Turn Key Property Management

20 Replies

I recently learned of an investor that was buying rental properties in out of state areas using a turn-key property management company. He never saw the house other then the pictures and the property management company took care of everything, for a fee of course. My market is at a point where buy and hold purcahses just don't make sense and so I wanted to see if anyone had experience with this type of investing in out of state markets using a Turn key management company. I assume there are a lot of pit falls. Let me know what your experience has been. Thanks.

It's not uncommon at all. A lot of our turn key investors buy site unseen but I wouldn't recommend buying without making a visit to the market unless you know you can really trust the turn key company and they know the area at a neighborhood and street level. It's not practical to make a trip to your market for every property you buy, but it's a good idea to make a trip and get to know the neighborhoods and identify the areas you like and don't like. I wrote a report on how to invest out of state that I'd be happy to share with you.

A few members on here created a website rating turn-key companies ,plus there are plenty of threads on the topic 

http://turnkey-reviews.com/

@Daniel Levine

I am an investor who buys turnkey properties, some of them sight unseen.  However I agree with @Mike D'Arrigo 100% it is best to make at least one visit to the market before you close on the first property in that area,  or have built a solid trust in the provider, know their rehab work, the kinds of properties they provide, the neighborhoods they buy in, and the property managment, which is a key to your success as an investor.

Hey Daniel! Yep, Colorado can be tough for cash flow. I wish it weren't because I love the state and would love to buy there. I'm in LA and we have the same cash flow problem here. 

I've always bought turnkeys out-of-state for myself, and most of them I have bought sight unseen. I don't recommend doing that with just anyone, but once you trust a team on the ground, it's pretty easy if you have a good trustworthy inspector who can help you out by checking everything out. The biggest thing is education--know what makes a good and bad turnkey, know how to run numbers, know when to run (haha), and understand market and property fundamentals. Then once you know the good teams, you can buy successfully all day long. It never hurts at least once though to fly out and get familiar with the turnkey process with a good provider. I'm glad I did that on my first one because everything made a lot more sense and I felt a lot better about it.

@Daniel Levine

  I am going to float something out here that could be a little different.

If you new what you knew now would you have bought property that broke even in Denver No cash flow or even maybe a tad negative say 3 to 5 years ago.. and how much money would have you made on those purchases.. Like BAy area and CA.. many who bought 3 to 5 years ago have seen 50% gains for 300 to 500k REAL equity.. as opposed to buying a cash flow home in the mid west that makes 200 month...

In the day before the crash it was great to get into a good market at break even and make the appreciation .. then when everything went into the crapper the pendulum swung and all the people in the bizzness starting pitching YOU MUST HAVE POSIVTIVE cash flow..

I will submit to you the pendulum has clearly swung back to looking at properties that break even or even lose a tiny bit a month in preparation for an equity run up... And that savvy investors will be looking for those types of deals,, and that there will be big money on appreciation that can actually be cash in.. as opposed to cash flow markets were the resale of the asset can be problematical at best.

YOu may want to look at markets that will have potential upside but maybe not real great cash flow now.. I predict that the investors that can find this metric will out perform those that have blinders on and just want positive cash flow no matter were they get it.

If you choose turn key being in Denver I would defiantly run over to the mid west and meet your teams. and check out the areas. and buy the best you can.

Thanks everyone. I plan on making at least on trip to each area, and meeting the property managers. I love the review site and yes Mike D'arrgo I would love to read your write up just head me in the right direction.

Ok...sorry for the long windedness...but here goes!!

Being an investor myself and owning a property management company, I can tell you that in Houston Tx there are a lot of out of state and out of country people buying what they can. We manage over 400 single family homes and 55% of our owners do not live locally.

I think the key to buying a out of town home or I guess the new sexy term is "Turn Key" basically I am assuming that means the investor doesn't need to do anything and the on the ground team handles everything. Anyways, I think that it needs to have the mindset of a partnership. Not financially or sharing in the ownership, but as a management company I feel that when an out of town owner is buying something they are trusting us to make sure they are not buying a mistake. When I get involved with an investor asking me to help or my opinion I always want to know what is their exit strategy. 3 years, 5 years, never... Then I want to know what is their goal, live off the cashflow or more of a speculator and appreciation with a modest amount of monthly positive cashflow. From this information I can help them on seeing if the deal they are looking at is a good fit. I would not suggest an investor buy a $200 cashflow property if they need it to live off of because they just quit their job.

When an investor finds a certain property and wants us to get involved, I feel that being a good partner and management company is to lay eyes on the property and let them know what I think. We will go to the property free of charge while it is under contract and provide them with a full interior and exterior video of the home, with it being narrated as to what we think of things as we are walking thru it ( How the walls look, carpet cleanable or replacement needed, landscaping, street traffic... etc.) we also give them a full professional investor assessment of the home. I feel that along with them getting an inspection, appraisal, and our assessment of a real live video. Gives them a good feeling or bad on the property. But I am talking to them as a fellow investor not someone that wants the business no matter what.

Also this is when I come back and let them know my thoughts and if I think it would be a good rental or are they buying a problem and the agents and everyone involved is B.S.ing the guy / or gal because they are not here.

So to me the turn-key is great, if you have the right team and that team has the right mindset. As soon as someone does not want to do their part then that is not a teammate that you want to have for your successful formula.

Again just my opinion and how we handle our out of town clients.

you must be overstaffed if you are able to shoot video and load it up online without the  care if you get their management business or not.  I think it's great but don't see how this is truly realistic especiAly if you are growing your mgnt business. 

I know quite a few investors who have bought turnkeys sight unseen. If you work with long established turnkey firms, I think it can work. Good luck.

@Les Isralow

  Mr. Les  welcome to BP  Put up a picture in your avatar ,,

Lots going on here its right up your ally... I have been here a year or so...

Looks like we have some stuff finally rolling..

@curt 

@Curt Davis undefined that is certainly a way to look at things. We look at customer service as an investment not an employee expense. Much like Zappos and Southwest Airlines. I wouldn't  think they are considered overstaffed.

But yes we do  have a staff member just for this service. And I can tell for fact that we have gotten clients and many referrals because of the service we give, so I would say his salary has more then been paid for.

@Steve Rozenberg

  I think you would call it marketing .... and I bet your close rate for client acquisition is darn near 100% with that kind of service... And I suspect you don't work in the war zones or the worse parts of town.

I often recommend folks looking for out of state investments to query PM up front as part of the DD phase... I mean who knows the good areas and the bad areas better than those on the front lines..

I do see out of state investors kind of go about buying Out of state get the order of DD backwards to a certain degree.. I mean start with tenant base and move out to what your going to buy.

Originally posted by @Steve Rozenberg :

Ok...sorry for the long windedness...but here goes!!

Being an investor myself and owning a property management company, I can tell you that in Houston Tx there are a lot of out of state and out of country people buying what they can. We manage over 400 single family homes and 55% of our owners do not live locally.

I think the key to buying a out of town home or I guess the new sexy term is "Turn Key" basically I am assuming that means the investor doesn't need to do anything and the on the ground team handles everything. Anyways, I think that it needs to have the mindset of a partnership. Not financially or sharing in the ownership, but as a management company I feel that when an out of town owner is buying something they are trusting us to make sure they are not buying a mistake. When I get involved with an investor asking me to help or my opinion I always want to know what is their exit strategy. 3 years, 5 years, never... Then I want to know what is their goal, live off the cashflow or more of a speculator and appreciation with a modest amount of monthly positive cashflow. From this information I can help them on seeing if the deal they are looking at is a good fit. I would not suggest an investor buy a $200 cashflow property if they need it to live off of because they just quit their job.

When an investor finds a certain property and wants us to get involved, I feel that being a good partner and management company is to lay eyes on the property and let them know what I think. We will go to the property free of charge while it is under contract and provide them with a full interior and exterior video of the home, with it being narrated as to what we think of things as we are walking thru it ( How the walls look, carpet cleanable or replacement needed, landscaping, street traffic... etc.) we also give them a full professional investor assessment of the home. I feel that along with them getting an inspection, appraisal, and our assessment of a real live video. Gives them a good feeling or bad on the property. But I am talking to them as a fellow investor not someone that wants the business no matter what.

Also this is when I come back and let them know my thoughts and if I think it would be a good rental or are they buying a problem and the agents and everyone involved is B.S.ing the guy / or gal because they are not here.

So to me the turn-key is great, if you have the right team and that team has the right mindset. As soon as someone does not want to do their part then that is not a teammate that you want to have for your successful formula.

Again just my opinion and how we handle our out of town clients.

thanks, of course Huston is one of the hot rental markets and I am looking to invest there I will look you up when I am ready.

Originally posted by @Mike D'Arrigo :

It's not uncommon at all. A lot of our turn key investors buy site unseen but I wouldn't recommend buying without making a visit to the market unless you know you can really trust the turn key company and they know the area at a neighborhood and street level. It's not practical to make a trip to your market for every property you buy, but it's a good idea to make a trip and get to know the neighborhoods and identify the areas you like and don't like. I wrote a report on how to invest out of state that I'd be happy to share with you.

 Hi Mike,

I have been trying to learn as much as possible about investing away from home. I would love to see your report. Can you point me in the direction where I can find it?

I only own one SF rental property (I own it free and clear) and it has been successfully managed well while I have lived not only out of state, but also abroad for several years. I know the manager well and they have done a great job. Unfortunately in this market (Flagstaff, AZ) there is not much opportunity for cash flow with long term leases.

I am determined to use my equity to begin building a significant portfolio of cash flowing property so that I can reinvest the cash flow. I dont want to be a property manager, I want to build a team and/or "partner" with great managers in markets that offer strong cash flow potential.

Your report would be great to read! Thanks

Hello

@Brian G. would you care to share the contact info for that property manager in Flagstaff, az

We own rentals there

Thanks!

@Daniel Levine

I work with investors to get them into emerging markets nationwide, most of our investors do not choose to make a site visit prior to purchasing.

Daniel,  

Turn-key investments are an extremely viable option for investors and nowadays there are providers in all major markets.  Obviously, the margin in some markets in no longer available but others remain HOT!  I would recommend doing research on all markets that interest you and getting as much info from the providers themselves and potentially scheduling a visit.

Full disclosure, I work for the largest turn-key provider in the Chicago market and we are always providing info to potential buyers and investors.  I have had the pleasure of seeing this model work and help investors accomplish their investment goals.

So, in my opinion, turn-key is a great option! Like anything else, it's not for everyone but worth researching!

Best,

Jose

There can be pitfalls, as with any investment structure, but if you do your due diligence and know what you are dealing with, turnkeys can be a great thing! I live in LA, so have always been priced out of my market, so I've always bought out-of-state turnkeys. I started with turnkeys as a buyer and now I work with them pretty heavily, and have been involved with them for a total of about 4 years. There are good and bad companies out there, but it doesn't take very long to learn the ins and outs and know what to look for. I can help you get more info any time if you are interested, several other people on here can as well, and if nothing else you can at least see what is out there for turnkeys and see if it seems to make sense as an investment potential. Worst case, it doesn't and you go towards something else! :)

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