (which happens a lot with memphis invest). IMO that's taking advantage of investors who are not in the area.

I have some contacts in my target city. They manage the properties for me. I could go on from there.

What do you think?

 They should never be marked up above the market value.

I agree with everyone else. First, I don't think Vegas can support a turnkey model. The two things required for that are 1) enough distressed inventory to sustain it and 2) price ability that allows for positive cash flow on the properties. Vegas doesn't really have either of these.

Second, I don't think you have quite the knowledge that is required for it. Not saying you can't get it, but there are key things that go into a turnkey company's success. One, since you brought it up, is the ability to find properties cheap enough (which requires a big skill in either negotiating or identifying deals others don't notice) that you can put the money into the rehab and your margins and the total price to the investor not be more than what it can appraise for. Every now and then it happens, but for the most part all the turnkey providers I work with sell their properties around appraisal value/market value. They can do that because of how they buy the properties, and the quantity in which they can buy them. So that's a major necessity in skill. 

More than anything though, since you can always learn the knowledge pretty easy, I think your big deal-breaker will be the fact that you are in Vegas.

Originally posted by @Alex Silang :

Has anyone done this? Any advice?

I was thinking about doing it in a nearby city. BUT - I wouldn't feel "right" marking up my product so much that it wouldn't be passing appraisal (which happens a lot with memphis invest). IMO that's taking advantage of investors who are not in the area.

I have some contacts in my target city. They manage the properties for me. I could go on from there.

What do you think?


Alex,

I was alerted to your post when you mentioned Memphis Invest and had to laugh a little bit about the pricing comment about Memphis Invest. I want you to know that this is not going to an attack for the comment, but I push back fiercely when the integrity of our company is questioned. I looked and couldn't find you in our database, so that meant I really needed to respond if you had formed an opinion without speaking with us.

We do not price properties above market value. We price them appropriately for the value and service provided by our company and that opinion is shared a vast majority of the time by independent appraisers. Occasionally, properties are appraised below our sales price, but again, that is an appraisal opinion we do not share.

I will also say that there are two sides to the value equation. It is difficult to apply it to a piece of property, but not that difficult to apply it to a real estate service. Value is determined both by the price you pay for something AND the service you get in return. You will be hard pressed to find another company coming close to offering the same value in service. That is kind of why I wrote the rest of this post. To help you understand where real value comes from in the Turnkey niche and to invite you to visit us if you want to learn how to start your own company. There are no secrets with us. This is hard work and it takes dedication to being better than average.

Memphis Invest has been around for 15 years now and is managing close to $680 Million in asset value for passive real estate investors from all over the country. When I see comments about taking advantage of investors I think of another company out of New Jersey who may have ruined the lives of hundreds if not thousands of real estate investors over the last couple of years...not Memphis Invest. (As an interesting side note, the owner of that company owned a handful of passive investments out of state and had a knack for marketing.)

I think about the millions in net rental income sent out to investors from our management company in May or the fact that our average length of occupancy per unit is at 59 months. I look at our data showing that our rental price per unit is on average well-above our competition in most of the six markets we operate and I just wonder how someone can look at that as taking advantage.

I think of the over 600 leases that were set to expire in the first half of 2018 and how our company renewed those leases with the residents rather than let the property go vacant. Seeing as how our management company keeps the first month of a new lease and our average rent is over $1200, we "gave up" the opportunity to make $720,000 in revenue so that our owners could realize those dollars as rental income. That is called alignment of interest.

I saw that you are marketer. You listed that as a skill you really thought would help you start a Turnkey company. Unfortunately, marketing is not really the top skill to be great at locating good properties, buying them properly, renovating them to at or above retail standards eliminating deferred maintenance and then acquiring quality, long-term residents and managing them properly. No, marketing is important for sure, but white papers don't help with any of that.

You have to be committed to being better than everyone else in your industry every step of the way. You have to commit to the small things like pulling permits on every job even when no other companies do it. It seems like a waste of money, yet it is imperative if you want to separate. Otherwise you're likely to be average and I can guarantee you that the last thing anyone on BP or anywhere else needs is another average Turnkey company.

Memphis Invest is a a green apple in a box full of red. If you need help understanding the analogy, read Becoming a Category of One by New York Times best selling author, Joe Calloway. Then read his follow-up, Being the Best at What Matters Most where he featured Memphis Invest and Premier Property Management.

When you are done, if you really want to be an exceptional Turnkey company then you are more than welcome to visit us here in Memphis. There are no secrets. We will be happy to show you around and help you understand for yourself exactly how intricate a company like this is.

We have over 90 team members in six cities. We have spent in the high seven figures on technology and infrastructure. Our offices are tied together and our teams in the field implement mobile technology to keep data updated in real time. We are planning to roll out a custom built property management platform later this year for Premier Property clients. This investment in technology and people is really the backbone of our success.

Yes, we charge an absolute premium for our services, but we are not your average company. Our clients get 100% of what they expect from us in service, return and value. That has helped us elevate into our own category and that was entirely by design.

So again, if you ever want to see what that looks like in person so you can decide if you think you can offer a Turnkey service in your city, you are welcome to come and visit. We will be happy to help. We have had dozens of entrepreneurs from all sorts of customer service industries come visit our company to learn from us. A few real estate entrepreneurs have even been mentored by us as they started their Turnkey companies. There are no secrets with us.

Many of them are thriving today. No matter what, they all walked out with a sense of just how hard it is to be exceptional. Anyone can be average - that just never interested us all that much.

As a partner in another TK company in Indy, I could not agree more with what @Chris Clothier   has said here.  I have a marketing background, and without sounding too cocky, I'm pretty good at it.  I understand all aspects of online marketing...SEO, PPC, Social Media, etc.  That said, the effort that it takes to put systems in place to consistently find deals, rehab to proper standards, place good tenants, and then manage those tenants is 100X harder than marketing. 

I get calls once a week from lots of online "educators" and "wealth networks" that want to partner with us.  These people are great marketers, as they've developed a list of buyers.  However,  in EVERY case, they simply want to leverage our expertise (have us do all the work), so that they can re-sell a property to their network for $11-15K MORE than what we would be charging the investor directly.  And, in all those cases the sale would be branded to them.  Of course, the only ones that would benefit from this scenario is the resellers.  We would lose our branding, and the investor would be overpaying for the property.  This is how many turnkey properties are sold (aside from hucksters in NJ), and is the main reason why those properties don't appraise for selling price.  

Additionally, we get a lot of investors reaching out to us that want to "partner" with us to do BRRRR projects with them. Usually, these are investors who previously read some eBook on how easy it is go into another city, buy a property from a wholesaler, hire a contractor, then find a good property manager...it all sounds so easy... Just like 1-2-3. Then, they come to understand that it's a LOT of work, and they don't want to do that, so they call us. I can understand why. Again, they want to leverage our expertise, take advantage of our economies of scale, and take our normal profits (which are there because of our streamlined systems) for themselves. Of course, as Chris so eloquently pointed out, this is where a good TK company brings value to their customers.

Although we operate in different markets and at different price points, we look to Memphis Invest as the gold standard for Turnkey companies.  Although I've not met Chris Clothier personally, we have some mutual friends, and would someday enjoy that, and enjoy seeing their operation.  

@Alex Silang sorry if I jumped on the bandwagon too.  You obviously struck the same chord with me as you did with Chris.  Should you want to learn more about the behind the scenes operations of another successful TK company, we are also happy to show you what we're up to here in Indy.  

Originally posted by @Alex Silang :
Originally posted by @Dr. Axel Meierhoefer:

Alex Silang How much experience do you have in the work a turnkey provider does?

Not much to be honest. I've been a passive land lord for 3 years. But I do have experience in marketing (website, white paper, social media). I have "insider" knowledge to an extent. Plus I could partner with someone to fill gaps in my skillset, and acquire more skills over time.

 Running a big ole turnkey company is tough. Mine has over 60 employees. You can't do it as a side project. You are essentially running 7 separate businesses.

  1. Construction
  2. Real Estate Sales
  3. Property Management
  4. Accounting
  5. Marketing
  6. Landscaping
  7. Public Relations - (IE what @Chris Clothier is doing on this thread after some unnecessary shade was thrown his way)

You'll need to devote everything you have to it. Having some serious competitive advantages will also be a must. Not to mention you would likely need to work as a licensed Real Estate Agent for several years before you are legally allowed to open your own brokerage and offer Property Management to 3rd parties.

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