As an investor do you prefer turnkey or empty house at purchase
Property Manager · Rochester, NY · Member since 2015 · 243 posts · 62 votes
As an investor do you prefer turnkey or empty house at purchase
Most Popular Reply
Real Estate Broker · Dunedin, FL · Member since 2015 · 74 posts · 43 votes
10yEmpty at closing is the only way I would buy. In fact it is part of my inflexible "criteria". As Investors we want the highest rate of return. Let us assume it us currently rented at $1,000. In every situation like this the market is a little higher. So I would prefer to go in an do a wall to wall rehab including kitchen and go for the $1395 renter who wants perfect. So in other words, I like to "set records" with my rents for my market. Do the tenants stay and are they happy, the happiest. I do this formula more and more now. The extra $12,000 I spend on the rehab nets me another $200-400 in this $1000 price range and that is an extra 30% return above the turn key investor. Or non buy/rehab/hold investor, or the guy that just buys/holds without the rehab. I specialize in pretty houses in Pasco/Pinellas $675-$2500 rent range and this works on them all. So to recap, in my pretty house model, doing a wall to wall rehab, all floors, kitchen baths, walls will allow me to set a record on the rents, and when it comes time to advertise I attract the tenant with the higher credit/income and I would like to add that in March I closed on a SFR in Embassy Hills Port Richey for $51,000 A 2/1/1, 1100 SF. Right off the MLS. So it would have rented for 700-750 since it was super dated and ugly. I did a $13,000 rehab, opened up one porch to the house by taking out sliders and wall to wall porcelain tile, kitchen, baths, ceilings, all walls baseboards, anyways I am getting $895 and the list of applications has several 700+ credit scores. The tenant i chose pays the rent one month early every month they are so happy. So, for me they have to be empty, I rehab them all, if I do not have the cash at purchase, then at the first check out that I can do a rehab I do it and go for the record high rent. On that $51,000 purchase I did 100% financing, 6% 20 yrs private and it cash flows $409.00 and that is net before maintenance. I do not factor vacancies ever, I manage myself and it is a non factor. I also received a $1200 commission when I bought it. I approach the private lenders with this formula, they do 100% financing, I rehab after closing., we both win as I get a new house with a cherry tenant, and they get the equity position and the beautiful home. I actually learned this by accident, I just noticed the rehabbed new inside houses got us better tenants and the maintenance calls are almost non existent and they stay forever, seriously, they have nowhere to go when the house is new and even though we are priced at the high end, it is still a win win for all. Namaste.
34 Replies
- Residential Real Estate Broker · Lindon, UT · Member since 2016 · 50 posts · 8 votes10y
Just depends how passively you want to invest.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes10y
Empty house. I want to pick my own tenants. We have a fairly rigorous screening process that has served us well and I have no way of knowing what screening purpose was used by former landlord, other than maybe checking for a pulse and a wallet. Caveat: I deal in SFH's only at this point. This would be a different dynamic if it was a 60 unit apartment building.
Skyline Properties - Property Manager · Rochester, NY · Member since 2015 · 243 posts · 62 votes10y
thanks for input let's continue this as everyone has their own thoughts. Thanks
Empty. I'm a hands on landlord and manage my own properties. Choosing the right tenant is a huge part of running a profitable business, particularly for low end rentals (I love my $30-40k SFR's!). A mistake in screening can cost a huge amount of time and money. Unless I know the person doing that task, and their process and criteria are well documented, I'm reluctant to take on a tenant someone else has placed.
- 10yMichael BarbariPro MemberBanker · Downers Grove, IL · Member since 2014 · 396 posts · 107 votes
@Matt Harris Empty. Screen your own tenants. You never know what you might inherit. You can also do repairs or minor work before renting out.
- Property Manager · Rochester, NY · Member since 2015 · 243 posts · 62 votes10y
wow I expected the opposite if offering turn key. Great insight as I'm licensed and deal with low priced homes with high cash flow. So if I'm selling properties should i offer a choice either empty or occupied with management in place? Thanks great advice so far keep this open as great knowledge and opinions are helpful
- Ormond Beach , FL · Member since 2015 · 345 posts · 223 votes10y
I've bought both. I currently he a sfr that I'd like to sell that has a month to month tenant in place paying $1300. I would view this as the ideal situation, as a month to month does not commit anyone long term, but I manage myself.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes10y
Originally posted by @Matt Harris:
wow I expected the opposite if offering turn key. Great insight as I'm licensed and deal with low priced homes with high cash flow. So if I'm selling properties should i offer a choice either empty or occupied with management in place? Thanks great advice so far keep this open as great knowledge and opinions are helpful
I would offer neither and address concerns as the investor brings them up. It is the investor's responsibility to know what situation they prefer. If you are completely hands off or far away geographically, you may be better off with good management and an existing tenant. I suspect most who prefer empty are actively involved in the management side of things like myself.
Skyline Properties - Property Manager · Rochester, NY · Member since 2015 · 243 posts · 62 votes10y
great points
- Investor · Milwaukee, WI · Member since 2014 · 811 posts · 420 votes10y
I definitely prefer the unit to be vacant and prefer being able to select my own tenant.
- Cypress, TX · Member since 2016 · 132 posts · 49 votes10y
@Matt Harris if you inherit a tenant you inherit all the problems. How well did the previous owner screen tenants? What lease was he using? Did he have any side agreements with the tenant? Will you be constantly running into "I was told that it was ok if I...?"
- Ormond Beach , FL · Member since 2015 · 345 posts · 223 votes10y
However, you can also inherit great tenants.....we have twice!
- Property Manager · Rochester, NY · Member since 2015 · 243 posts · 62 votes10y
loving it guys... sharing experiences and opinions really helps the community great discussion so far.. guess I look at things slightly differently I would love a propert already cashflowing from the start guess it all comes down to what your comfortable with and if you trust the source of where those tenants came from
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes10y
Empty ... if it is occupied with a good tenant, then I'm not likely getting much of a discount. If it is occupied with a bad tenant, then I could get a discount, but I want them out before COE and specify such in the contract. If it is empty and trashed, I get the biggest discount, and can rehab and tenant it up to my specifications. If you want a passive investment, buy a stock. Good news, though, is that it is not all active all the time ... after the rehab and tenant are in place, I can go back to the beach :)
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes10y
Originally posted by @Matt Harris:
wow I expected the opposite if offering turn key. Great insight as I'm licensed and deal with low priced homes with high cash flow. So if I'm selling properties should i offer a choice either empty or occupied with management in place? Thanks great advice so far keep this open as great knowledge and opinions are helpful
Then the buyer you are looking for is an out of state sucker, not an investor. Selling them a property that all the local investors already passed on and is so damn profitable that you would prefer to sell it off rather than keep it in your own portfolio. Not a good business model, IMO. Put your interests in alignment with your investors rather than in opposition to their interests and you can build a much more profitable and long term sustainable business with the same financially sophisticated clients rather than always having to constantly search for the next sucker.
- Property Manager · Rochester, NY · Member since 2015 · 243 posts · 62 votes10y
Originally posted by @David Faulkner:
Originally posted by @Matt Harris:
wow I expected the opposite if offering turn key. Great insight as I'm licensed and deal with low priced homes with high cash flow. So if I'm selling properties should i offer a choice either empty or occupied with management in place? Thanks great advice so far keep this open as great knowledge and opinions are helpful
Then the buyer you are looking for is an out of state sucker, not an investor. Selling them a property that all the local investors already passed on and is so damn profitable that you would prefer to sell it off rather than keep it in your own portfolio. Not a good business model, IMO. Put your interests in alignment with your investors rather than in opposition to their interests and you can build a much more profitable and long term sustainable business with the same financially sophisticated clients rather than always having to constantly search for the next sucker.
Maybe I should explain better and this isn't the case at all for me at least. But I do know local managers that rip off out of state investors and such even tried on me but difference is im here locally and handle my own maintenance and such so harder to get away with overcharging me and such. let me make this very clear I do not offer turn key properties or practice unfair business practices as you seem to almost be implying but like described I do see happening nd this is why I question this cause I would like offer quality honesty and integrity where it is lacking . I am on here asking peoples opinions and questions that's all. Selling to out of state or out of country investors doesn't make them suckers or mean my interest are in opposition to theirs in anyway. example here I have a 30,000$ property rented at 800$, a 20,000$ rented at 700$ which others may be open to investing into this market from other areas that don't have cash flow like this or so forth. Possible reasons to sell could be need cash now, investing in new areas selling single families to buy multi families, retiring. Any reason that's logical in any other transaction doesn't mean its a bad or negative property. But yes I advise people to be cautious until a proven track record is shown and that's where reputation comes in. Reason being is their market maybe overpriced or low rental rates or what not or maybe people don't want to go put in all the work, time and money to find fix and rehab a property as there's more to it then most can even think of. here locally you need a c of o inspection and lead test passed by the city. And also turn key may not always be sold to out of state local buyers may buy them also for the same reasons. You pay for things as a convenience doesn't mean someone needs to be a sucker on one side long as its a fair price and done ethically.
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes10y
Originally posted by @Matt Harris:
Originally posted by @David Faulkner:
Originally posted by @Matt Harris:
wow I expected the opposite if offering turn key. Great insight as I'm licensed and deal with low priced homes with high cash flow. So if I'm selling properties should i offer a choice either empty or occupied with management in place? Thanks great advice so far keep this open as great knowledge and opinions are helpful
Then the buyer you are looking for is an out of state sucker, not an investor. Selling them a property that all the local investors already passed on and is so damn profitable that you would prefer to sell it off rather than keep it in your own portfolio. Not a good business model, IMO. Put your interests in alignment with your investors rather than in opposition to their interests and you can build a much more profitable and long term sustainable business with the same financially sophisticated clients rather than always having to constantly search for the next sucker.
Maybe I should explain better and this isn't the case at all for me at least. But I do know local managers that rip off out of state investors and such even tried on me but difference is im here locally and handle my own maintenance and such so harder to get away with overcharging me and such. let me make this very clear I do not offer turn key properties or practice unfair business practices as you seem to almost be implying but like described I do see happening nd this is why I question this cause I would like offer quality honesty and integrity where it is lacking . I am on here asking peoples opinions and questions that's all. Selling to out of state or out of country investors doesn't make them suckers or mean my interest are in opposition to theirs in anyway. example here I have a 30,000$ property rented at 800$, a 20,000$ rented at 700$ which others may be open to investing into this market from other areas that don't have cash flow like this or so forth. Possible reasons to sell could be need cash now, investing in new areas selling single families to buy multi families, retiring. Any reason that's logical in any other transaction doesn't mean its a bad or negative property. But yes I advise people to be cautious until a proven track record is shown and that's where reputation comes in. Reason being is their market maybe overpriced or low rental rates or what not or maybe people don't want to go put in all the work, time and money to find fix and rehab a property as there's more to it then most can even think of. here locally you need a c of o inspection and lead test passed by the city. And also turn key may not always be sold to out of state local buyers may buy them also for the same reasons. You pay for things as a convenience doesn't mean someone needs to be a sucker on one side long as its a fair price and done ethically.
Either you are a sucker for selling, or they are a sucker for buying ... if you want to do as you say, then you and your investors would both be better served by better aligning your incentives via JV, syndication, or what have you. The way it sounds like you have it set up now, you and your investors interests will always be at odds. Either you make more and they make less, or visa versa. Either they are a fool or you are, or perhaps both, but not neither.
I won't even begin to get into the gaping flaws in your logic about valuation ... that shows either ignorance on real estate valuation or an attempt to artificially pump up values using valuation methods that are not valid. Again, either you are a fool or the people you are selling to based on this logic are ...
You asked for opinions, you now have mine ...
- Property Manager · Rochester, NY · Member since 2015 · 243 posts · 62 votes10y
Originally posted by @David Faulkner:
Originally posted by @Matt Harris:
Originally posted by @David Faulkner:
Originally posted by @Matt Harris:
wow I expected the opposite if offering turn key. Great insight as I'm licensed and deal with low priced homes with high cash flow. So if I'm selling properties should i offer a choice either empty or occupied with management in place? Thanks great advice so far keep this open as great knowledge and opinions are helpful
Then the buyer you are looking for is an out of state sucker, not an investor. Selling them a property that all the local investors already passed on and is so damn profitable that you would prefer to sell it off rather than keep it in your own portfolio. Not a good business model, IMO. Put your interests in alignment with your investors rather than in opposition to their interests and you can build a much more profitable and long term sustainable business with the same financially sophisticated clients rather than always having to constantly search for the next sucker.
Maybe I should explain better and this isn't the case at all for me at least. But I do know local managers that rip off out of state investors and such even tried on me but difference is im here locally and handle my own maintenance and such so harder to get away with overcharging me and such. let me make this very clear I do not offer turn key properties or practice unfair business practices as you seem to almost be implying but like described I do see happening nd this is why I question this cause I would like offer quality honesty and integrity where it is lacking . I am on here asking peoples opinions and questions that's all. Selling to out of state or out of country investors doesn't make them suckers or mean my interest are in opposition to theirs in anyway. example here I have a 30,000$ property rented at 800$, a 20,000$ rented at 700$ which others may be open to investing into this market from other areas that don't have cash flow like this or so forth. Possible reasons to sell could be need cash now, investing in new areas selling single families to buy multi families, retiring. Any reason that's logical in any other transaction doesn't mean its a bad or negative property. But yes I advise people to be cautious until a proven track record is shown and that's where reputation comes in. Reason being is their market maybe overpriced or low rental rates or what not or maybe people don't want to go put in all the work, time and money to find fix and rehab a property as there's more to it then most can even think of. here locally you need a c of o inspection and lead test passed by the city. And also turn key may not always be sold to out of state local buyers may buy them also for the same reasons. You pay for things as a convenience doesn't mean someone needs to be a sucker on one side long as its a fair price and done ethically.
Either you are a sucker for selling, or they are a sucker for buying ... if you want to do as you say, then you and your investors would both be better served by better aligning your incentives via JV, syndication, or what have you. The way it sounds like you have it set up now, you and your investors interests will always be at odds. Either you make more and they make less, or visa versa. Either they are a fool or you are, or perhaps both, but not neither.
I won't even begin to get into the gaping flaws in your logic about valuation ... that shows either ignorance on real estate valuation or an attempt to artificially pump up values using valuation methods that are not valid. Again, either you are a fool or the people you are selling to based on this logic are ...
You asked for opinions, you now have mine ...
please I ask your opinion so teach me about real estate valuations. Maybe I can learn. That is what this sites here for.
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes10y
Originally posted by @Matt Harris:
Originally posted by @David Faulkner:
Originally posted by @Matt Harris:
Originally posted by @David Faulkner:
Originally posted by @Matt Harris:
wow I expected the opposite if offering turn key. Great insight as I'm licensed and deal with low priced homes with high cash flow. So if I'm selling properties should i offer a choice either empty or occupied with management in place? Thanks great advice so far keep this open as great knowledge and opinions are helpful
Then the buyer you are looking for is an out of state sucker, not an investor. Selling them a property that all the local investors already passed on and is so damn profitable that you would prefer to sell it off rather than keep it in your own portfolio. Not a good business model, IMO. Put your interests in alignment with your investors rather than in opposition to their interests and you can build a much more profitable and long term sustainable business with the same financially sophisticated clients rather than always having to constantly search for the next sucker.
Maybe I should explain better and this isn't the case at all for me at least. But I do know local managers that rip off out of state investors and such even tried on me but difference is im here locally and handle my own maintenance and such so harder to get away with overcharging me and such. let me make this very clear I do not offer turn key properties or practice unfair business practices as you seem to almost be implying but like described I do see happening nd this is why I question this cause I would like offer quality honesty and integrity where it is lacking . I am on here asking peoples opinions and questions that's all. Selling to out of state or out of country investors doesn't make them suckers or mean my interest are in opposition to theirs in anyway. example here I have a 30,000$ property rented at 800$, a 20,000$ rented at 700$ which others may be open to investing into this market from other areas that don't have cash flow like this or so forth. Possible reasons to sell could be need cash now, investing in new areas selling single families to buy multi families, retiring. Any reason that's logical in any other transaction doesn't mean its a bad or negative property. But yes I advise people to be cautious until a proven track record is shown and that's where reputation comes in. Reason being is their market maybe overpriced or low rental rates or what not or maybe people don't want to go put in all the work, time and money to find fix and rehab a property as there's more to it then most can even think of. here locally you need a c of o inspection and lead test passed by the city. And also turn key may not always be sold to out of state local buyers may buy them also for the same reasons. You pay for things as a convenience doesn't mean someone needs to be a sucker on one side long as its a fair price and done ethically.
Either you are a sucker for selling, or they are a sucker for buying ... if you want to do as you say, then you and your investors would both be better served by better aligning your incentives via JV, syndication, or what have you. The way it sounds like you have it set up now, you and your investors interests will always be at odds. Either you make more and they make less, or visa versa. Either they are a fool or you are, or perhaps both, but not neither.
I won't even begin to get into the gaping flaws in your logic about valuation ... that shows either ignorance on real estate valuation or an attempt to artificially pump up values using valuation methods that are not valid. Again, either you are a fool or the people you are selling to based on this logic are ...
You asked for opinions, you now have mine ...
please I ask your opinion so teach me about real estate valuations. Maybe I can learn. That is what this sites here for.
I think they teach real estate valuation as part of the basic training needed before getting your real estate license. If you need a refresher on that, perhaps you could ask your broker. Hint: it has nothing to do with what the property currently rents for.
- Property Manager · Rochester, NY · Member since 2015 · 243 posts · 62 votes10y
never stated it has anything to do with rent I never said such but I wont continue this any further. I was giving an example based on property value from cma's, appraisals and the actually current rent. but I wanted to learn from you.
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes10y
You can't learn what you don't want to know.
- Property Manager · Rochester, NY · Member since 2015 · 243 posts · 62 votes10y
Thanks for all the differecession in opinions and even personalities that's what makes real estate so interesting everyone has a different way of doing or thinking of things. Together we can teach and learn from each other. Please keep this going
- Raleigh, NC · Member since 2015 · 59 posts · 15 votes10y
Maybe I should have started this questions elsewhere, but with the lively discussion I thought I might as well jump in...
@David Faulkner what would you think of project manager/key "turning" operation (not ready to go, but helps make it ready to go)? You are in a pretty expensive market, do you invest solely in CA? For you or the investors in those high price markets that do invest out of state - are there options for having someone on the ground in more affordable markets that works in your interest. I guess it could go the JV route, but wouldn't that require shared ownership? What about just offering the service of finding the property, over seeing repairs, and helping vet tenants/PM companies? The idea of offering this type of service is something I have been tossing around recently.
- Investor · st louis, MO · Member since 2014 · 57 posts · 26 votes10yKids, this has been an incredibly enlightening thread for me. I'm in St. Louis with a similar model (creating turn-key $30-35k rentals). Ive been doing it about a year now. I think I create really good houses (concentrating on the home's systems and use long wearing finishes), then have been screening my own tenants and selling as turn-key. Ive been struggling with why they sometimes take a while to sell. THIS THREAD HAS ANSWERED THAT! Why would someone want to marry into my potential problem?? What I thought was a service I now realize is a hindrance for the buyer. As a side question, what then do buyers want/ look for? Sure, location, cash flow potential etc. but numerically, is there a sweet spot? Here, 750 rentals are about 30-35k. Lately though a lot of the offers have been really low. Like 24-27. I'm just wanting to make sure I get guys what they want, not what I want to feed them. Maybe I should be posting that part somewhere else. Anyway, great stuff! Thanks to you all for talking about this.
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