What are the experienced professionals opinion on working with turn key companies or finding your own deals?
I like “time” so part of me only wants to work with turn key providers, but I like bigger returns as well, so maybe in the long run that will create more time.
What turnkey companies do you suggest working with?
What method do you use to find the “deals” and do it on your own? If you do it on your own but you live out of state who do you work with?
Here is what I tell W2 employees... For those who are able to save more than $30k a year or have substantial liquidity (over 200k), being a landlord and especially flipping is a lot of work. If you like it cool/good for you... but just remember why we got into this... To be free from a JOB. A lot of us (80%) who stumble upon passive investing and start drinking Kool-Aide will be financially free in 4-7 years pending taking action. So I always urge people to start with the end in mind and take a more passive approach.
Do the math here… you with 300 dollars per property (2 months of work to buy a turnkey rental) you are going to need 20-40 of these to replace your income. I have 10 of these and have systems in place but have 1-2 evictions a year and 3-4 big things that happen. Image if I had 30, just 3 x those numbers.
Directly investing in a turnkey rental or small MFH is a good way to start to learn and build up the war chest to go into my scaleable investments such as private placement syndications. Whatever you do, try to be as close to the investment as possible. This is the fundamental problem I have with Wall Street who takes too much fees off the hard-working efforts of the middle class.
If your net worth (income minus expenses) is under $200,000 or barely save $30,000, syndications are not for you. Stick with these Turnkey rentals despite what Gurus (who are trying to sell you their program) tell you for now. They have a little higher gains (a lot more volatility) but a syndicator who is willing to put you in a deal with more than 10-20% of your net worth is asking for trouble.
*PS never like the idea of wholeselling where you basically steal houses from people at 50 cents on the dollar and say you are "helping people solve problems"
What are the experienced professionals opinion on working with turn key companies or finding your own deals?
I like “time” so part of me only wants to work with turn key providers, but I like bigger returns as well, so maybe in the long run that will create more time.
What turnkey companies do you suggest working with?
What method do you use to find the “deals” and do it on your own? If you do it on your own but you live out of state who do you work with?
Time & money. One equals the other. I agree that you either spend the time finding and learning or you pay to have somebody do that for you. So, "it kinda depends".
I buy for myself and I buy to make Turnkeys for others so here is my take:
If you can do the marketing, learn the process and be available when the deals show up and then take action, you can do well. You can also buy some stinkers at first until you know what to avoid. In the long run, if all you want to do is real estate I'd learn the process and buy on my own.
If you have more money than time, or if you don't like looking at house after house, or don't like picking up the phone to talk to sellers or don't understand the costs and repairs of buying houses, you buy Turnkeys.
If you decide to buy Turnkeys, whether it's in your state (which you don't tell us the state you are in so it's hard to recommend anyone) or to buy in Texas or in Arizona, or in Nevada, or in Ohio, or in Tennessee (but not in California - taxes and cash flow are problems) you should visit both the vendor and the properties so that you can see what you are getting for your money. Don't leave something this important to chance and short cuts cost you big money.
Amongst vendors you will find that some have you pay $80,000 for a house, then they give you a laundry list of repairs you pay for, then they charge a fee to find a tenant, then you pay them a management fee. So, you have to add up all of the costs to figure out if you got a diamond (probably not) or an "okay deal" (pretty typical) or a lemon (more often than advertised ;-). be sure to get the details before you write a check.
Then there are those who charge about $60,000 and are "all inclusive". That is, the amount covers taking ownership of the property, any repair work is included, it includes finding the tenant and depending on the vendor they will set you up with a tenant buyer on a lease option and the tenant buyer will give you an option amount as high as $25,000 which you get, and the tenant buyer takes care of all maintenance and repairs going forward. You have taken over the financing of the original seller, no bank needed.
Here is a scenario that hopes to explain that:
Average Turnkey Cash Flow Per Door In Phoenix Metro Area No Bank Needed
No matter how you do things go, get good with both the list of things involved in real estate, the advantages that you get with taxes, and get good with a spreadsheet. Real estate is long term investing with great tax advantages as well as the cash flow.
A good vendor will help you with all of that.
Disclaimer: I provide Turnkeys and I buy for my own inventory
There many threads about turnkey companies out there. Norada, Pinnacle, and Maverick are some that come to mind. These are actually marketers, but nothing wrong with them. People talk so negatively about marketers, but I think they provide a lot of value. 1 - they help guide you through the purchase process and 2 - they vet the turnkey sellers for you. But that doesn't mean you shouldn't do your own DD.
As far as saving time, thats one of the biggest reasons why people buy turnkey. Some don't have or want to spend the time building networks and doing the work themselves. But if you're career goals are to be an investor full time, then you may want to look into doing things yourself. Network and build relationships in the markets you're interested in. Your network will determine how successful you become.
Here is what I tell W2 employees... For those who are able to save more than $30k a year or have substantial liquidity (over 200k), being a landlord and especially flipping is a lot of work. If you like it cool/good for you... but just remember why we got into this... To be free from a JOB. A lot of us (80%) who stumble upon passive investing and start drinking Kool-Aide will be financially free in 4-7 years pending taking action. So I always urge people to start with the end in mind and take a more passive approach.
Do the math here… you with 300 dollars per property (2 months of work to buy a turnkey rental) you are going to need 20-40 of these to replace your income. I have 10 of these and have systems in place but have 1-2 evictions a year and 3-4 big things that happen. Image if I had 30, just 3 x those numbers.
Directly investing in a turnkey rental or small MFH is a good way to start to learn and build up the war chest to go into my scaleable investments such as private placement syndications. Whatever you do, try to be as close to the investment as possible. This is the fundamental problem I have with Wall Street who takes too much fees off the hard-working efforts of the middle class.
If your net worth (income minus expenses) is under $200,000 or barely save $30,000, syndications are not for you. Stick with these Turnkey rentals despite what Gurus (who are trying to sell you their program) tell you for now. They have a little higher gains (a lot more volatility) but a syndicator who is willing to put you in a deal with more than 10-20% of your net worth is asking for trouble.
*PS never like the idea of wholeselling where you basically steal houses from people at 50 cents on the dollar and say you are "helping people solve problems"
You're going to get opinions favoring both options. And knowing BP, more opinions favoring the DIY option.
It completely depends on your personal situation, interest levels, and time available. I'm turnkey all day long because I have no interested in spending that much time dedicated towards something I'm not good at or like anyway. It also depends on where you live and where you're trying to invest.
I get this question all the time and it really depends. Like @Account Closed mentioned, it comes down to time and money, but not only that, do you have the resources to find a good team for acquisitions, rehabs, and property management including enough margin/equity upfront to be able to BRRRR and recycle your cash.
A good turnkey provider will rehab a property so that there is no significant deferred maintenance (CapEx items and refresh cosmetically). I see many people post about their "BRRRRs" being better than turnkey, when they may have put lipstick on a pig from a wholesaler. #s may look good today, but you might bleed out slowly next 5-10 years.
Something to consider depending on your life situation (e.g. busy professional/w2 worker who may find better returns climbing up the corporate ladder while creating this on the side). Just my 2 cents.
What are the experienced professionals opinion on working with turn key companies or finding your own deals?
I like “time” so part of me only wants to work with turn key providers, but I like bigger returns as well, so maybe in the long run that will create more time.
What turnkey companies do you suggest working with?
What method do you use to find the “deals” and do it on your own? If you do it on your own but you live out of state who do you work with?
To find "deals" you're going to need to do heavy marketing to distressed sellers. This is very much a full time job with lots of overheard & infrastructure required to do successfully. So the real question is what do you wanna do? Do you want to start a new business with heavy involvement or do you want to invest money passively on the side. Only you can really answer that.
What are the experienced professionals opinion on working with turn key companies or finding your own deals?
If I was in an expensive market, had a w2 and needed to start from scratch 'finding deals', I'd be turnkey all the way.
I don't have a job and haven't for a long time. I also enjoy DIY. I also enjoy having paid for RE. I can pay things off because I buy below market value and don't have to pay a PM. But it took work to learn and build up.
Find the best PM in the country and invest in their market. Markets are markets and houses are houses. An awesome PM is the differentiator IMO.
@Brian Vog As an out of state investor, I have found marketplace websites like Roofstock and Homeunion to be a good compromise. I just had my 6th out of state rental property under contract, all bought in last 5 months. My experience is that you don’t pay inflated turnkey prices while you have full disclosure through a recent inspection report giving details of what need to be fixed, if any. You also have an opportunity to negotiate down the asking price , instead of fixed ones as in the case of turnkeys
I am out of state. My first rental was turnkey. Eight months later, I bought a property off the MLS that was pretty much "turnkey". I was able to get ~ $10k under asking on the latter. From contract to close on the second rental, the process was the same as turnkey. I handed off the second rental to the initial PM.
@Brian Vog Not sure what you're "compromise" you are referring to. A good TK will allow inspections, show full scope of repairs, and be very transparent. Companies like Roofstock (although providing the value of a central marketplace) take a fee for that. And even though you can make offers, the extra fees will make up that difference. I think you may have just not found a good TK to work with.
@Brian Vog What everyone has said so far has been spot on. Turnkey is not just a product, but a service. It's up to you to decide what you ultimately value the most. True Turnkey gives you everything in a nice little package, and provides you with passive monthly cashflow. It saves you a bunch of time and hassle, and I think that's worth it, but not everyone does. A lot of people prefer to be very hands-on, so it doesn't appeal to them, and that's totally fine! More for me that way, LOL.
That being said, I will also add my voice to the chorus on here that says "do your due diligence up front!" Ask questions. Ask HARD questions. Talk to locals. Fly or drive in and SEE the properties themselves, and meet the people who will be managing your investments. If you can't do that, at least talk to some third parties that have. If the provider isn't forthcoming or willing to accommodate you in any way, move on! Great ones will know their area very well, and be able to speak on its market, economy, growth, etc. They will WELCOME inspections and the opportunity to give you any and all information that they have. They're happy to make necessary repairs to make YOU happy and to save you AND them time and headaches by avoiding bigger issues down the road. :)
I think everyone else has mostly answered this, but here's a couple more things:
Turnkey vs. DIY-
https://www.biggerpockets.com/blog/buy-rehab-turnk...
The two options just kind of spelled out (you probably know all of this stuff though)-
https://www.biggerpockets.com/blog/2012/12/22/out-...
I've always gone the turnkey route. The higher returns would be cool but I have absolutely no interest in losing time or sleep do deal with properties on my own. :)