Turnkey Properties Out Of State
New York, NY · Member since 2018 · 86 posts · 29 votes
Hey everyone , I’m doing some research on turn key properties, and just have some questions .
What’s your take on turnkey properties?
Why would you want to do it in another state ?
Would you travel to the state your investing in ?
How to pick the right company to handle all your day to day activities?
What’s kind of fees are standard ?
How do you know if it’s a good deal ?
P.S : the reason why I want to do turnkey is because it will require me to do less work as I do work a full time job . Also I’m not looking to spend a lot of money . Plus doing turnkey rentals in other states are cheaper so I figured why not start with that ? Anyways I would like to get everyone opinions . And you can always contact me to tell me your experience
What’s your take on turnkey properties?
A property doesn't have to be fully rehabbed or turnkey to still cash flow great and to not be a headache. So I wouldn't limit yourself to only fully rehabbed properties if that's what you mean by turn key.
Alyssa, I agree that a property doesn't have to be fully rehabbed to cash flow well, but you really have to look at the long term IRR. A non rehabbed property may perform ok in the beginning until deferred maintenance and CAP EX starts catching up. Another factor to consider is that homes that are rehabbed to higher standards rent faster, can often times command a higher rent and tenants stay longer, which all make a big difference in returns.
Hey everyone , I’m doing some research on turn key properties, and just have some questions .
What’s your take on turnkey properties?
Why would you want to do it in another state ?
Would you travel to the state your investing in ?
How to pick the right company to handle all your day to day activities?
What’s kind of fees are standard ?
How do you know if it’s a good deal ?
P.S : the reason why I want to do turnkey is because it will require me to do less work as I do work a full time job . Also I’m not looking to spend a lot of money . Plus doing turnkey rentals in other states are cheaper so I figured why not start with that ? Anyways I would like to get everyone opinions . And you can always contact me to tell me your experience
I would definitely suggest you drive the neighborhood you want to buy a Turnkey in. What is a B neighborhood to one person might be a C neighborhood to another. It matters what side of a major street the property is on, what is within walking distance, how well people keep up their properties, if you are downwind from a garbage dump, etc. You can only tell by being there. Also, you'd want to walk through the property you are buying and look to see that it truly is rehabbed and what the quality of the rehab is. I'd suggest buying somewhere that is landlord friendly and preferably close enough to drive to. I think it is a good idea "if the numbers work". Here is a spreadsheet that helps give an idea of what numbers to look for: In general, if you can spend $60,000 and get some built in equity & cash flow for $500 a month, that's a decent deal. If you spend $80,000 and cash flow $100 a month with no equity, that's a bad deal.Typically people don't buy turnkeys in California for instance. But, they do buy in Arizona, Nevada, Ohio, Indiana, Tennessee, etc.
Average Cash Flow Per Door In Phoenix Metro AreaDiscloser: I sell turnkeys in Arizona
@Andy Ramdeen I think you'll find there are tons of other investors in your same position here on BP. Pricey home market, not a lot of free time. Turnkey can be a great investment (obviously I'm biased), but it's not the passive income holy grail that some people say. While there should be no real day-to-day interaction with your investment once it's made, you have plenty of homework to do before you get to that point.
I'll answer some of your questions below, but I really recommend you read this recent thread on the same topic. I give some more in-depth guidance and James Wise also has some solid tips for first-time turnkey investors:
https://www.biggerpockets.com/forums/55/topics/675...
Again, take a look at the thread linked above for some other tips from me and from some other seasoned pros.
Good luck!
Clayton
Hey everyone , I’m doing some research on turn key properties, and just have some questions .
What’s your take on turnkey properties?
Why would you want to do it in another state ?
Would you travel to the state your investing in ?
How to pick the right company to handle all your day to day activities?
What’s kind of fees are standard ?
How do you know if it’s a good deal ?
P.S : the reason why I want to do turnkey is because it will require me to do less work as I do work a full time job . Also I’m not looking to spend a lot of money . Plus doing turnkey rentals in other states are cheaper so I figured why not start with that ? Anyways I would like to get everyone opinions . And you can always contact me to tell me your experience
Sup dude. Biggest thing you need to remember when buying out of state is to get an inspection & appraisal. The horror stories you hear about out of state investing almost always involve a buyer who didn't do either of these two simple due diligence activities.
Hey @Andy Ramdeen,
1:
I always tell people that REI requires 4 resources:
The folks that are happy with turnkey are the ones that usually have money, but don't want to give time, work, and experience to REI. To them their turnkey rentals are the same as a stock or bond.
The best returns will always be if you can handle a flip yourself, but flipping requires the most from all four of the above resources.
2:
I agree with @Clayton Mobley, the major reason why investors choose turn key is because there aren't cash-flowing properties available in their area. If you're looking to invest passively, then it doesn't matter where the property is, the only thing that matters then is the return.
3:
I again agree with @Clayton Mobley's #3 point. If you're looking to invest out of state the best first investment you can make is a plane ticket. I would add Cleveland, OH to @Account Closed have both purchased turn key from out of state and have had good experiences. They both did a phenomenal job researching and visited before they purchased. I'm sure they'd be willing to weigh in as well.
@Andy Ramdeen. Turnkey properties aren’t that complicated. Find a good provider and a marker you like. Then fly out there and your some stuff.
Get an appraisal, get an inspection.
Hey everyone , I’m doing some research on turn key properties, and just have some questions .
What’s your take on turnkey properties?
Why would you want to do it in another state ?
Would you travel to the state your investing in ?
How to pick the right company to handle all your day to day activities?
What’s kind of fees are standard ?
How do you know if it’s a good deal ?
P.S : the reason why I want to do turnkey is because it will require me to do less work as I do work a full time job . Also I’m not looking to spend a lot of money . Plus doing turnkey rentals in other states are cheaper so I figured why not start with that ? Anyways I would like to get everyone opinions . And you can always contact me to tell me your experience
Turnkeys are a great investment when you are looking to go OOS. They can be VERY passive if done correctly. Make sure you go with a true Turnkey Provider and not just some RE agent. Ideally, the provider will own the property first, renovate it, and manage it after the purchase. Everything should be done IN HOSUE and they should use third parties for anything. The only third party should be your home inspection.
Try looking at:
How to Find the Right Turnkey Real Estate Investment Company for You
What to Ask When Working With a Turnkey Provider
and
5 Things to Consider When Choosing a Turnkey Rental Property Location
I'd always recommend flying out, especially if it's in a lower priced market, which it presumably is if you're looking at turnkey. You've got a lot more to lose buying the wrong property than spending a few hundred dollars on flights and an AirBnb for a weekend.
@Andy Ramdeen These are common questions that most people in your situation have. I'll give you my two cents in the order that you asked them.
1. Turn key is merely a method of buying real estate so you can't really generalize. Turn key can be a good way for an inexperienced out of state investor. There's a lot of moving parts in acquiring, renovating and stabilizing rental properties and a lot can go wrong for someone that doesn't have much experience or time, especially out of state. It can be a safer, easier way to get started. There are very good turn key companies and not such good ones. Make sure you are dealing with the right people.
2. If you live in a high cost market like you do, you probably have no choice but to go out of state if your goal is cash flow. The vast majority of investors that we work with are in high cost markets that don't cash flow.
3. No harm is ever going to come from visiting the market. Some markets like Indianapolis and Kansas City where we are active can vary neighborhood to neighborhood which you can't always see without being there. Unless you have trusted people on the ground to guide you, it's best to make a trip,
4. Most true turn key companies don't charge a fee for their services. The only fee's you should pay are 3rd party title company and lender fee;s.
5. It's a good deal if it's the right asset class and it fits your ROI objectives. If you define what class of property and neighborhood is right for you and what your criteria for financial returns is, it will be very simple to recognize a deal for you without all of the hand wringing and angst.
My answers:
What’s your take on turnkey properties?
I love them and have primarily bought just turnkeys for myself. I will never claim them to be perfect, but in comparison with the risks and efforts required for more intensive strategies.
Why would you want to do it in another state ?
For cash flow and entry prices (as compared to California). Plus being willing to be in whatever state lets you always invest in the most advantageous markets at the time, as it's always changing. So, less restrictive in addition to cash flow ability and entry prices.
Would you travel to the state your investing in ?
I think it's worth going to visit a turnkey operator at least once, just so you know what you're getting into and you can make the decision to go forward based on your own personal analysis. But, a lot of turnkey buyers don't go see what they're buying ahead of time. Totally up to you.
How to pick the right company to handle all your day to day activities?
Turnkeys come with property management companies to do all of that. I usually recommend people start with the PM company that comes with the property because there is usually a scope of work guarantee and such that wouldn't be available if you change PMs in that timeframe. But you can always change PMs later if you want.
What’s kind of fees are standard ?
Shouldn't be any fees outside of normal financing fees and such associated with the lenders. Unless you're talking about property management fees?
How do you know if it’s a good deal ?
Due diligence. Definitely have to do that. But more generally, I tend to think the best way to know if you're getting a good deal is to have shopped around. When I shop around for a while, I'm better able to know if I'm getting a good deal- prices, returns, the offering, etc.
P.S : the reason why I want to do turnkey is because it will require me to do less work as I do work a full time job . Also I’m not looking to spend a lot of money . Plus doing turnkey rentals in other states are cheaper so I figured why not start with that ? Anyways I would like to get everyone opinions . And you can always contact me to tell me your experience
I think turnkeys are great for newer investors, regardless of what strategy they plan to go for later, because they let you learn the fundamentals of investing without bogging you down with the hard more advanced and risky stuff.
Hey everyone , I’m doing some research on turn key properties, and just have some questions .
What’s your take on turnkey properties?
Why would you want to do it in another state ?
Would you travel to the state your investing in ?
How to pick the right company to handle all your day to day activities?
What’s kind of fees are standard ?
How do you know if it’s a good deal ?
P.S : the reason why I want to do turnkey is because it will require me to do less work as I do work a full time job . Also I’m not looking to spend a lot of money . Plus doing turnkey rentals in other states are cheaper so I figured why not start with that ? Anyways I would like to get everyone opinions . And you can always contact me to tell me your experience
- Not a big fan, but they can work OK at least on the cash flow side.
- Some areas are too expensive for good cash flow.
- I would definitely travel to view in person
- Getting referred and asking for references (as well as asking the operator questions) is the best way to evaluate
- They just make money on the sale and then a standard property management fee (if they manage too; about 10% or so)
- Got to do a CMA or cap rate/IRR analysis like any other deal
@Andy Ramdeen all great points made here! I think you have to decide on the opportunity cost. Doing a deal by yourself from a long ways away requires many moving parts to work in your favor. If you don't have the time of the inclination for that, then TurnKey is a great way to go. Once you've decided on that route, pick 3-4 that seem to be the best, then go through their stuff, look at deals, analyze, compare. Once you get down to a couple that you feel comfortable with, GO SEE THEM. As the CEO of a Turnkey in Indy, I am amazed at how few people come see us.
What’s your take on turnkey properties?
A property doesn't have to be fully rehabbed or turnkey to still cash flow great and to not be a headache. So I wouldn't limit yourself to only fully rehabbed properties if that's what you mean by turn key.
Why would you want to do it in another state?
I'd do it wherever the numbers make sense, as long as you find a team you can trust.
Would you travel to the state your investing in?
Probably not as long as I can be facetimed the property in real time to make sure I'm getting what the pictures show.
How to pick the right company to handle all your day to day activities?
I'd evaluate reviews, have a phone interview and talk to a past client if possible
If you trust the team you're buying with I'd look to them first for who they suggest for property management.
What’s kind of fees are standard?
I'm aware of companies that only charge the seller, so that's ideal in my mind!
How do you know if it’s a good deal?
It depends on your goals! For cash flow I hope for at least $150 a door. Because you're wanting the least headache I would do a little better areas/a little newer/better condition home. You might make a bit less, but less maintenance = less times. However, I work with a property management company that doesn't even call you unless a repair is over $300, so it might not be too much more time for something that'll require a few repairs here and there.
What’s your take on turnkey properties?
A property doesn't have to be fully rehabbed or turnkey to still cash flow great and to not be a headache. So I wouldn't limit yourself to only fully rehabbed properties if that's what you mean by turn key.
Alyssa, I agree that a property doesn't have to be fully rehabbed to cash flow well, but you really have to look at the long term IRR. A non rehabbed property may perform ok in the beginning until deferred maintenance and CAP EX starts catching up. Another factor to consider is that homes that are rehabbed to higher standards rent faster, can often times command a higher rent and tenants stay longer, which all make a big difference in returns.
What’s your take on turnkey properties?
A property doesn't have to be fully rehabbed or turnkey to still cash flow great and to not be a headache. So I wouldn't limit yourself to only fully rehabbed properties if that's what you mean by turn key.
Alyssa, I agree that a property doesn't have to be fully rehabbed to cash flow well, but you really have to look at the long term IRR. A non rehabbed property may perform ok in the beginning until deferred maintenance and CAP EX starts catching up. Another factor to consider is that homes that are rehabbed to higher standards rent faster, can often times command a higher rent and tenants stay longer, which all make a big difference in returns.
Agreed! There’s so many factors that come into play. Age of mechanicals is certainly important.
I guess more than anything I believe that there’s pros and cons to everything. It comes down to paying attention to the market, investing in a way the market will reward, and knowing how the specific investment is (condition, location, etc) so you know what’s price makes sense.