Flipper/Rehabber · New York City, NY · Member since 2020 · 18 posts · 10 votes
Hi everyone! I'm looking to begin my real estate investing within the next few months and I've been doing as much self-educating as I can with all my free time. I've read a lot about BRRRR but haven't seen much discussion about purchasing turnkey properties to make rental properties. Are there any big disadvantages to doing this that I'm not aware of? I'd greatly appreciate any input on this.
Rental Property Investor · Washington, DC · Member since 2020 · 16 posts · 29 votes
6y
@Javier Kaufmann My first property is a turnkey single family. It works for me because I have a very busy job and I live in a very expensive market so doing something locally doesn’t work for me right now.
I qualified for 20% down but put down a little less than 30% down - my loan to value is 71% so when I want to buy another property I will refinance & pull out that equity for the next property.
As others mentioned there are pros and cons - turnkey only works for long term buy & hold because you’re purchasing at market value. I’m bringing in $350/mo in cash flow which isn’t a bad start in my opinion.
Property Manager · Atlanta, GA · Member since 2014 · 12 posts · 4 votes
6y
I think purchasing a turnkey as a rental is a personal choice. I believe the biggest disadvantages are purchasing at close to market rate and not being able to force appreciation. This is assuming that the numbers are as they were presented. These disadvantages are worth it for some people.
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
6y
Less upside potential but low involvement. I think they can work out ok for some that are in expensive markets and want to invest out of state. Finding the right turnkey company and management team would be what it comes down to.
Flipper/Rehabber · New York City, NY · Member since 2020 · 18 posts · 10 votes
6y
@John Teachout That is definitely something to think about, considering I'm in NYC and am looking to go out of state for most (if not all) of my investments. Thank you!
Investor · Tampa, FL · Member since 2017 · 589 posts · 251 votes
6y
Turnkey does have a great hands off approach but there isn't much wiggle room to build equity as stated above. Money is made through the deals of finding something rough and making it beautiful lol.
It really depends on you. How much time and money do you have to do or oversee renos and carry the home while it is vacant? Go ahead and buy an ugly duckling that needs only a bit of work-maybe some painting, change the flooring in one room. I've bought both places that need no work-well minor stuff that can be done in a day, and places that need a lot more work (1-3 months).
Specialist · DETROIT · Member since 2019 · 116 posts · 243 votes
6y
If you are looking for the best rent to value ratio’s and cash on cash returns in the country and world invest in off-market section 8 rental properties in Detroit. Just be sure to connect with a turnkey operation with a ton of muscle and excellent in-house property management. Also, make sure the company has numerous references.
Rental Property Investor · Washington, DC · Member since 2020 · 16 posts · 29 votes
6y
@Javier Kaufmann My first property is a turnkey single family. It works for me because I have a very busy job and I live in a very expensive market so doing something locally doesn’t work for me right now.
I qualified for 20% down but put down a little less than 30% down - my loan to value is 71% so when I want to buy another property I will refinance & pull out that equity for the next property.
As others mentioned there are pros and cons - turnkey only works for long term buy & hold because you’re purchasing at market value. I’m bringing in $350/mo in cash flow which isn’t a bad start in my opinion.
Investor · Detroit, MI · Member since 2015 · 32 posts · 12 votes
6y
Dear Isaura, thank you very much for that information. I am an investor in Detroit and I am wondering about the possibility of Section 8 rental income. I did not know just how lucrative it could be. I plan on jumping into the research and learning all I can about the Detroit market. Thanks again!
Another option to consider is buying a property in turnkey or near turnkey condition, rather than a property from a turnkey company. There's usually more of an opportunity to get deals doing it that way, and it is work, but not nearly as much work as an involved rehab.
Rental Property Investor · Dayton, OH · Member since 2019 · 293 posts · 440 votes
6y
@Javier Kaufmann all of the podcast and sites have made everyone believe you have to Brrrrr deals to be successful! Transparency, I utilize the value add strategy and do not buy turnkey for my portfolio, but I also only invest locally.
However, several of my out of state clients buy turnkey properties and they cash flow just fine. Buying turnkey does not mean your buying at the highest price possible. You will if you buy from a turnkey company as they need to make their money on the rehab. Turn key means you have renters in place or ready for them and you don't have to do any immediate work. Might not be the best looking property on MLS and it might not be retail price. Probably means you can't brrrrr all out.
If the numbers work for you, it’s not a bad option if you have your team place. It is a longer term strategy.
Don’t be fooled though, you can find turn keys under valued or off market turn keys as well, but it takes more grind!
Investor · Minneapolis, MN · Member since 2016 · 145 posts · 108 votes
6y
Hi Javier,
I think it's a question of how much capital you have and how active you'd like to be. Turnkeys will be less work but how do you get into your 2nd deal in order to start building wealth? So If you have a lot of capital and just want to park it somewhere consider turnkey. If you are trying to make something out of nothing consider BRRRR. Partner up with someone if you don't want to do the work but still want the benefits of the BRRR strategy. Good Luck! - Justin
Property Manager · Kansas City, MO · Member since 2018 · 280 posts · 221 votes
6y
@Javier Kaufmann buying turn key has worked well for me because I’ve bought at prices that cash flow for long term renters. In addition, I’ve turned them into short term rentals and that increased the cash flow significantly. They can be great, It just depends on what strategy you will use.
Property Manager · Charlotte, NC · Member since 2020 · 80 posts · 41 votes
6y
I too have had success with turnkey investment properties in terms of quality of tenant and securing long term leases but definitely agree about the limited appreciation. As stated above it really depends on your personal style and strategy.
Investor · Boulder, CO · Member since 2016 · 1k+ posts · 1k+ votes
6y
@Javier Kaufmann Location, Location, Location! I like turnkey. However, you have to buy super right. For turnkeys, I like buying in B/B+ areas, that are affordable to new homeowners (one of my exits), or attractive to for a lease option (another exit). Rents have to be strong (1%+), great location to major travel routes, great amenities, great schools. The area should have decent appreciation 3-4%+. Can you lose money on turnkeys? Yes! Mostly if you violate one of the guidelines above. With this formula, I've only made money on my exit.
Investor · Las Vegas, NV · Member since 2019 · 499 posts · 259 votes
6y
@Javier Kaufmann I got my start in investing through turnkeys. I did so because #1 I had no idea what I was doing and #2 I was still getting 10%+ coc returns (using very conservative numbers) at the time I was buying them. It's a little different now since prices have gone up so much. For the most part, turnkeys are best served for busy people with little or no time. If you're willing to put in the time, then I don't see anything wrong with trying to build your own team and sourcing your own deals. That should be your long term goal anyway. But I don't see anything wrong with starting with turnkeys. Feel free to DM me if you'd like to get in contact with some turnkey companies I worked with. Good luck!
Edmonds, WA · Member since 2019 · 61 posts · 46 votes
6y
@Javier Kaufmann turnkeys are great if you can find a reliable seller for turnkeys and if you're looking to be very hands off. The advantage of BRRRR, as I'm sure you know, is that you can recoup your money and do it again. But, you will have to put a little more work and effort in. An advantage is you know what was fixed on a property. The disadvantage of a turnkey is you're hoping someone else fixed all major issues on a property and that they didn't just paint a pig.
My wife and I are looking into Rent to retirement, Brandon Turner advertises for them all the time. We plan to BRRRR, flip, and wholesale for our actual income then self direct our IRAs to purchase turnkey. That way we work for our money upfront and our retirement money sits and grows.