Turnkey Investment Properties

OP

Property Manager · St. Louis, MO · Member since 2019 · 7 posts · 4 votes

7y

@Charles Carillo

Thank you for the response Charles! I’ve always looked at Turnkey’s as a low risk/low reward type property for most investors, but for someone starting out as myself, it may be higher reward as I’ll be learning the first step in home buying.

Thanks again for the response. I greatly appreciate it.

Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes

7y

Originally posted by @Eric Lopez:

Dear BiggerPockets Family;

I am relatively new to this site and still learning the basics of it all, but after listening to many of the podcasts, I kept hearing Brandon talk about posting on here as a great way to get involved. So here I go:

I currently live and work in St. Louis, MO as a Property Manager. I have been doing so for the past 2 years and over that time, come to the realization that I want to begin doing this for myself. I currently do not own any property but am interested in getting started. With that being said, I am wary of starting off my investment career with a major project (foreclosure, LRA, etc.). Instead, I have looked more into turnkey rental properties as a means of getting my “feet wet” and learning the basics of property ownership. Once I have the basics down, I’ll then begin to look into more complex and intricate properties.

What are some of the major issues with investing in Turnkey properties?

Any and all help is appreciated!

Turnkey properties are a great way to get started. They are even a good way to invest OOS if that is what you are thinking of doing. If you go with a true Turnkey provider, then everything should be done and in place for you from the start. Including a tenant. A True Provider will not close on a property until it is rented.

OP

Property Manager · St. Louis, MO · Member since 2019 · 7 posts · 4 votes

7y

@Tom Ott

Hi Tom,

Thank you for your response. I have considered OOS investing and that was what initially got me into the idea of turnkey properties. I have a mentor that I have been discussing investment properties with and he has been hesitant on the idea of OOS investing, but with a solid and reputable PM company the idea does not scare me as much.

I see you’re in Cleveland, I’ve got some family there!

Thanks for the response and help.

Jonathan Oh

Investor · Las Vegas, NV · Member since 2019 · 499 posts · 259 votes

7y

@Eric Lopez There are people investing turnkey in St Louis as well. Why don't you look for properties there? If your a PM, you have a huge advantage of knowing what areas rent and what areas to stay away from. If I were you I would take advantage of your knowledge and connections in St Louis and invest in your backyard.

4 Reply

Todd Hymel

Investor · Seattle, WA · Member since 2017 · 3 posts · 2 votes

7y

@Eric Lopez do a multifamily house hack

Courtney Jones

Rental Property Investor · Dayton, OH · Member since 2016 · 210 posts · 160 votes

7y

My only additional advice is to get an inspection done,no matter how good it looks. Its the hidden things that can make-turn key go sideways quickly and eat into your return.

Best of luck.

3 Reply

OP

Property Manager · St. Louis, MO · Member since 2019 · 7 posts · 4 votes

7y

@Jonathan Oh

Hi Jonathon,

Thanks for responding. I was planning on doing some investing in St. Louis for that exact reason, the only small issue is that I am will be moving to New Hampshire for a year and then back to San Diego (my home), after that. You are correct in that I absolutely know St. Louis and the areas, but very soon I will no longer be in state and will be an OOS investor.

OP

Property Manager · St. Louis, MO · Member since 2019 · 7 posts · 4 votes

7y

@Courtney Jones

That is one thing I learned to never skimp on!

Jason Pabon

Investor · Oakland, CA · Member since 2016 · 171 posts · 63 votes

7y

Hi @Eric Lopez - to put in simple terms: Do you want to be an active or passive investor?

If you want to work with contractors, negotiate repairs, be a landlord, source deals, find a tenant and manage rehabs, then being an active investor is the way to go. No need for turnkey.

If you want to just collect rent and get your feet in the game, turnkey is the way to go. This will also give you the ability to learn about other markets without jumping into the deep end. Time is valuable for people and having another part time job may not be ideal for everyone.

Hope this helps!

Michael Kay

CA · Member since 2018 · 83 posts · 44 votes

7y

Dude.

You have a HUGE advantage compared to the rest of us schmucks. I have to do this Out of state but you live right in a prime rental market. STL is great for finding rental properties!

You know the area, you're in the area, you work as a PM -- put these advantages to use. You're set up for success! Even if you move away to SD, you know more than I do about STL and I have properties there.

I know you'll do great

2 Reply

David OunanianBusiness Member

Real Estate Broker · St. Louis, MO · Member since 2017 · 380 posts · 195 votes

7y

Hi @Eric Lopez

The biggest issue is finding a turn key provider you can trust, who has a good track record and reputable referrals from other investors. If you don't find that, then you need to hire a realtor with experience in this market who can vet out the property and the turn key provider and if necessary negotiate to get you a fair deal.

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James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

7y

Originally posted by @Eric Lopez:

Dear BiggerPockets Family;

I am relatively new to this site and still learning the basics of it all, but after listening to many of the podcasts, I kept hearing Brandon talk about posting on here as a great way to get involved. So here I go:

I currently live and work in St. Louis, MO as a Property Manager. I have been doing so for the past 2 years and over that time, come to the realization that I want to begin doing this for myself. I currently do not own any property but am interested in getting started. With that being said, I am wary of starting off my investment career with a major project (foreclosure, LRA, etc.). Instead, I have looked more into turnkey rental properties as a means of getting my “feet wet” and learning the basics of property ownership. Once I have the basics down, I’ll then begin to look into more complex and intricate properties.

What are some of the major issues with investing in Turnkey properties?

Any and all help is appreciated!

Why do you need to engage with a turnkey provider? You are a property manager. The company you work for isn't setup for everything you need?

Mike Giallanza

Property Manager · Centennial, CO · Member since 2019 · 95 posts · 63 votes

7y

Good advice from many in here like @Michael Kay. NH and San Diego are expensive markets, and you're expertise in St Louis is golden. This is where you should consider building your portfolio. It comes down to time - as a PM myself, I know how busy we get so if you have time to fix up a home, this will be a great way to go. If you just simply don't have the time, then either buy the property that is turnkey or close to turnkey, or leverage your vendor relationships to get the work done at a better rate. You're sending them a ton of business, so they'll scratch your back and give you a deal. If they don't, then find other contractors for your PM biz. If you can build up a few properties in STL, you will find OOS investing to be a breeze when you move since you have all the connections in place.

Andrew HoganPro Member

Rental Property Investor · Indianapolis, IN · Member since 2016 · 559 posts · 463 votes

7y

Eric, like the others have said, turnkey (and multifamily syndications) are great for those who don't want a second job and just need to put their capital to work without taking hours out of their day.

Most individuals on BP are looking to actively invest in their own deals.

Downsides to turnkey or syndications are that you won't add much value yourself and the upside is basically capped.

Anthony Rosa

Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes

7y

@Tom Ott - I understand that turnkey is a fully rehabbed and rent ready. When your properties get rehabbed is there a certain age guideline you follow to replace the boiler, roof and windows?

If you don't repalce the roof and/or boiler do you give the buyer a warranty on it ?

OP

Property Manager · St. Louis, MO · Member since 2019 · 7 posts · 4 votes

7y

@Jason Pabon

Hi Jason,

That absolutely does, thank you for the advice!

OP

Property Manager · St. Louis, MO · Member since 2019 · 7 posts · 4 votes

7y

@Michael Kay

I don’t think anyone using this site is a schmuck! I think some of my hesitation comes from knowing the areas and some of the issues associated with them. Analysis paralysis by location if you will!

Thanks for the awesome response!

Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes

7y

Originally posted by @Anthony Rosa:

@Tom Ott - I understand that turnkey is a fully rehabbed and rent ready. When your properties get rehabbed is there a certain age guideline you follow to replace the boiler, roof and windows?

If you don't repalce the roof and/or boiler do you give the buyer a warranty on it ?

Usually past mid-life. We replace when needed. If it is not needed, we would have it serviced by a licensed HVAC Tech. Yes, all properties have a 6-month home warranty. Can't have an investor go in blindly and unassured if this is supposed to be a TURNKEY!

Anthony Rosa

Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes

7y

Originally posted by @Tom Ott:

Originally posted by @Anthony Rosa:

@Tom Ott - I understand that turnkey is a fully rehabbed and rent ready. When your properties get rehabbed is there a certain age guideline you follow to replace the boiler, roof and windows?

If you don't repalce the roof and/or boiler do you give the buyer a warranty on it ?

Usually past mid-life. We replace when needed. If it is not needed, we would have it serviced by a licensed HVAC Tech. Yes, all properties have a 6-month home warranty. Can't have an investor go in blindly and unassured if this is supposed to be a TURNKEY!

I thought the warranty would be longer than 6 mos. I may not need to turn on the boiler for 6 months (April-Sept). If you replaced a boiler with a new one the warranty is 3-5 years parts and labor. With the top dollar sales price of TK homes you would think all capes would waranteed for a few years.

Mike D'ArrigoPro Member

Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes

7y

@Eric Lopez I agree that turn key can be a low risk way to get started if you're working with the right turn key company. Here are some things you want to look out for with whoever you work with and what to avoid.

Don't allow financing or a finance contingency (it can be a good indication they are selling above market value)
Don't allow for your own independent property inspection
Are not realistic with their pro forma's (i.e. they don't include vacancy or maintenance projections or use unrealistically low vacancy factors)
Require you to pay for any renovation upfront
Sell only in cheap. low end neighborhoods
Don't accurately represent the neighborhood/property classification
Don't have consistent rehab standards for all properties
Don't provide a scope of work for the property
Can't provide references of repeat investors
Require you to close before a tenant is in place

Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes

7y

Originally posted by @Anthony Rosa:

Originally posted by @Tom Ott:

Originally posted by @Anthony Rosa:

@Tom Ott - I understand that turnkey is a fully rehabbed and rent ready. When your properties get rehabbed is there a certain age guideline you follow to replace the boiler, roof and windows?

If you don't repalce the roof and/or boiler do you give the buyer a warranty on it ?

Usually past mid-life. We replace when needed. If it is not needed, we would have it serviced by a licensed HVAC Tech. Yes, all properties have a 6-month home warranty. Can't have an investor go in blindly and unassured if this is supposed to be a TURNKEY!

I thought the warranty would be longer than 6 mos. I may not need to turn on the boiler for 6 months (April-Sept). If you replaced a boiler with a new one the warranty is 3-5 years parts and labor. With the top dollar sales price of TK homes you would think all capes would waranteed for a few years.

A boiler has a good chance of being turned on in April and possibly even May here in Cleveland!

Anthony Rosa

Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes

7y

Originally posted by @Tom Ott:

Originally posted by @Anthony Rosa:

Originally posted by @Tom Ott:

Originally posted by @Anthony Rosa:

@Tom Ott - I understand that turnkey is a fully rehabbed and rent ready. When your properties get rehabbed is there a certain age guideline you follow to replace the boiler, roof and windows?

If you don't repalce the roof and/or boiler do you give the buyer a warranty on it ?

Usually past mid-life. We replace when needed. If it is not needed, we would have it serviced by a licensed HVAC Tech. Yes, all properties have a 6-month home warranty. Can't have an investor go in blindly and unassured if this is supposed to be a TURNKEY!

I thought the warranty would be longer than 6 mos. I may not need to turn on the boiler for 6 months (April-Sept). If you replaced a boiler with a new one the warranty is 3-5 years parts and labor. With the top dollar sales price of TK homes you would think all capes would waranteed for a few years.

A boiler has a good chance of being turned on in April and possibly even May here in Cleveland!

Even if it is turned on in April and May the best warranty is a couple/few months?? Basically, a clean unit with fresh paint on the walls and and kitchen cabinets would be considered turnkey.

Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes

7y

Originally posted by @Anthony Rosa:

Originally posted by @Tom Ott:

Originally posted by @Anthony Rosa:

Originally posted by @Tom Ott:

Originally posted by @Anthony Rosa:

@Tom Ott - I understand that turnkey is a fully rehabbed and rent ready. When your properties get rehabbed is there a certain age guideline you follow to replace the boiler, roof and windows?

If you don't repalce the roof and/or boiler do you give the buyer a warranty on it ?

Usually past mid-life. We replace when needed. If it is not needed, we would have it serviced by a licensed HVAC Tech. Yes, all properties have a 6-month home warranty. Can't have an investor go in blindly and unassured if this is supposed to be a TURNKEY!

I thought the warranty would be longer than 6 mos. I may not need to turn on the boiler for 6 months (April-Sept). If you replaced a boiler with a new one the warranty is 3-5 years parts and labor. With the top dollar sales price of TK homes you would think all capes would waranteed for a few years.

A boiler has a good chance of being turned on in April and possibly even May here in Cleveland!

Even if it is turned on in April and May the best warranty is a couple/few months?? Basically, a clean unit with fresh paint on the walls and and kitchen cabinets would be considered turnkey.

Sadly, some give Turnkey a bad name by doing that. It takes a lot more than fresh paint to make a property a Turnkey.