Are turnkey properties good investments? (First time investor)

General Real Estate Investing
5yFollow

Are turnkey properties good investments? (First time investor)

Anthony Dimino
Rental Property Investor · Rancho Santa Margarita, CA · Member since 2020 · 5 posts · 2 votes

My name is Anthony and I live in Southern California. My goal is to have enough passive income to replace me and my wife’s income and then some. We love to travel and have 3 kids and would love take them around they world.

I am a first time real estate investor and am eager to acquire my first deal but at the same time I’m being very cautious and taking this step by step. I currently have a decent amount in savings and would like to start out of state. I’m setting the budget for our first buy and hold property at under 150k. My first thought was a brrrr but after some thought I switched to maybe doing a turn key ready property form one of those turnkey companies. I thought this would be a good way to get my feet wet into the real estate game.

Does anyone have any recommendations on turnkey properties preferably in the Midwest (if not that’s fine as well)?

Any information would be great, whether good or bad. Also is now a good time to jump into a turnkey investment?

1Reply
28 views

Most Popular Reply

Joseph Crunkilton
Rental Property Investor · Oregon City, OR · Member since 2020 · 324 posts · 780 votes
5y

@Anthony Dimino

I was in the same spot a few months ago. I wanted to get my first deal under my belt that was low risk but still provided good returns. @Zach Lemaster over at Rent to Retirement provides high quality rentals in strong markets. 

It's a great way to get some experience and properties under your belt. Have a look at what they can offer. 

6Reply
See this reply in the discussion

18 Replies

Jump to latestLatest
  • Jody Sperling
    Omaha, NE · Member since 2020 · 611 posts · 665 votes
    5y

    I'm increasingly a fan of turnkey. Currently, I own one rental house, that needed very moderate rehabbing. My primary is several blocks from the rental. In my neighborhood of Omaha, where I live and invest, property is inexpensive and reliably appreciates.

    Since I prefer a mostly passive investment, turnkey benefits my goals, the tension being that unless I BRRRR, I can only afford one or two houses a year. At that rate, it will take me five to seven years to replace my income with rental properties. Sometimes that timeframe feels too long, because I really would love to quit my W2 and focus my time on personal pursuits.

    Because I've circled back to turnkey as the most likely method for me, I've spent considerable effort on learning ways to make turnkey a better, faster investment. Two practices that you have to master to make turnkey work are location and population flow. You have to buy houses where people want to be if you're going to make turnkey work, and you're going to have to research where an area's population is flowing, because the majority of the benefit you'll get with turnkey properties is several years removed.

    A turnkey house in a bad neighborhood could cost you big in both time and money.

    The foundation of my investing is anchored in two strategies: Velocity Banking and Infinite Banking. Many people misunderstand both. You might find it worth your time to research these strategies as ways to accelerate your investing.

    I'd be happy to share more about my journey, and why I chose VB and IB if, after you research them, you are interested in diving deeper. Best of luck to you, as you move forward.

    4Reply
  • Joseph Crunkilton
    Rental Property Investor · Oregon City, OR · Member since 2020 · 324 posts · 780 votes
    5y

    @Anthony Dimino

    I was in the same spot a few months ago. I wanted to get my first deal under my belt that was low risk but still provided good returns. @Zach Lemaster over at Rent to Retirement provides high quality rentals in strong markets. 

    It's a great way to get some experience and properties under your belt. Have a look at what they can offer. 

    6Reply
  • Anthony Dimino
    OP
    Rental Property Investor · Rancho Santa Margarita, CA · Member since 2020 · 5 posts · 2 votes
    5y

    @Jody Sperling thank you so much I’m going to research those two methods and get back to you. I appreciate the answer sir!

    1Reply
  • Anthony Dimino
    OP
    Rental Property Investor · Rancho Santa Margarita, CA · Member since 2020 · 5 posts · 2 votes
    5y

    @Joseph Crunkilton That’s awesome I’ll check them out. Do you mind breaking down the deal you got? How many properties do you currently have with them?

    0Reply
  • Tom Ott
    Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes
    5y
    Originally posted by @Anthony Dimino:

    My name is Anthony and I live in Southern California. My goal is to have enough passive income to replace me and my wife’s income and then some. We love to travel and have 3 kids and would love take them around they world.

    I am a first time real estate investor and am eager to acquire my first deal but at the same time I’m being very cautious and taking this step by step. I currently have a decent amount in savings and would like to start out of state. I’m setting the budget for our first buy and hold property at under 150k. My first thought was a brrrr but after some thought I switched to maybe doing a turn key ready property form one of those turnkey companies. I thought this would be a good way to get my feet wet into the real estate game.

    Does anyone have any recommendations on turnkey properties preferably in the Midwest (if not that’s fine as well)?

    Any information would be great, whether good or bad. Also is now a good time to jump into a turnkey investment?

     Sometimes it just depends on your goals. Turnkeys work well for investors looking for OOS or if they work a full-time job. Many live in CA, NY, or TX where investing locally is difficult. Turnkeys in the Midwest are ideal. The Turnkey Provider should own the property first, renovate it in-house, place a tenant prior to closing, and then manage the property after you purchase it. This way it is very passive and little to no work is needed on your end. 

    I would check out places in the Midwest like Cleveland or Cincinnati where property prices are still very low. 

    1Reply
  • Gary David
    Rental Property Investor · Greater Cincinnati Ohio Area · Member since 2020 · 33 posts · 18 votes
    5y

    The only caveat I would add to this is that with Turn Key property you cant be sure of the level of repairs If they are substandard or "enough to get by" you could buy a can of worms. Nobody will fix it like you would do it. That's my 2 cents.

    1Reply
  • Joseph Crunkilton
    Rental Property Investor · Oregon City, OR · Member since 2020 · 324 posts · 780 votes
    5y

    @Anthony Dimino

    My property is a SFR in KC. The property cost me 77k and is bringing in $750 a month and had a tenant in place from the start. The unit did have an initial issue but @Zach Lemaster stepped up to the plate and covered me on it. He did this because of our agreement and I was impressed with the level of service I received. 

    My property is bringing in about $395 in cash flow currently. I'm projecting this to change over the life of ownership with maintenance and vacancies but it's still solid. I will most likely be raising rents every year I can to maximize my ROI.

    4Reply
  • Tony Kim
    Rental Property Investor · Los Angeles · Member since 2018 · 844 posts · 1k+ votes
    5y
    Originally posted by @Joseph Crunkilton:

    @Anthony Dimino

    My property is a SFR in KC. The property cost me 77k and is bringing in $750 a month and had a tenant in place from the start. The unit did have an initial issue but @Zach Lemaster stepped up to the plate and covered me on it. He did this because of our agreement and I was impressed with the level of service I received. 

    My property is bringing in about $395 in cash flow currently. I'm projecting this to change over the life of ownership with maintenance and vacancies but it's still solid. I will most likely be raising rents every year I can to maximize my ROI.

    Is Rent to Retirement a provider in the traditional sense (i.e., they own, rehab, rent and then sell the property)? Or are they a directory of other traditional providers that they have vetted?

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    5y
    Originally posted by @Anthony Dimino:

    My name is Anthony and I live in Southern California. My goal is to have enough passive income to replace me and my wife’s income and then some. We love to travel and have 3 kids and would love take them around they world.

    I am a first time real estate investor and am eager to acquire my first deal but at the same time I’m being very cautious and taking this step by step. I currently have a decent amount in savings and would like to start out of state. I’m setting the budget for our first buy and hold property at under 150k. My first thought was a brrrr but after some thought I switched to maybe doing a turn key ready property form one of those turnkey companies. I thought this would be a good way to get my feet wet into the real estate game.

    Does anyone have any recommendations on turnkey properties preferably in the Midwest (if not that’s fine as well)?

    Any information would be great, whether good or bad. Also is now a good time to jump into a turnkey investment?

     So long as you are buying it for the right price you can't go wrong. When buying turnkey assets what you want to do is use a mortgage. Bank's going to pony up 75% of the money and do an appraisal on the home for you. Can't really go wrong doing it that way.

    1Reply
  • Zach LemasterBusiness Member
    Rental Property Investor · Denver, CO · Member since 2015 · 1k+ posts · 3k+ votes
    5y

    @Tony Kim

    We have many properties that we do fully in house, and we have many other affiliates we can put you in touch with if we are not able to satisfy your needs with our properties. We work in many different markets in mainly B & A class locations offering SFR, MF & New Build investment options. I'm more than happy to discuss any further questions you have in greater detail whenever it's convenient for you. Just let me know.

    Below are some previous forum threads from investors we've previously worked with that can give you a better idea of their experiences:

    https://www.biggerpockets.com/users/ZacharyCole/references

    https://www.biggerpockets.com/forums/92/topics/518583-feedback-on-renttoretirement-and-zach-lemaster

    https://www.biggerpockets.com/forums/92/topics/765347-rent-to-retirement-review

    https://www.biggerpockets.com/forums/92/topics/893621-rent-to-retirement-review?highlight_post=5222888&page=1#p5222888

    https://www.biggerpockets.com/forums/92/topics/808479-rent-to-retirement-experiences

    https://www.biggerpockets.com/forums/12/topics/533693-anyone-worked-with-renttoretirement-turnkey

    https://www.biggerpockets.com/forums/92/topics/581730-rent-to-retirement-zach

    https://www.biggerpockets.com/forums/48/topics/874096-reviews-on-r2r-and-nch?page=1&utm_source=Iterable&utm_medium=email&utm_campaign=Transactional:%20topic_notification&utm_content=Transactional#p5123754

    https://www.biggerpockets.com/forums/311/topics/883772-turnkey-investing-renttoretirement-feedback-reviews?highlight_post=5171720&page=1#p5171720

    https://www.biggerpockets.com/users/ZacharyCole/references

    [email protected]800-311-6781Podcast Guest on Show How to Get 10%+ Off Your Next Real Estate Deal Right Now
    Rent To Retirement5334 Reviews
    WebsiteView Page
    5Reply
  • Tim Ryan
    Investor / Mentor / Contractor · Arcadia, CA Buying Out of State · Member since 2015 · 654 posts · 622 votes
    5y

    I've always recommended people to be careful with the turn-key as a new investor. The part about that it's been rehabbed and rented is really good.  But to be an out-of-state investor for the first time it is still very risky with having the right property management (even if its the turn-key people) and maintenance/contractors.  I've seen turn-key companies many times sell and then they are out and you are on your own. Something to think about. Out-of-state can be very tough but there are methods that make it very lucrative. I am in 2 states now and live in California. I don't (and won't) own rental property in So Cal.  If you want to hear more, message me and I can tell you how I do it.

    1Reply
  • Scott Swanson
    Member since 2020 · 92 posts · 39 votes
    5y

    Anthony,

    I agree with Tim Ryan. We find properties in Illinois and Indiana, for investors that are located all over the country. When someone tells us they have a turnkey property for sale, we go look at it, to see if it's worth flipping to one of our investors. I would say that 90% of the time, they're NOT turnkey. There might be painting that has to be done, electrical work, new fixtures or whatever. So I would be very careful with turnkeys! Plus, turnkeys are typically higher priced than if you rehab them yourself or have a contractor do it for you. I know that's difficult if you don't live in the area. Just be careful! Good luck.

    0Reply
  • Jason Norton
    Specialist · Huntsville, AL · Member since 2020 · 96 posts · 35 votes
    5y

    @Anthony Dimino

    Highly recommended. Especially if you’re buying a turnkey property or somebody’s been there longer than 24 months or 2 12 month contract. It shows stability. But at the end of the day what you really want to do is make sure that it cash flows and if it already is don’t reinvent the wheel.

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    5y

    @Anthony Dimino turn key can be a great way for a new investor with no experience especially out of state. With a reputable, well vetted turn key company it will be a lower risk alternative. Like with any business, there are good turn key companies and bad ones. Here are some things to look out for and avoid when evaluating turnkey companies.

    1. * Don't allow financing or a finance contingency (it can be a good indication they are selling above market value)
    2. * Don't allow for your own independent property inspection
    3. * Are not realistic with their pro forma's (i.e. they don't include vacancy or maintenance projections or use unrealistically low vacancy factors)
    4. * Require you to pay for any renovation upfront
    5. * Sell only in cheap. low end neighborhoods
    6. * Don't accurately represent the neighborhood/property classification
    7. * Don't have consistent rehab standards for all properties
    8. * Don't provide a scope of work for the property
    9. * Can't provide references of repeat investors
    10. * Require you to close before a tenant is in place
    2Reply
  • Terrance Curry
    Member since 2020 · 10 posts · 4 votes
    5y

    New to BP so I apologize in advance for the ignorance. My biggest question for turnkey properties and companies that offer them is why would they market these to investors? If they are good properties that are cash flowing with good tenants why not just keep them?

    Hope someone can help. Not trying to be cynical just looking for some transparency

    0Reply
  • Darius Ogloza
    Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
    5y

    @Anthony Dimino I am generally not a fan of this strategy for inexperienced investors.  If you go ahead, I would recommend that you ask to be put in touch with investors who have actually made some money pursuing the same strategy with the same company.


    0Reply
  • Zach LemasterBusiness Member
    Rental Property Investor · Denver, CO · Member since 2015 · 1k+ posts · 3k+ votes
    5y

    @Terrance Curry

    This is a common question I get all the time.  My response is in regards to our company specifically as I cannot speak to others that operate in the industry.

    Your question being "if these are good cash flowing properties, why don't we keep them for our own portfolio?"  It just takes a deeper understanding of our overall business model.

    The first answer is we absolutely do, but that does not mean that it fits our business model to keep every single property that we come across. We are heavily invested in each market that we operate in, but we have a specific business plan in terms of how many SFR, MF, commercial, new build, etc. type of investments that we want to keep for our own portfolio. For instance, we invest heavily in KCMO, but we do not want to own the entire city of KC, nor do we have the financing capability to do so. We spend years building our teams to find, acquire, rehab & manage properties in each location so we have the infrastructure in place to easily do that for ourselves & other investors as well. We constantly have many properties we come across that would make a great investment property for a long term hold, but it does not fit our business model to hold all those properties we come across. So instead of doing nothing with those properties we can still monetize on those opportunities by offering them to an investor where it does fit their long term hold strategy since we have built the systems in that location to rehab & manage the properties still. Does this make sense? Hopefully this sheds some light on your question. I'm more than happy to answer any other questions you might have.

    https://www.biggerpockets.com/users/ZacharyCole/references

    [email protected]800-311-6781Podcast Guest on Show How to Get 10%+ Off Your Next Real Estate Deal Right Now
    Rent To Retirement5334 Reviews
    WebsiteView Page
    3Reply
  • Terrance Curry
    Member since 2020 · 10 posts · 4 votes
    5y

    @Zach Lemaster Thank you for the explanation. Really helpful!

    3Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free