New OOS investor looking for Turnkey. Help deciding company

Rental Property Investor · Escondido, CA · Member since 2017 · 684 posts · 550 votes

I would not agree to look for a company first and then see if what they offer fits your investment goals. IMHO, you want to set your goals, your financial and cash flow frame and then see in which markets that can be met. You might also take a really close look at financial market movements and economic conditions. You have some good companies in your list but to me, the biggest problem we all face right now is that pretty much anybody was successful in the market in the last 4 years. You would have to come up with criteria that serve you well going forward. This is not the place the go into details about economic developments but I strongly believe strong changes are coming that will influence your outcomes substantially and are not very dependant on the past performance of the turnkey provider.

2 Reply

Wei Jie Yang

OP

New York City · Member since 2018 · 161 posts · 75 votes

7y

@Axel Meierhoefer I get your point but it seems to me if there is a rental market, then there should be tons of turnkey providers. The difficulty would be to see if any of them can provide what they market they can provide. After reading tons and tons of threads around here about the downsides of turnkey, PM and renovations seems to make or break a turnkey/OOS provider. That's my thinking anyway.

As far as market movement goes, are you talking about a Peter Schiff/perma-bear scenario where we have a falling market but rising rates as well? That might happen ( I doubt it) but I do not think it will be as long lasting or as catastrophic as those guys suggest. I've traded enough derivatives to believe in Random walk far more then any analysis by experts when it comes to future market directions.

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Axel MeierhoeferPro Member

Rental Property Investor · Escondido, CA · Member since 2017 · 684 posts · 550 votes

7y

@Wei Jie Yang Yes, there are turnkey providers (even though that term is interpreted differently by different people). I have checked a few myself and am working with some. My suggestion is to set your criteria of investment category, cash flow, finance or all cash, market condition of your location. (I recommend reading Chris Closier's book "Turnkey Revolution". Yes, he is biased to his company, but they are the gold standard and if one does everything Chris recommends I am pretty sure you will not end up with a bad provider - could still end up with a bad deal though ;) )

I am also not an extreme bear or doom and gloom person but I look at the markets and market behavior over time. That's why I am contemplating how smart it will be to have cash positions to jump on new opportunities. Inverse yield curves saying something, 10 year bull-markets, etc. are not going to be around forever. Having some powder in your back pocket when the next crisis comes is not a bad idea.

That does not mean to stop investing. I am in the closing steps of a new construction investment and also bought a piece fo cacao farms this year for my retirement plan.

For next year I am working on a 1031 with Memphis Invest (very early stages right now)

1 Reply

Deborah Hardin

Attorney · Cabot, AR · Member since 2016 · 130 posts · 39 votes

7y

I just wanted to thank @Wei Jie Yang for starting this thread and for posting all of the information above! I really appreciate hearing about your personal experience and impressions of the companies you have been reviewing. I look forward to hearing which direction you chose and how things turn out.

I am just starting to think about turnkeys, myself.

2 Reply

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes

7y

Originally posted by @Wei Jie Yang:

Hi guys, I'm a new investor trying to find the and am trying to find the right turnkey company to work with.

I think the most important thing about finding the right turnkey company is finding a great property management team and worry about the area later. I came with a list (with commentary):

Memphis Invest - The golden standard. Property might be a tad more expensive but if turnover and repairs are minimal then I'm fine with that. Another plus is that they are in five markets going to seven. They also seem to have thrown out their requirement of buying two houses initially with them as well, which works great for me. I did the initial consultation with them and got preapproved by two of their lenders already but haven't pulled the trigger for part 2 since I wanted to research other companies first. Currently my top pick. Can anyone share their experience with them and help me decide which market I should invest in with them?

Smartlands(Ohio) - Interested in the Cleavland Market. The only "full" turnkey company I know of in the Cleavland area. Had an initial consultation with them where they promised to send me a list of their approved vendors as well as any current deals they have open for me to look at. It's been almost two weeks and I haven't heard back from them. I tried emailing the rep I talked to a few times and no response. I'll just chalk it up to me giving them too long a time frame for my purchase(I told them 3-6 months at the time. Now I've made up my mind to 1-3 months though) during my initial phone call more then anything else, as there customer service reputation on these forums seems to be pretty stellar.

Holton Wise(Ohio) - The whole reason I am interested in the Cleavland market thanks to @Jameswise blog and his youtube videos. Holton-Wise does not seem to be a "Full" turnkey company however. They seem more like a realtor with a PM and renovation arm. They seem more like a company I want to work with for my third or fourth deal, not my first or second.

JWB (Florida) - Great reputation, sample of properties given is by far the more expensive out of any companies I've seen. Cash flow seems really poor. Expenses seem really high. It seems that the only real play is Appreciation for these Florida houses? Or maybe just an alternative to investing in Treasury/Fixed income interest rate products if an investor is paying for everything in cash. Am I missing anything?

Spartan Investment(Alabama) - Their biggerpocket presence seems good. Alot of people on this forums vouched for @Clayton mobley and Spartan invest which makes me feel great about possibly investing with them. I just have two issues with them. The issue I have is it seems that Birmingham in general seems to be declining. Population is decreasing and has been for DECADES. Also there is a recent thread about several Spartan investor not being able to evict their tenants due to "sheriff backlog". I believe one guy has had this issue since June and it still hasn't been resolved yet. That being said, that sounds more like an area issue rather than a Spartan Invest issue, but still, it's in the area that Spartan invest are in. Anyone has any local knowledge of the Birmingham area know where the Sheriff department has such a terrible backlog of evictions as of late?

Turnkey Investment Properties(Memphis and Little Rock) - @Alex Criag seems to come highly recommended on this Biggerpockets. I've even seen @Chris Clothier recommended his him on several occasions! @Alex Criag's company seems to work in a rougher part of Memphis than Memphis invest. Does anyone have any experience working with him and his team? I know some of their investors had weird experiences. Was that due to the area that @Alex Criag invest in being rougher or was it more bad luck more than anything?

Buy memphis Now! - Comes highly recommended again by the BP forums. From what I can gather either uses @Chris Clothier PM company or @Alex Criags. Seems to be in the same neighborhood as @alex Criag as well. Any benefit of using @Curt Davis over @Alex Criag or vice versa? Well, other than wanting to invest in multifamilies and in Little rock that @alex Criag offers?

Can anyone throw in their suggestions, experiences, and critiques on my though process?

A lot of good companies on this list Wei. Whichever route you choose to go I am sure you'll do fine.

0 Reply

Hadar OrkibiPro Member

Rental Property Investor · USA / NZ · Member since 2016 · 1k+ posts · 812 votes

7y

@Wei Jie Yang i didnt invest with @Alex Craig because i don't do houses, but have friends that did and they are very pleased with the property and management.

2 Reply

Wei Jie Yang

OP

New York City · Member since 2018 · 161 posts · 75 votes

7y

Spoke with both @Alex Criag's Memphis Turnkey Properties and Memphis invest and got access to their current deals. Here are my comments and comparisons:

Memphis invest:

Talked to their portfolio advisors today and she sent me 4 deals to look at. One is in Texas, two in Memphis, and one in Arknsas. I'm currently analyzing two of their Memphis deals.

Both properties are located in the 38115 which seems to be a mixed area from all the information I can find on biggerpockets and google. Crime seems to be on the higher side for this Zip as compared to the rest of Memphis. One property seems to be in a higher crime area and the other one is in a lower crime area (according to Realtor.com anyway).

Both properties are on the expensive end of the scale for their block. Using Realtor.com to look at Comps, there is a difference of 20K-30K in terms of pricing. But again, they are estimates and old sales data, so I take those with a grain of salt. But still MI is definitely on the high end in terms of pricing, which was expected anyway.

In terms of what was provided by rehab scope, MI seems to do much more extensive rehabbing than Memphis Turnkey Properties, which I guess justifies the higher price. MI seems to gut the whole place and redoes everything top to bottom. Memphis Turnkey Properties does not.

Also a general question. It seems the two Memphis properties are both listed on the public MLS. Meaning, I can find both properties listed on redfin, zillow, trulia etc. Is that normal? Does that mean I'm going to be competing with everyone else in the public for these properties? Why have only the two Memphis homes their but not the Arkansas or Texas Property?

Memphis Turnkey Properties -

Talk to Dave Dickton yesterday and I've been enlisted in their deals list. Their deals so far consists of two Little rock properties and one Memphis. Going by Memphis only, the area their property is located is in 38128, which seems to be in a good area. The property itself is in a low crime area (according to realtor.com), and the price is very comparable to the surrounding houses. The difference seems to be is 0-5K according to Realtor.com.

One thing to note though, is that the insurance estimates are almost twice as high for Memphis Turnkey Properties as opposed to Memphis Invest estimated numbers. I would imagine the difference is that MI has their own Insurance underwriting department.

I'll be honest, Memphis Turnkey Properties seems to have deals at first glance, but like I stated earlier, MI rehab is MUCH more through than Memphis Turnkey Properties. I'm still on the fence about who to choose for my first property. I will probably skip MI's current Memphis deals and keep looking though. Can anyone comment on the quality of rehab that both company does? And the quality of their PM?

Any comments? Criticisms of my thinking process? Please tell me if I am missing anything, or if I should analyze anything else.

0 Reply

Justin WindhamPro Member

Banker · Nationwide · Member since 2015 · 4k+ posts · 1k+ votes

7y

Welcome to Bigger Pockets, @Wei Jie Yang!

You'll find plenty of friendly, knowledgeable people willing to help respond to your questions. Many members are experts in their respective fields related to real estate investing, whether that is real estate brokerage, wholesaling, flipping, buy and hold, lending, self-directed IRA and Solo 401k investing, or tax and legal guidance.

There are some pretty cool discounts on various products and services offered as Perks to BP members that you might want to check out: https://www.biggerpockets.com/perks/pro

I really like the alerts feature that can quickly guide you to current topics that might interest you: http://www.biggerpockets.com/alerts

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Wei Jie Yang

OP

New York City · Member since 2018 · 161 posts · 75 votes

7y

Actually scrap what I said about renovation. Since I've only seen a whopping 4 deals from MI and quite a bit of deals from Memphis turnkey Properties (since they post old proformas on their website) I shouldn't generalize so quickly.

Other MTP properties has had the same extensive rehabs as MI properties.The three current deals from MTP doesn't seem to have as an extensive rehab process as Memphis Invest, but other deals definitely does.

0 Reply

Wei Jie Yang

OP

New York City · Member since 2018 · 161 posts · 75 votes

7y

@Account Closed MI stands for Memphis Invest.

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Jer Yeung

Specialist · Los Angeles, CA · Member since 2018 · 42 posts · 50 votes

7y

I didn't go through any deals with MTP, but am working with MI. The process is smooth, and my first property was leased out on a 2 year lease before we closed, with another that I'm working on in the same situation.

I'm not sure how long others have operated this business model, but with MI having worked through the recession, that made me just that much more comfortable with their business. I'm also more comfortable with their metrics given that every house they put on the market fits within similar criteria and has similar renovations, giving more weight to those metrics. I'm looking forward to getting out there in a few weeks and checking out their operations and hopefully see some of the properties in the pipeline.

Based on what I've seen here, if you're willing to go TK, then those that you listed are good ones to choose from.

Best of luck!

2 Reply

Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

7y

@Wei Jie Yang. I sent you a message. Feel free to message means I can discuss this topic with you In depth

1 Reply

Axel MeierhoeferPro Member

Rental Property Investor · Escondido, CA · Member since 2017 · 684 posts · 550 votes

7y

@Account Closed It depends on what you mean by ... make money on the buy. Most people look for steady positive cash flow when working with a TK company. If you mean appreciation I agree that that should be seen as icing on the cake if it happens but not be the motivation to buy.

0 Reply

Wei Jie Yang

OP

New York City · Member since 2018 · 161 posts · 75 votes

7y

Yeah completely scratch out what I said about MTP's renovations. It seems that MTP give live updates for their renovation, so the list of renovations that seemed minor and small was actually an incomplete version. I received their full version today and it's very extensive as well.

0 Reply

Wei Jie Yang

OP

New York City · Member since 2018 · 161 posts · 75 votes

7y

Doing more analysis on some of the deals that Memphis Invest sent. Their Price to rent ratio for their property is .74 to .77 for all their properties across the board. MTP is .99 assuming all their rent projections are correct.

It might seem like a slam dunk for MTP at this point, but I am still seriously considering Memphis Invest due to their reputation and just the areas they operate in. All areas I've seen so far has been in A maybe B+ class areas (barring properties in Memphis oddly enough.)

I've seen @Chris Clothier state recently that their property are priced at .8 to .9 Price to rent ratios. Anyone know if that's still the case and I might just be getting a batch of expensive properties or has Memphis Invest just increased prices across the board (which I assume might be due to their expansion?)

0 Reply

Wei Jie Yang

OP

New York City · Member since 2018 · 161 posts · 75 votes

7y

Are you talking about MTP's? It seems they just have a weekly list with all their deals in the pipeline. I doubt they're filtering it for individual/potential clients. That's way too much work for no gain.

Or are you referencing MI? You know it's possible to research the area they give out right? The only area's I'd say that weren't B to A class were the Memphis ones. But I've read that Memphis isn't really a zip code town anyway.

0 Reply

Chris ClothierBusiness Member

Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes

7y

Originally posted by @Wei Jie Yang:

Doing more analysis on some of the deals that Memphis Invest sent. Their Price to rent ratio for their property is .74 to .77 for all their properties across the board. MTP is .99 assuming all their rent projections are correct.

It might seem like a slam dunk for MTP at this point, but I am still seriously considering Memphis Invest due to their reputation and just the areas they operate in. All areas I've seen so far has been in A maybe B+ class areas (barring properties in Memphis oddly enough.)

I've seen @Chris Clothier state recently that their property are priced at .8 to .9 Price to rent ratios. Anyone know if that's still the case and I might just be getting a batch of expensive properties or has Memphis Invest just increased prices across the board (which I assume might be due to their expansion?)

Hi Wei Jie Yang,

I hate to pop in, but I wanted to clear up a couple of questions you are asking. So far, you are just in the exploring stage with Memphis Invest and the four properties that Ashley shared with you were a basic representative of what our company purchases, manages and offers for investors portfolios. I think she sent you properties from 3 different cities. They just happened to all fall between .74 and .77 - that is not a standard pricing model to have them all fall in that range. Once, you have an opportunity to continue the conversation with Ashley, after hearing your feedback and confirming what your goals and reasons are for wanting to invest passively, then she can sharpen what you see to hopefully align with your needs.

Right now, every property we have falls between .71 and .86 rent to price ratio. I am not a big fan of using letter grades for properties because I think it can be very misleading and easily abused by sellers. I think most experienced investors who use that type of classification to define properties would place a majority of our properties in the B class with a percentage in C class and a percentage in A class. We still have properties that we have now managed for over 10 years that would fall into D class, but we no longer actively operate in those areas.

As for Alex and Memphis Turnkey, they are a fine company with a great reputation. There is some overlap in neighborhoods between us. I don't want to speak for him, but I believe that we both would describe the others company as a good option for the right investor. I also think two big differences are the fact that we have a higher overhead due to having a much larger footprint and team. We work hard to balance that higher cost with true value added services. At the same time, we do a lot more work on the front end. We believe that adds to the value of the property and the investment. Memphis Turnkey holds down costs by not doing as extensive work on the front end and that allows investors to get in at a lower cost. You will find a ton of investors who believe in investing both ways. Neither is necessarily better, they are just two different philosophies about when to pay for work to be done. I personally know them and we are not affiliated. I say that so you know that I do truly think that they are good option should you go that route. It all comes down to the philosophy you have as a passive investor.

Lastly, you do need to meet whomever you are going to do business with. A trip to Memphis would be a great way to meet both companies and have a look at properties and learn how each operates. The word Turnkey is often frowned upon by commentators on here. Some of that is earned reputation. There have been some pretty unscrupulous people who use the word to hurt investors. At the same time, there are some really good companies out there. Take your time, be patient and make an effort to get to know personally the company you are going to work with. Make sure you eyes see what your ears heard. Verify for yourself! Best to you ~

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Wei Jie Yang

OP

New York City · Member since 2018 · 161 posts · 75 votes

7y

Hi @Chris Clothier!

Thanks for getting back to me and clarifying everything!

I have just started the process of acquiring a property with Memphis Invest. The reason I choose them? Well beside the reputation and all that, they offered a great building in a great area. I wanted to buy two but unfortunately Fannie Mae seasoning rules prevented me from doing so. The current offering by MTP seems to be in lower quality areas, which is not what I wanted for my first (maybe first few) properties even though price to rent ratios are better.

Well I hope everyone here wishes me luck and I didn't make a horrific mistake doing this. I'll keep everyone updated on the status of my MI and how it goes as I think the case study threads that I see around BP are invaluable for any investor.

0 Reply

Alex CraigBusiness Member

Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes

7y

@Wei Jie Yang just a tad bit of wrong information you are putting out here on Bigger Pockets. Our average rent for the properties we have sold over the past several years is $932.

Thanks @Chris Clothier for the kind words.

Goo luck Wei.

901-848-9028

1 Reply

Alex CraigBusiness Member

Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes

7y

@Chris Clothier I disagree with the language that we spend less on the front end. Compared to what? That statement makes it sound like we cut corners. I sure did not feel like I cut corners on a recent $42,000 rehab we just completed in Bartlett or the granite bill I pay each month for Little Rock. Not only are doing our normal spec, but also addressing deferred maintenance that a lot of companies may not address. We all try to guess what everyone else does, but the reality is, we do not know. I have a good insight into Buy Memphis Now because we manage quite a few of their homes, but that is it. Caleb is on this thread. He bought a 1,112 sq ft, 3 bed, 1.5 Bath house on 3115 Curtis; rehab cost was $24,140.14, which is $21.70 a sq ft. Breakout below. We have started keeping older furnaces to keep our prices down; the reason we chose furnaces is because they are cheap to replace, typically under $1,500 to replace brand new. Also, manufactures develop lifespans of these components by usage, which in our part of the country, our usage of a furnace is well below their usage calculations. I would say the average furnace in Memphis should last 25 years. Actually in Little Rock, we are putting in granite throughout, shaker cabinets in several rehabs, 12" x 24" tile in bathrooms and some other really awesome visual upgrades. @Hadar Orkibi, next time you are in LR, stop by our 28 unit in Sherwood and check out what we did (BTW, we manage and own most of those MF units near yours. we need to talk about getting rents up). Sorry--ADHA kicking in.

While I act as a contractor in Memphis with project managers overseeing our renovations, we use a contractor in LR, which is why our rehab cost are slightly higher in that market, on average about $25 a sq ft.

https://turnkeyproperties.box.com/v/CurtisIncomeSt...

As anyone who knows me, knows how transparent I am and will try to talk someone out of buying real estate if they are worried about events outside of anyone's control. Caleb had a hiccup with his home. The tenant was great, but the home was broken into, which we all know happens and can happen to anyone TK provider. As for the area of his specific home, I counted MI, MIRP, MCF, BMN, MSBHM all buying within a mile of here, so it is not like he owns a home that we all would own ourselves and all put our clients into. Luckily we placed another tenant quickly, but Caleb did suffer some expenses because of this. This happens to every TK provider and Property Manger, every single year. Those who say it doesn't happen, is not being up front about the ups and downs of owning real estate.

@Wei Jie Yang mentioned about a couple of u"weird experiences" but when you sell close to 200 doors, that is going to happen from time to time. I keep a pulse on every late payment and eviction filing and off the top of my head, I am thinking we had to evict 4 tenants out of close to 200. Anyone TK provider who says they do not have that happen to them is not being up front and honest. When Cristina and Meg went on Maternity leave for us this summer, I stepped up and went to eviction court. The bigger the PM company, the more cases they had in eviction court. Every single large TK provider in Memphis who manages over 1,000 properties had no less then 10 to 20 cases on the days I went to court, some had far more. That being said, 95% of the time, eviction filings do not actually turn into evictions.

Lastly, I hope I am not coming off defensive, which I probably I am, but I see some bad information on this thread and I as I mentioned earlier, I shoot it straight and one of our core values is to be transparent as possible.

901-848-9028

4 Reply

Dean Letfus

Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes

7y

@Wei Jie Yang, all the companies mentioned above are "good" as opposed to the many "bad" outfits in Memphis.

Now your most important 6 items are really all you need to focus on regardless of where you buy from.

Number 1, 2,3,4 and 5 are GOOD MANAGEMENT. Find the best PM you can. That may or may not be with the turnkey provider but the best property can be a lemon with bad management. Also with Turnkey often there are big promises made about performance and remedy. So make sure the company is big enough and likely to last long enough to fulfil their obligations. We went through 5 companies before we found one we have now been with for many years. The previous ones cost us a fortune. Sadly even the ones oft recommended on here I have seen perform terribly.

Once you sort the above out you have already eliminated 95% of the players in Memphis.

Then your second issue is simply whether the property is a good deal or not. As Chris has pointed out they tend to have higher overheads as they are such a big machine so you may pay more for their property over a smaller outfit like Curts. However if the quality of rehab is higher with Chris or the rental guarantees are better then they may be a better option. Conversely Alex or Curt may be able to put you in the same house as Chris for 10K less simply because they carry less internal costs. However they won't have the range of properties to offer you that Chris will!

So then it comes down to the actual property. Do you like the location? Make sure it's all brick, avoid frame houses in Memphis. Does it have at least 2 baths? If not it will be hard to rent. Does it have any big trees not removed? If yes then this is going to be a big cost perhaps later. Is it too close to an area that is degentrifying? There are many in Memphis. If it has a basement make 200% sure it doesn't have water issues. Knowing you are paying full retail for turnkey is it a sensible price for the area. If you buy a 70K house for 95K no matter how well it's rehabbed, you will have to own it a LONG time to ever exit it.

3 Reply

Account Closed

Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes