Turn key ready worth it??

Question

I have a full time job and Turn key sounds appetizing for starters , anything tips to keep in mind if pursue ?

Mike D'Arrigo · Answer

@Damien Papillo turn key is a good way for someone with no experience, a demanding job and family life to get in to rental. Like with any business, there are good turn key companies and bad ones. Here are some things to look for and what to avoid in any turn key company.

• 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

James Wise · Answer

Yup. Here are some best practices to utilize when buying turnkey.

• Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
• Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
• Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
• Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
• Make sure your property manager is a licensed real estate brokerage.
• Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estate
• Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.

Damien Papillo · Answer

@James Wise big thanks, very helpful

Nathan Gesner · Answer

There are many companies that use the term "turn key" but there are different definitions. A company like Memphis Invest has over 8,000 rentals in 8-9 different markets and - from what I've seen - they seem pretty honest and transparent. Other companies don't know what they're doing or are running a sham, so be careful.

A turn-key provider should sell you a home that is 100% renovated and either ready to rent or already rented. They should be open to an inspection and verification. If not, they are probably hiding something.

Many turn-key companies buy properties cheap, then sell it to you for a profit. Then they send their own contractors in to renovate the home...for a profit. Then they place a Tenant...for a profit. Then they manage it for you. They're selling you something 3-4 different times in the process. A reputable company sells you the home fully renovated and provides professional property management.

Damien Papillo · Answer

@Mike Thankyou!!!

Taylor L. · Answer

There's an active thread from a gentleman who recently bought one here. Seems you should select a few turnkey providers and get to know them. Read around about investors' experiences with the various companies and take those experiences seriously.

Generally turnkey investing is seen as a capital preservation play with modest cash flow. That's totally fine and there's nothing wrong with it at all. It's just not going to make you financially free in a short period of time unless you're sitting on a lot of cash.

Ali Boone · Answer

Shoot me a direct message so I have your info. I'll never remember where to find you on here otherwise.

Damien Papillo · Answer

@Nathan G. Thankyou

Robert Biggerstaff · Answer

I have bought mostly fixer-upper properties and done the work myself. The cash flow is great the equity is phenomenal however it’s very difficult to build reserves due to the fact that you’re basically consistently putting money to make repairs until the house is totally done. The other thing to consider is if you buy a fixer-upper how long will the property shit before you get it going

Damien Papillo · Answer

@Ali Boone Thankyou, please contact me when you create the document. Very helpful!!

Turn key ready worth it??

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