Turn key rental properties under 100k
Investor · Fort Lauderdale, FL · Member since 2015 · 2 posts · 32 votes
Turn key rental properties under 100k
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Columbus, OH · Member since 2018 · 164 posts · 126 votes
5yI live in Columbus OH, and have invested in in different states like TN , MS, MD, OH etc.. I actually like Tennessee and actually drove there to check out Memphis Turnkey properties, REI nation , Mid south home buyers and met all of them -(in waiting list since 1 and half year for Midsouth) - they all are great companies - I am invested with Memphis turnkey properties at the moment(2 properties). 50-75k range is now little tricky but yes you can get if you are lucky. what I am finding out with turkey's as I learn day to day - if a property is making $250 per door cashflow after (mortgage + escrows) that's $3000 income on that unit. However - when your lease expires or the tenant moves out after 12 months - the cost to get the property rent ready is avg $1 or 1.50$ per sqft (900 sqft unit) or something I provided in example below- so that is around $1000 to $1500 in rent ready expense. so literally I am only making $1500 on a unit in TN.
also I forgot to mention - add in couple of maintenance calls @ $100 each (labor+parts) which will eat up your income further down. so on the paper I made only $1200/year cash flow on one of the units. not trying to discourage but no one gave me this detail picture(dollar to dollar) when I started out. (REI nation, Memphis turnkey they all have fancy spreadsheets with proformas - but on the ground when rubber meets the road is little different)
if I had put in 50k-75k in S&P 500 ETF I would have made 30%+ return :) just kidding - different factors, parameters are in play here and pro's and con's on both sides :-)... but bottom line is Turnkey's are I would say still ok "ish" not great per my learning so far. Investor need to be little aggressive when it comes to demand bang for a buck - I am diversified in Stocks, real estates, 401k - all over - and all I care about is who is making me rich and creating wealth for me :-)
I started my journey couple of years ago to try out and I have learned a lot from BP community , youtube video's ,local meet ups podcasts..
Rent ready example :
$150 - carpet clean
$200 - cleaning
$100 - yard clean up
$400 - paint touch up
$150 - misc repairs - HVAC filters, batteries, door stops, etc.
Happy Investing!!!!!
124 Replies
- Rental Property Investor · Knoxville, TN · Member since 2011 · 701 posts · 531 votes5y
Originally posted by @Sachin Amin:
I live in Columbus OH, and have invested in in different states like TN , MS, MD, OH etc.. I actually like Tennessee and actually drove there to check out Memphis Turnkey properties, REI nation , Mid south home buyers and met all of them -(in waiting list since 1 and half year for Midsouth) - they all are great companies - I am invested with Memphis turnkey properties at the moment(2 properties). 50-75k range is now little tricky but yes you can get if you are lucky. what I am finding out with turkey's as I learn day to day - if a property is making $250 per door cashflow after (mortgage + escrows) that's $3000 income on that unit. However - when your lease expires or the tenant moves out after 12 months - the cost to get the property rent ready is avg $1 or 1.50$ per sqft (900 sqft unit) or something I provided in example below- so that is around $1000 to $1500 in rent ready expense. so literally I am only making $1500 on a unit in TN.
also I forgot to mention - add in couple of maintenance calls @ $100 each (labor+parts) which will eat up your income further down. so on the paper I made only $1200/year cash flow on one of the units. not trying to discourage but no one gave me this detail picture(dollar to dollar) when I started out. (REI nation, Memphis turnkey they all have fancy spreadsheets with proformas - but on the ground when rubber meets the road is little different)
if I had put in 50k-75k in S&P 500 ETF I would have made 30%+ return :) just kidding - different factors, parameters are in play here and pro's and con's on both sides :-)... but bottom line is Turnkey's are I would say still ok "ish" not great per my learning so far. Investor need to be little aggressive when it comes to demand bang for a buck - I am diversified in Stocks, real estates, 401k - all over - and all I care about is who is making me rich and creating wealth for me :-)
I started my journey couple of years ago to try out and I have learned a lot from BP community , youtube video's ,local meet ups podcasts..Rent ready example :
$150 - carpet clean
$200 - cleaning
$100 - yard clean up
$400 - paint touch up
$150 - misc repairs - HVAC filters, batteries, door stops, etc.
Happy Investing!!!!!
I don't buy or sell turnkey rentals so have no dog in that fight. However, it is not comparing apples to apples when one only uses rental cash flow vs stock market gains, imo. The beauty of real estate is it has multiple avenues of return for the owner and all of those need to be accounted for when doing a comparative analysis.
The Total Return of rental real estate includes:
1. Cash flow
2. Forced appreciation
3. Market appreciation
4. Loan amortization
5. Forced Appreciation (turnkey providers generally provide some equity upfront is my understanding)
Some discount market appreciation in their return calculations as it's not realized until sold. However, their securities portfolio is calculated the same way. Market appreciation is an integral aspect of wealth building and shouldn't be downplayed, imo.
The Total Return of the SP500 (VOO) is its market appreciation. It has one avenue of wealth building
Assume you buy a $110k property for $100k on a 20yr note with 20% down that nets $120/month in cash flow and 3% market appreciation. The Total Return:
Cash Flow: $120/month
Loan Amortization: $235/month
Market Appreciation: $275/month
Total Return: $630/month or $7560/yr which is a 38% return, not considering the forced appreciation on purchase or tax benefits. The SP500 returned 15.76% last year in comparison.
- Member since 2019 · 7k+ posts · 4k+ votes5y
100K house in many states is a pretty decent one and a good investment, especially when they're from turnkey. I said 100k home is good because they're the typical entry price home for that cash-flowing market. So if you're buying turnkey from them, it's good, what you need to do more scrutiny is whether the turnkey is doing a good job or not to the house. The inspection report will reveal most of the surprises.
- 5yAxel MeierhoeferPro MemberRental Property Investor · Escondido, CA · Member since 2017 · 679 posts · 550 votes
@Carlos Ptriawan Totally true, and that's where the discussion should go. If people accept that a balance around $100K in markets with generally lower than national average prices is a good starting point, then it really is a matter of the quality of the renovation.
Study the scope of work, look at the pictures of renovation progress (ideally visit the property while in renovation or one similar to the one you plan to buy at in the same location from the same provider).
Good TK's have established certain standards for pretty much everything. Check those out and compare to each other. That helps determining who just makes things look reasonable and who really does the work that adds value and creates a property that will last a long time when rentes.
That's also the reason why I only purchase from the TK companies that renovate, sell and manage the property under one roof. They know they will have to deal with the house they renovated and I require a 1 year warranty after closing, so anything that breaks they need to fix. That's a powerful motivator to renovate it well to begin with
- Columbus, OH · Member since 2018 · 164 posts · 126 votes5y
@Christopher B. totally agree with your opinion and I believe in REI too - what I am trying to say is "Diversify" REI on its own will not create wealth for you - in my case I started(2015) with 100K in REI and 100K in Stocks in (Robinhood self managed) - also depends I am a hands off Investor (mostly Turnkey) as I have a full time job
My returns are average or REI but great on stocks "so far" and that might change may be in next 5 yrs , that doesn't mean I am going to quit REI - they both have pros and cons. Stocks allow me to liquidate today and I can have 100k by tonight in my account - it gives me that flexibility - but of course every one has diff goals and perspectives - my goal is to adapt and embrace anything which would create wealth for me. Cheers!!! and Happy Investing!!!
- Columbus, OH · Member since 2018 · 164 posts · 126 votes5y
@Ekta Patel Yes need to be very careful when choosing and picking markets and all I request fellow investors to do extra due deligence when picking the markes they want to invest in. (drive there , stay there for few days and then decide if its right for them
- Columbus, OH · Member since 2018 · 164 posts · 126 votes5y
@Jay Hinrichs Absolutely!!!! I exactly know what you are saying.. :-)
- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Axel Meierhoefer:
@Carlos Ptriawan Totally true, and that's where the discussion should go. If people accept that a balance around $100K in markets with generally lower than national average prices is a good starting point, then it really is a matter of the quality of the renovation.
Study the scope of work, look at the pictures of renovation progress (ideally visit the property while in renovation or one similar to the one you plan to buy at in the same location from the same provider).
Good TK's have established certain standards for pretty much everything. Check those out and compare to each other. That helps determining who just makes things look reasonable and who really does the work that adds value and creates a property that will last a long time when rentes.
That's also the reason why I only purchase from the TK companies that renovate, sell and manage the property under one roof. They know they will have to deal with the house they renovated and I require a 1 year warranty after closing, so anything that breaks they need to fix. That's a powerful motivator to renovate it well to begin with
I know this is the quote definition of turnkey everything under one roof.. but that's not mandatory in my mind.. I had a vendor ( turn key reseller) from Australia and they really did not like the tenant in place.. they felt that it put to much pressure on the operator and they wanted some amount of vetting on the tenant.. I like that approach.. it takes the motivation of trying to fit a tenant in when you may well pass on them if your not under pressure to retire your loan on the asset.. And really whats the big deal to the buyer.. if it takes 30 or 60 days to get the RIGHT tenant in there in the first place and one you have a say in whether you approve them or not.. I mean these are long term investments.. if losing 30 to 60 days up front is going to kill the deal then its not deal to start with in my mind..
as you allude to the 100k mark.. i would further add investors would be miles ahead on these turn key markets if they just did ONE thing. that is google the Median home price for the market ( SFRs) and buy as close to the median they can.. this is where you will normally find better schools better tenants better everything.. and a mixture of owner occ and tenants.. with hopefully more owner occ than tenants.
Where investors get type cast is buying in areas that are ONLY renter dominated and are cheaper but show better paper returns.. this is in my mind a mistake and the investor takes a risk that they are not aware they just took..
Buy better in these markets these houses are still dirt cheap..
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes5y
I know that the more you learn about real estate investing, the more open you should become to the different ways of making money in it. But right now in this thread, we are talking about people making money in $50-$75K properties, and that is really the only part of real estate I happen to know more than my fair share about. I am about as far from a turnkey investor as you get. I am a handyman in the the Pittsburgh area running a tight little mom-and-pop portfolio with my wife.
So I can say with confidence that YES, there are $50K-$75K single-family properties for sale here that you can make money on. But not as a turnkey, long-distance investor reliant on a property management company to keep you profitable. The people who successfully run these places are all like me, local investors who do almost of their own work and of course self-manage. The margins on properties like the ones we're talking about are just too tight to do otherwise.But the dream lives. You tell people with some money to spend that it's possible, you flash some hefty cash-on-cash return numbers their way, and they'll buy these places and believe that everything's going to be fine. It won't be. Again, the margins are too tight. No property manager will really screen tenants, put them under a microscope, not for the piddle they're being paid on a $50K property. No property manager will order the kinds of fixes you need, and spend time convincing you that the expensive way is the smart way to go on things like furnaces and under-sink plumbing, despite the low cost of the house.
- Columbus, OH · Member since 2018 · 164 posts · 126 votes5y
@Jim K. totally with you on this...
- 5yBrandon SturgillBusiness MemberReal Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
@Casey C. a couple of thoughts come to mind on the comments you wrote about @Chris Clothier
I see BP had the insight to take down you post...but I did take a screen shot of that one and your last post where you called me a what? a con man??...
what were the words I was looking for again...oh, it's called libel...maybe look that one up.
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes5y
Originally posted by @Jay Hinrichs:
Originally posted by @Axel Meierhoefer:
@Carlos Ptriawan Totally true, and that's where the discussion should go. If people accept that a balance around $100K in markets with generally lower than national average prices is a good starting point, then it really is a matter of the quality of the renovation.
Study the scope of work, look at the pictures of renovation progress (ideally visit the property while in renovation or one similar to the one you plan to buy at in the same location from the same provider).
Good TK's have established certain standards for pretty much everything. Check those out and compare to each other. That helps determining who just makes things look reasonable and who really does the work that adds value and creates a property that will last a long time when rentes.
That's also the reason why I only purchase from the TK companies that renovate, sell and manage the property under one roof. They know they will have to deal with the house they renovated and I require a 1 year warranty after closing, so anything that breaks they need to fix. That's a powerful motivator to renovate it well to begin with
I know this is the quote definition of turnkey everything under one roof.. but that's not mandatory in my mind.. I had a vendor ( turn key reseller) from Australia and they really did not like the tenant in place.. they felt that it put to much pressure on the operator and they wanted some amount of vetting on the tenant.. I like that approach.. it takes the motivation of trying to fit a tenant in when you may well pass on them if your not under pressure to retire your loan on the asset.. And really whats the big deal to the buyer.. if it takes 30 or 60 days to get the RIGHT tenant in there in the first place and one you have a say in whether you approve them or not.. I mean these are long term investments.. if losing 30 to 60 days up front is going to kill the deal then its not deal to start with in my mind..
as you allude to the 100k mark.. i would further add investors would be miles ahead on these turn key markets if they just did ONE thing. that is google the Median home price for the market ( SFRs) and buy as close to the median they can.. this is where you will normally find better schools better tenants better everything.. and a mixture of owner occ and tenants.. with hopefully more owner occ than tenants.
Where investors get type cast is buying in areas that are ONLY renter dominated and are cheaper but show better paper returns.. this is in my mind a mistake and the investor takes a risk that they are not aware they just took..
Buy better in these markets these houses are still dirt cheap..
Huh. That works out, Jay. You know I firmly believe Pittsburgh is the most complicated city to understand in the Rust Belt, so if it works here, it works anywhere. But you have to get more specific than county-wide, or even city-wide. Once you identify the four highest ranked school districts in this town and search on values within the areas they service, the process you describe is totally bang on, laser-focused for all four. That's wild.
Anybody local here to Pittsburgh trying to do this for Allegheny County to check on this technique, the four school districts according to Niche are:
Fox Chapel
Mt. Lebanon
North Allegheny
Upper St. Clair - Rental Property Investor · Wooster, OH · Member since 2014 · 72 posts · 41 votes5y
@Matthew Smith I'm in NE Ohio. I started out wholesaling and now added flips and rentals as well.
I have a partner in another business and we did a few turnkey flips last year. We are planning to scale that this year. If youre interested in connecting feel free to reach out to me.
- Investor · Seattle, WA · Member since 2019 · 139 posts · 54 votes5y
@Sachin Amin Sachin, thank you sharing your thoughtful analysis on turnkey model. I know brrrr method without a doubt will bring the max profit by adding value on distressed properties under market value to comps.
Most of us would agree that higher risk would generate a higher return. Those new investors who are investing out of state thousands of mile, if they use brrrr method, there are huge risk factors as we know. Especially in a highly competitive market, the only way you can buy a property under market value, is deals from wholesalers. Im fairly new but I had to move super quick on wholesaler's deals, and most cases, I am not able to focus w-2 professional job but just signed contract on assignable contract and have to send EMD without my regular DD. Also those deals are usually tenants occupied so you cant even drive by and take a look inside.
So my question to you is
How can a new OOS investor protect themselves to do brrrr when they have not much value to an experienced investor / mentor? No one would look at your chance to be wealthy as is theirs! I am grateful that many experienced investors have advised me and helped me to learn how to analyze a deal, but again, no one would consider as their own deals.
So my humble logistic is
I have to start safely having few properties under my belt, and getting experience “Before” I can speak to experienced / rockstar investors.
I know rockstars are only one getting a spotlight in BP but no one says any of their catastrophic failure here because they left real estate for good.
- 5yAxel MeierhoeferPro MemberRental Property Investor · Escondido, CA · Member since 2017 · 679 posts · 550 votes
@Sachin Amin stocks can be great if you have risk tolerance and a lot of year until you want to reach your TFP ( time freedom point).
Most people I talk to want to hit that in the next 7-10 years, so risking a massive downturn and having to make previous gains back would be challenging.
The other thing I also always hope stock investors keep in mind is the fact that you normally need the full 100% of the funds you want to invest in a stock or fund. Even with options you need to be prepared to cover.
As a real estate investor I only need to bring 20% to the table fir my purchases and get tax benefits I too.
If your stocks consistent performance at least 4-5x better than my TK investments I suggest you keep doing them, especially if your TFP is much more than 10 years in the future. I hope you agree that timing the market to get out on top is a fool’s errand. We have had tops for 10 years, so when would you have left and liquidated?
By the way, when that day comes, hopefully with lots of profit, put that money in real estate and enjoy the great sleep TK investors have based on their passive income for life. 😜😜
- 5yAxel MeierhoeferPro MemberRental Property Investor · Escondido, CA · Member since 2017 · 679 posts · 550 votes
@Jay Yoo I think it is possible to do BRRR well.
I still like OOO TK better.
Please all, tell me what the hourly rate in $$ is that you apply to the time you spend on your Brrr?
Do you add that to the value calculation and comparison?
I believe you should
- 5yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
Originally posted by @Brandon Sturgill:
@Casey C. a couple of thoughts come to mind on the comments you wrote about @Chris Clothier
I see BP had the insight to take down you post...but I did take a screen shot of that one and your last post where you called me a what? a con man??...
what were the words I was looking for again...oh, it's called libel...maybe look that one up.
Did I miss something or were you trying to tag someone else Brandon...?
- 5yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
Originally posted by @Jay Hinrichs:
Originally posted by @Axel Meierhoefer:
@Carlos Ptriawan Totally true, and that's where the discussion should go. If people accept that a balance around $100K in markets with generally lower than national average prices is a good starting point, then it really is a matter of the quality of the renovation.
Study the scope of work, look at the pictures of renovation progress (ideally visit the property while in renovation or one similar to the one you plan to buy at in the same location from the same provider).
Good TK's have established certain standards for pretty much everything. Check those out and compare to each other. That helps determining who just makes things look reasonable and who really does the work that adds value and creates a property that will last a long time when rentes.
That's also the reason why I only purchase from the TK companies that renovate, sell and manage the property under one roof. They know they will have to deal with the house they renovated and I require a 1 year warranty after closing, so anything that breaks they need to fix. That's a powerful motivator to renovate it well to begin with
I know this is the quote definition of turnkey everything under one roof.. but that's not mandatory in my mind.. I had a vendor ( turn key reseller) from Australia and they really did not like the tenant in place.. they felt that it put to much pressure on the operator and they wanted some amount of vetting on the tenant.. I like that approach.. it takes the motivation of trying to fit a tenant in when you may well pass on them if your not under pressure to retire your loan on the asset.. And really whats the big deal to the buyer.. if it takes 30 or 60 days to get the RIGHT tenant in there in the first place and one you have a say in whether you approve them or not.. I mean these are long term investments.. if losing 30 to 60 days up front is going to kill the deal then its not deal to start with in my mind..
as you allude to the 100k mark.. i would further add investors would be miles ahead on these turn key markets if they just did ONE thing. that is google the Median home price for the market ( SFRs) and buy as close to the median they can.. this is where you will normally find better schools better tenants better everything.. and a mixture of owner occ and tenants.. with hopefully more owner occ than tenants.
Where investors get type cast is buying in areas that are ONLY renter dominated and are cheaper but show better paper returns.. this is in my mind a mistake and the investor takes a risk that they are not aware they just took..
Buy better in these markets these houses are still dirt cheap..
I agree with so many of these points about lower priced homes, but a major fact gets over-looked. The homes that investors can buy today for $100k are in the same areas that they could by homes for $60k or 70k a few short years ago. Back then, the advice was to buy $100k as your floor to protect yourself from buying properties that are too cheap and have low demand outside of investors. Of course, that is just back of the napkin advice as a general rule. Unfortunately, that number is round and looks pretty and is easy to remember. The houses that investors needed to focus on half a decade ago at $100,000 are now priced at $140-$170k. Everything has gone up in value due to supply/demand and inflationary pressure. It simply costs more to build the same today than it did 5 years ago.
So, investors that are wanting to play in the low price points are going to facing higher risks. There is no avoiding that fact. And, if they are doing it turnkey or passively, they are going to incur other costs that active, hands-on investors don't face.
Passsive investors need to be paying close attention right now. Jay gave really, really good advice about buying close to median value for a market. I would also suggest to pay attention to the other posters sharing their experience as turnkey investors. Right now, it matters less about what your expected returns are going to be and much more about how you are actually going to achieve them. Deferred maintenance and poorly managed properties will absolutely kill a passive investment right now.
Last point, read @J Scott recent article. I believe he published it on the BP Blog this week. I can't find that link so I am sharing a post he made on Facebook https://www.facebook.com/jscot.... There are a lot of people on BP that are much smarter than me like Jay Hinrichs and J Scott. I look to what they say for both guidance and great back and forth discussion. J Scott makes the case that buying real good, solid assets with a high quality, low-cost loan may be the single best real estate play you can make right now and that the loan itself may be more valuable than the asset. That is only the case with an in-demand, appreciating asset. For any investor, the idea of wasting an opportunity to use leverage at these low prices on anything other than the absolutely best asset we can find, may be a decision we look back on with regret. It is really good food for thought and dovetails nicely in my opinion with the current thread on low price and turnkey.
- Rental Property Investor · Knoxville, TN · Member since 2011 · 701 posts · 531 votes5y
Originally posted by @Sachin Amin:
@Christopher B. totally agree with your opinion and I believe in REI too - what I am trying to say is "Diversify" REI on its own will not create wealth for you - in my case I started(2015) with 100K in REI and 100K in Stocks in (Robinhood self managed) - also depends I am a hands off Investor (mostly Turnkey) as I have a full time job
My returns are average or REI but great on stocks "so far" and that might change may be in next 5 yrs , that doesn't mean I am going to quit REI - they both have pros and cons. Stocks allow me to liquidate today and I can have 100k by tonight in my account - it gives me that flexibility - but of course every one has diff goals and perspectives - my goal is to adapt and embrace anything which would create wealth for me. Cheers!!! and Happy Investing!!!
Your stock portfolio has performed very well, congrats!
A little diversification is good for sure. I strongly disagree REI alone will not create wealth for someone though. With the right strategy and time it will. End of the day it's all about picking a strategy the person will consistently stick with over time. That's the biggest key to success, imo.
- Columbus, OH · Member since 2018 · 164 posts · 126 votes5y
@Jay Yoo - 1% rent rule, decent property manager who is not charging your crazy rent ready / maintenance costs & finally good appreciation on the property - if you get these 3 things right - your numbers will be positive.
- Investor · Seattle, WA · Member since 2019 · 139 posts · 54 votes5y
@Sachin Amin Thanks Sachin. That’s the #1 priority to me!
btw, would you still buy a property if the tenant tends to pay rent late but catch up the payment throughout the rest of month? Good location. Lease expires 6/30/2021 - Columbus, OH · Member since 2018 · 164 posts · 126 votes5y
@Adrienne Green I just got an estimate from Memphis turnkey properties (CB property management) (TN) to make the rent ready on a 1200 sqft unit - $3,500 which I never expected. so for folks who are taking notes - this unit is negative cash flow and the rent ready costs have eaten up my entire 1 yrs cash flow. Time to make call to the PM and discuss if they can do something for me :( :(
- Columbus, OH · Member since 2018 · 164 posts · 126 votes5y
@Jay Yoo Absolutely! if the tenant is good and takes care of the property well - be flexible with them. these are the tannates you need to respect and as long as they catchup you are good. (need be compassionate and empathize sometimes) - this will help you in long run.
- New to Real Estate · Laguna Niguel · Member since 2021 · 10 posts · 4 votes5y
@Chelsea Ziss would you mind sharing a few of the local turn key companies from that are (Toledo)? Thank you in advance!
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