Starting a Great "Turnkey" company...How?

36 Replies

I know this post is long but if you ever thought of investing or have invested with a turnkey company could you help me?

Over the past 8 years I have worked hard to establish myself as both a investor friendly contractor and a real estate investor who specializes in flips 200,000 and under. I have worked in many different types of flipping/contracting including JV, Partners, Investors. I have had the pleasure of being apart of about 30 flips mostly, about 20 in the last 2 years. As I stated in previous posts I am going full time into real estate investing to work on my business. This past year has really opened my eyes to the lack of good turnkey companies in Northeast Ohio. I have redone/fixed 4 properties this year that turnkey companies sold to out of state investors. The standards, craftsmanship and overall product was disgusting, sad and unethical. I am tired of seeing "turnkey" companies hurt Northeast Ohio. I see short term practicing in a long term game and I want to change that.

In the next year I am focusing on 2 things: Retail Fix and Flips and developing a Turnkey company. I have read a ton of posts on bp on turnkey companies and understand the importance of following the rule as it seems not only the product of the home is important but also property management (which in the state of ohio must be done under a broker). 

There is a lot to learn in managing a turnkey but I am more worried about what individuals/investors expect, demand and want in a turnkey company. From that I am going to focus developing my turnkey business on those. I would love to hear suggestions, ideas, wants, needs. I will do my business out of Northeast Ohio in both suburbs and Cleveland. Basically A-D neighborhoods. 

Basically the question could read: What would be the perfect turnkey company? What would they do that others don't? Expectations, ROI, Price, Neighborhoods, etc.

Hey John congrats on your successes to this point. 

One of the issues I see and you didn't mention is a property manager. You can have the best turnkey company but if there is sub par management any investor (unless he/she is managing themselves which would then defeat the turnkey idea) will have a bad experience, which will ultimately come full circle back around to you/your company. I'm not trying to be negative here just telling it like it is. Do you have a good property manager in place? I think the management is key. You already know you can find good deals and have plenty of experience, you're just looking for that ongoing repeat business. I understand that. 

If I was going to build a great turnkey company I would want a solid property manager in place. 

Good luck!

@John Ellis

There is no such thing as a perfect Turnkey company but if there was ever a company that comes to mind it would be Memphis Invest.  Understand the reason why they are considered #1 in the country is they have a large staff which a lot of other providers simply could not do.  They have people who are strictly customer service agents for example.  They also have a good management company and they do quality renovations. 

Your TK company will only be as good as the size it can grow and the people you hire. 

FYI - I dont work for Memphis Invest. 

Curt Davis, Real Estate Agent in TN (#00321765)

Quality Property Management.  Quality Property Management.  Quality Property Management.  

@Sam B.  soooooooo what your saying is quality property management got it lol

@Curt Davis  I am captivated by their success, growth and continued improvements. I first heard of them a few years back after seeing them in the INC 5000 and looked them up and was blown away by what they offer/do.  Obviously they are a company that every TC should strive to be but as I suspect they started somewhere and not with the vast amounts of employees, properties and such. I am assuming they started with simple but profound business practices that they did not see happening in Memphis which is what I am currently seeing in NE Ohio and want to bring to NE Ohio.

@j j powlaski I agree with you and the other two about quality property management. Since in Ohio you must be a broker I have sent a few feelers out to small brokerages to gauge their interest in teaming up or forming a quality property management company. From what I can tell from research of other companies there are three major parts to this business: Remodel, Property Management, and Properties I know this is broad but nevertheless it seems to be the major focus. I have been watching a show on cnbc called the Profit. In it he focuses on People, Process and Product. As I research this and learn more about this among business I get a sense that each of those three should be the main focus of the Remodel, PM, and Properties. 

With that being said rom what I can tell from the three post so far is that I need to first focus on the people, process and product of establishing a  property management company and then work from there. 

Thanks Guys!

It would be nice to see a turnkey company offer 100% transperancy on the surface level. That would be what they paid for the property, what the rehab cost was and how much the mark up is ....all spelled out on the first page. Thanks, Matt

Originally posted by @John Ellis :

I know this post is long but if you ever thought of investing or have invested with a turnkey company could you help me?

Over the past 8 years I have worked hard to establish myself as both a investor friendly contractor and a real estate investor who specializes in flips 200,000 and under. I have worked in many different types of flipping/contracting including JV, Partners, Investors. I have had the pleasure of being apart of about 30 flips mostly, about 20 in the last 2 years. As I stated in previous posts I am going full time into real estate investing to work on my business. This past year has really opened my eyes to the lack of good turnkey companies in Northeast Ohio. I have redone/fixed 4 properties this year that turnkey companies sold to out of state investors. The standards, craftsmanship and overall product was disgusting, sad and unethical. I am tired of seeing "turnkey" companies hurt Northeast Ohio. I see short term practicing in a long term game and I want to change that.

In the next year I am focusing on 2 things: Retail Fix and Flips and developing a Turnkey company. I have read a ton of posts on bp on turnkey companies and understand the importance of following the rule as it seems not only the product of the home is important but also property management (which in the state of ohio must be done under a broker). 

There is a lot to learn in managing a turnkey but I am more worried about what individuals/investors expect, demand and want in a turnkey company. From that I am going to focus developing my turnkey business on those. I would love to hear suggestions, ideas, wants, needs. I will do my business out of Northeast Ohio in both suburbs and Cleveland. Basically A-D neighborhoods. 

Basically the question could read: What would be the perfect turnkey company? What would they do that others don't? Expectations, ROI, Price, Neighborhoods, etc.

Hi John,

WOW, I don't even know where to start with this one.

Its quite a lengthy topic.

A few short tips I could offer with a turnkey business

Learn how to say NO to the good opportunities so you can say YES to the great ones. Don't take on business for the purpose of making sales/profit. Only work with investors that you have established a long term trust with and that are genuinely interested in building a large portfolio.

Never sell anything at more than retail. If the investor decides to turn around and sell the property 1 day after they bought it, they would need to at least get the initial investment back.

Look towards having in house property management as this will be crucial for ongoing success. Won't be easy to set up straight away but keep it in mind.

One of our goals for 2015 is to have a franchise outlet separate to Ohio. So we will definitely need to put everything on paper regarding how and what we do.

Thanks and have a great day.

@Engelo Rumora as I began researching starting a turnkey company from start it looks to be the biggest hurdle is the property management company. The in house idea is one that I share as well as it seems that it is a must to offer great service and have control over it. As you know in Ohio as possible in other states you must be a broker to be a legitiment property management company. As it seems from previous BP members that should be my number 1 priority is finding a broker who has the same passion for perfection, a willingness to start small and grow and who I am able to work with. With that said I think finding a qualified broker who is interested will be the hardest part of starting this company. There is no doubt Northeast Ohio yearns for a quality company I just hope that I can find a broker who would want to start this.  Thank you for your input and I understand the broad sense of this questions but it seems that it has been answered in the form of property management.

Originally posted by @John Ellis :

@Engelo Rumora as I began researching starting a turnkey company from start it looks to be the biggest hurdle is the property management company. The in house idea is one that I share as well as it seems that it is a must to offer great service and have control over it. As you know in Ohio as possible in other states you must be a broker to be a legitiment property management company. As it seems from previous BP members that should be my number 1 priority is finding a broker who has the same passion for perfection, a willingness to start small and grow and who I am able to work with. With that said I think finding a qualified broker who is interested will be the hardest part of starting this company. There is no doubt Northeast Ohio yearns for a quality company I just hope that I can find a broker who would want to start this.  Thank you for your input and I understand the broad sense of this questions but it seems that it has been answered in the form of property management.

Thanks John,

Find a retired broker that just wants the odd phone call here and there to see how things are going.

In the end you want complete control of all operations and only guidance from the broker regarding how to abide by all state laws and regulations. The broker will also prob want access to your account which is fine.

We are just in the process of setting this up and have a broker on board. All good things take time and its important to do it correctly from the start.

I have 2 guys in the office with Realtor licenses so I can continue being a rebel 

haha jokesss.

You can start off with out sourced PM just make sure you hold the reigns.

Drive revenue and keep costs at a minimum.

Thanks

@Engelo Rumora   How did you find him/her? I was thinking the same thing in terms of a retired broker.

Originally posted by @John Ellis :

@Engelo Rumora  How did you find him/her? I was thinking the same thing in terms of a retired broker.

 lol

Check your pockets... haha

"Leave no stone unturned" as the saying goes.

Just get busy tapping into all resources you have.

Call and email everyone and anyone with what your looking for.

Eventually you will get what your after.

Took us 6 weeks and a tonne of posts on Craigslist before we got a reply.

Thanks

@Matt R.   what a great idea. What do you think is a fair mark up? Hypothetically lets say I buy a property for 12,000 put 10,000 into it and rent it for 700.00. What would be fair sale price for that property. In this hypothetical example and keeping with what @Engelo Rumora suggested in not selling a property for more then its worth the FMV for this property is $35,000 and it is in a C neighborhood.

Originally posted by @John Ellis :

@Matt R.   what a great idea. What do you think is a fair mark up? Hypothetically lets say I buy a property for 12,000 put 10,000 into it and rent it for 700.00. What would be fair sale price for that property. In this hypothetical example and keeping with what @Engelo Rumora suggested in not selling a property for more then its worth the FMV for this property is $35,000 and it is in a C neighborhood.

Its murky waters when appraising fair value in C class areas.

The comps are all over.

This is where you need to stress on PM. 

If you are looking at doing lower end turnkey you will need to hit the paper figures.

Do everything you can to get the investors initial purchase funds back within 5-7 years.

I suggest going a step up to B- or B class.

The comps will be more genuine and B class offers a great exit strategy as the numbers work for investors but the area is attractive enough for home owners.

Thanks

ps. I wouldn't sell the deal you mentioned for more than $30,000. How you get a bad name is when investors want to sell and they can't get anywhere near what they paid. This is why IMO turnkey has the biggest stigma on Bigger Pockets.

@Engelo Rumora   sounds good I think I will start with a B property and make it the best example of what type of total product I can produce. I have just the property in mind that I was planning on flipping but bought it low enough that I can use it for this purpose. Thanks again for the great advice. I'll keep you updated on progress.

Originally posted by @John Ellis :

@Engelo Rumora  sounds good I think I will start with a B property and make it the best example of what type of total product I can produce. I have just the property in mind that I was planning on flipping but bought it low enough that I can use it for this purpose. Thanks again for the great advice. I'll keep you updated on progress.

Awesome stuff,

Sounds good and def let me know how it goes.

Thanks and have a great day.

I guess if you are seling directly to investors 10k to 20k mark up as long as it comes close to arv appraisal...it probably would still be under arv in many cases. I think it would stand out in the crowd as far as comparing tk companies.

The line would be " sir, we always share openingly what all the cost are so you know the exact math on this opportunity. Some other competitors.. well they don't want you to know these details...you got to ask yourself ....why is it a secret? We prefer a 100% transperancy model and especially when it involves creating positve

cash flow business decisions. You would agree...yes?"

@Matt R.  like the separation from other companies. I planned on between 7-12 mark up on each so that is right in line. Thanks for the idea to set me apart. 

Originally posted by @John Ellis :

Basically the question could read: What would be the perfect turnkey company? What would they do that others don't? Expectations, ROI, Price, Neighborhoods, etc.

 John - I have a long answer, forgive me on the front end!!   It is great that you are flexing your entrepreneurial spirit and setting up a Turnkey company.  I don't necessarily have empirical data to show the number of investors that want to invest passively, but I have been talking to and working with investors going on 11 years now and my perception is that passive investors far outnumber active investors.

When you see all of the demand for Turnkey product, it is easy to realize that if you are willing to work hard and develop a quality, service company, you can enter that market and get a piece of that demand.  I have worked with maybe a dozen companies and am writing a blog this week for the BP Blog about turnkey companies and the investor that should avoid them.  It will also answer some of your question, but here are a few pointers.

 - Quality matters!  As you have already seen in your area, poor quality requires the investor to come behind and do more work.  It cost dollars and time, the two things passive investors (any investor for that matter) does not want to lose.  If you want to build a solid reputation, start with the quality of your properties and the quality of the work done.

 - You must build a profitable company.  You have to be profitable in order to build a team around you that provides high quality and high service.  @Curt Davis  was correct when he noted the size of our company and the reasoning.  We set out with a goal to be the best at what we do.  We built a team around us and have always been willing to invest in our company.  New people, new technology, new services.  None of that happens if you are not profitable.  (FYI - the company that Curt works for is a quality operation and we meet regularly with the owner of that company to talk about best practices.  We learn as much from them as they may learn from us even though we are "competitors".  Realize that there is an abundance of business and a HUGE demand for quality so there is plenty for everyone).

 - DO NOT APOLOGIZE FOR BEING PROFITABLE.  I cannot tell you the number of times investors have stood up in a room full of other investors and said they would rather do business with a profitable company ALL DAY LONG!  They understand that a cut rate, "cheap" company CANNOT provide the service that a passive investor wants and needs.  You are providing service to your clients for years to come and the only way you are able to survive and thrive as a service provider is by offering your service at a fair price...but a profitable one as well.  

 - You become more profitable by improving your relationships on the buy side.  Buy homes at a proper price for you to be able to do the work needed on the property and make a profit as a service provider, YET still provide the passive investor - your client - with a high quality, consistent and fair return on their investment.  The same rules apply - you make money when you buy the properties.  Buy them at a fair price, drive down your renovation costs through volume and offer the property at a price that helps you to be a profitable company offering a quality product.

 - Do Not Try To Compete On Price!  Companies that compete on price, in my opinion, lose sight of the fact that these investments are long-term.  Cheap properties and cheap prices lead to poor investments.  A company without the needed capital to grow, cannot compete on REAL VALUE for investors.  Value that comes from systems, workforce, communication, service programs.  So companies that do not have money to grow, cannot offer value-added services.  So they try to compete on being the cheapest and that - again, in my opinion - is not the route you would want to take.  Compete on real value for the investor provided that you truly offer real value.

 - Property management can be a huge difference maker.  Being great at property management can be the true differentiator between you and other companies in your area.  Having built our company to managing over 2,700 properties today in three different markets, I can tell you that I do not agree with aligning or hiring a local broker, especially not one retired or retiring and done with their career.  Why?  They have their own ideas about real estate and they come from an old school thinking about property management.   If that is your only option for having a licensed broker, then I would use them ONLY for the license.  Do not use them to run your company - again, my opinion.

Instead, use someone from your inner circle, someone on your team.  Think about what you have seen already - the low quality.  As a property manager, be a high quality provider.  Build a company that manages only the highest quality renovations - yours!  Hire and train great people to be friendly yet stern with tenants and train your entire team that quality and service are what will set you apart.  

***  It is very important to remember that tenants are your clients as well.  A happy tenant stays longer, is willing to pay a premium for great service, will handle minor issues for you and be more than willing to extend lease agreements and tell others to rent from you.  It takes TEAM MEMBERS to offer these services. 

Part of being a profitable Turnkey company means that you are able to subsidize the property management company.  You can hire team members to answer every phone call and return tenant issue calls.  You can hire team members to close every rental contract in a professional manner and cover up the tenants with great service.  A happy tenant absolutely leads to happy investors.

Two quick things.  I firmly believe that a company that concentrates on quality will have no choice but to grow in quantity  Your clients and investors will demand it.  We have worked with and trained other entrepreneurs many times over and helped them develop Turnkey companies.  I have offered to help many others and it amazes me how few take us up on it.  I know it feels unconventional to have someone you view as a competitor actually help you.  So, some entrepreneurs simply do not take us up on it.  We do not do it for free, our time and knowledge is valuable to us, but we share with others and host entrepreneurs several times a year at our Memphis offices to learn.

Feel free to reach out.  I still have coffee and lunch with two other local companies on a fairly regular basis and we all share ideas and tips about what is working and what is not working.  I travel a little bit speaking at different financial and real estate events and always meet with other Turnkey company owners to share.

When you have an abundance mentality, you can build anything without fear of others.  When you have a scarcity mentality, you will always fear others and worry that the deal in front of you is the last deal you will do.  

Have an abundance mentality in all that you do.  Be the absolute best at what you do and use your marketing to compete on value and not on price.  Be profitable yet fair and you can do awesome things.  We are proof of that in Memphis, Dallas and now Houston.  Be great, concentrate on relationships and you can grow your company.  Best of luck as you start to move forward!  

Originally posted by @Chris Clothier :

 - Quality matters!  As you have already seen in your area, poor quality requires the investor to come behind and do more work.  It cost dollars and time, the two things passive investors (any investor for that matter) does not want to lose.  If you want to build a solid reputation, start with the quality of your properties and the quality of the work done.

I feel this is the one aspect I feel very comfortable with. I truly believe that the quality of work and service will undoubtedly raise me above my competitors. I feel as though I have learned from them without ever talking to them. There work is poor, there vision lacks long term and their service is suspect as the investor has my company go in and fix the issue left. I'm in the early stages of working with passive investors but my main focus has been communication and great service.

 - You must build a profitable company.  You have to be profitable in order to build a team around you that provides high quality and high service.  @Curt Davis  was correct when he noted the size of our company and the reasoning.  We set out with a goal to be the best at what we do.  We built a team around us and have always been willing to invest in our company.  New people, new technology, new services.  None of that happens if you are not profitable.  (FYI - the company that Curt works for is a quality operation and we meet regularly with the owner of that company to talk about best practices.  We learn as much from them as they may learn from us even though we are "competitors".  Realize that there is an abundance of business and a HUGE demand for quality so there is plenty for everyone).

 - DO NOT APOLOGIZE FOR BEING PROFITABLE.  I cannot tell you the number of times investors have stood up in a room full of other investors and said they would rather do business with a profitable company ALL DAY LONG!  They understand that a cut rate, "cheap" company CANNOT provide the service that a passive investor wants and needs.  You are providing service to your clients for years to come and the only way you are able to survive and thrive as a service provider is by offering your service at a fair price...but a profitable one as well.  

I believe you when you talk about being profitable and creating new ways to offer better services but my fear is that I grow to fast or not enough. I guess my question is what comes first the profitable company or the investor. When you were starting out I would love to hear with what you started with. What was your staff like in the early days? I can tell you focused on quality above all else in every aspect of passive investing but did you create all this before you had a company or did this come about after X number of properties or that first big investors. Over the past 8 years I have concentrated my efforts on the flipping business. The systems I have developed over that time has helped me become what I am today but I don't think I could have developed those systems without having first did X amount of properties or worked with different kinds of investors. I guess my over arching questions would be on day one of Memphis Invest how many employees did you have or what type of structure did you put in place. By researching and asking about a total turnkey company I came up with 3 areas that I believe are most important. Construction, Property Management, and Investor Relations. I would be interested in learning about what your structure looked like to provide the best quality in all aspects of turnkey properties.

 - You become more profitable by improving your relationships on the buy side.  Buy homes at a proper price for you to be able to do the work needed on the property and make a profit as a service provider, YET still provide the passive investor - your client - with a high quality, consistent and fair return on their investment.  The same rules apply - you make money when you buy the properties.  Buy them at a fair price, drive down your renovation costs through volume and offer the property at a price that helps you to be a profitable company offering a quality product.

As I look at your website I notice prices in the 80s to over 100 plus, was this always you investment strategy? What type of neighborhoods do you invest in? Looking at my market in Cleveland. There is a number of different options but I am trying to understand what real passive investors are looking for. As I read forums on BP it seems there is a divide between cash flow and appreciation. For example in the City of Cleveland, you can provide a turn key property for under $35,000 that would garner $750 in rent but the issue being is that property will always be worth $35,000 I could not in good faith promise that after 5 years you could sell it for more then $35,000. If I move to the inner ring suburbs or even a little further rent will increase but so will the purchase price but the appreciation would be minimal to the tune of 1-5% in 5 years. I think Northeast Ohio is a great market and contender for turnkey properties that a passive investor will love but I fear just as you say below that companies will compete on price not value. When you started Memphis Invest how did you "sell" investors that they should pay a higher price. Obviously now you can point to the tremendous systems you have in place but at the beginning how did you sell that vision to investors. I will create a great turnkey company but first I need examples of how my systems work.

 - Property management can be a huge difference maker.  Being great at property management can be the true differentiator between you and other companies in your area.  Having built our company to managing over 2,700 properties today in three different markets, I can tell you that I do not agree with aligning or hiring a local broker, especially not one retired or retiring and done with their career.  Why?  They have their own ideas about real estate and they come from an old school thinking about property management.   If that is your only option for having a licensed broker, then I would use them ONLY for the license.  Do not use them to run your company - again, my opinion.

Instead, use someone from your inner circle, someone on your team.  Think about what you have seen already - the low quality.  As a property manager, be a high quality provider.  Build a company that manages only the highest quality renovations - yours!  Hire and train great people to be friendly yet stern with tenants and train your entire team that quality and service are what will set you apart.  

I agree with you and this will be my most important decision. You must use a broker in Ohio and I not in position yet to become a broker. My goal is to find someone who lets me develop my business, using my systems and my emphasis on quality. I am very concision of that and I firmly believe that this will be the make or break decision.

When you talk about subsidizing the property management part what do you mean? As I research more it seems as though Single Family property management companies consistently lose money because of the costs of providing quality services and systems. Do you feel this is true? Since I am not only concentrating on creating a property management company can I afford to lose in this aspect of the business or do you have a better idea/plan. Again to me this seems like what comes first company or investors in terms of developing.

Again thank you for taking the time to go this in depth with your response. I really do feel that might ideas, drive and most of all integrity will enable me to create a company in which investors are proud of, the community is proud of and the employees are proud of. My goals are complex but my mission within the next 6 months is sell 1 (I know this is small) turnkey rental in which I provide the absolute best service, quality renovation, and incredible property management. In that time I want to learn more about turnkey companies, create a property management aspect of the company,  further expand my relationships in order to buy properties at better prices, and finally really study niches within the Northeast Ohio market to see where the best place to create my "Model" Turnkey Home. I would love to hear you speak and even bounce off ideas to you. I know your time is valuable so thank you for taking this much time already in helping me.

@John Ellis  

This is purely my opinion, but I don't think you can effectively offer turn key properties in "A-D" neighborhoods. You'd be trying to be everything to everyone. I would seriously reconsider D neighborhoods. I think they just have too many tenant problems and by offering low end properties to your investors you'll end up tarnishing your brand and image. My company offers turn keys in Indianapolis and Kansas City but we focus narrowly on certain B and C areas that we know perform well for the investor. When the problems happen with D properties, and they will, it's you that the client will blame. I think it's best to focus on a particular niche but that's just my 2 cents.

@John Ellis  - When we really formalized this, there were 6 people.  Two people were  looking at properties then negotiating and buying properties.  Those same two were in all of our houses on a  weekly basis "inspecting what we expect".  There were two guys running renovation crews.  One guy was selling and marketing and one guy ran the property management company, which had 3 other paid employees doing management tasks. 

When I talk about subsidizing a management company, I mean that it will not make money until you are able to scale to critical mass.  That will be between 250 and 350 properties.  Until you reach that volume under management, the management company itself will not be able to fund all operations.  That funding comes from your primary business, which is selling a Turnkey property.  

My company used to work in a lot of areas around Memphis that we no longer buy or manage.  They were the lower end homes, low barrier of entry for an investor and on paper they all cash flowed ridiculous!  You still see these same deals today, just like the one you described.  Understand, what I am telling you is our experience and you can do with it what you want.  

$35,000 houses renting for $750 a month and continuing to cash flow years into the future are unicorns for Turnkey buyers.  At $35,000 as a sell price, there is not enough profit for a TK company to purchase, properly renovate and profit on the deal.  So in order to keep the price low for the investor and the paper return high, something has to be cut.  Either the renovations have to be skimped (or deferred into later years - BIG PROBLEM FOR OUT OF TOWN BUYERS) or the company has to cut their profit margin.  If you cut the profit margin, the same amount of service and work has to be done on the front end and back end, but for fewer dollars.  And don't forget that as an owner you want to be profitable, but you can only do so much without a team.

In the end, the investor loses on the "cheap" deal because they expect top of the line and Turnkey processes where everything is done for them.  Every Turnkey company in the country has copied the same marketing tags.  Everyone is all about customer service, high integrity, "we're here for you" messaging but that is impossible to provide if you do not have the revenue to do it.  

On January 1 2011, we made a decision that we were done with cheap.  We moved away from lower end even though we could sell hundreds of houses in those neighborhoods.  They were too difficult to rent, keep rented and secure when they were vacant.  They took up WAY too much of our time and resources as a company.  So we moved away from cheap renovations and super cheap houses.  We pull over 1,000 permits on our properties have invested hundreds of thousands of dollars in team members and technology.  We never intended to necessarily build the company as it is today, we just took advantage of opportunity and did it.  As we improved our service, more investors wanted to buy more properties.  Today, 60%+ of our monthly sales go to existing clients building portfolios.  That is because we attract investors that want SERVICE first, CONSISTENT return second and YIELD third.  

Lastly, you cannot guarantee your investors anything.  You cannot guarantee that the rent will not go down, or the value will stay the same or that they can sell at any price int he future.  Those things are completely out of your control.  What you can do, is guarantee that you know how to operate a good company, that you will work diligently on their behalf and that you will always communicate honestly with them.

From reading your post, you seem apprehensive (which makes sense) about moving forward.  You have to create your vision for what you want to do.  Business does not come from thin air.  Without getting into a lot of mind set, I will tell you that you have to believe you can create this company you describe and get to work on it.  Anyone can do the exact same thing we have done.  There is no secret and nothing special.  The difference to date has been one thing.  When we have mentored companies, we have had more than one walk away saying they simply did not want to work that hard.  That we put in way too much energy and effort and worked too hard.  Not only us but our team.  That is the difference.  There is no 4-hour work week in the Turnkey business!!!! If you are willing to work, you can do exactly what we have done up in Ohio.

Here's my idea for starting a turnkey company, very biased by my personal buy and hold strategy.  It may be much smaller scale than what you are planning.   Basically build a buy and hold portfolio and offer them for sale.  You only buy properties that are in great areas you would want in your personal portfolio.  They have to be good enough bargains that you would add them to your personal portfolio.  You rehab them to your standards (assuming your standards are high).  Then you rent them out, hold them and enjoy the passive income.  Build a website and offer your properties for sale at a price that makes you want to sell.  If they sell great, more cash for acquistiions.  If they don't sell, great you have excellent buy and holds.  Sold properties can be transferred to a management company with your excellent tenants in place.  The quality of neighborhood, rehab and tenants is top notch, good enough for you personally should be good enough for a passive investor.

@Mike D'Arrigo  nailed it on the high spread of properties.  The better the neighborhood, the better the renovation and the better management will allow you to do more with less.  It takes fewer people to manage properties when you are in better neighborhoods and doing better renovations.  The lower end properties will absolutely eat your alive and consume too many resources and time to manage.  @Alex Craig  made the same decision here in Memphis and Little Rock with his company and I think it has made his life happier and easier.  I think he would probably second these comments.  

Originally posted by @Brant Richardson :

Here's my idea for starting a turnkey company, very biased by my personal buy and hold strategy.  It may be much smaller scale than what you are planning.   Basically build a buy and hold portfolio and offer them for sale.  You only buy properties that are in great areas you would want in your personal portfolio.  They have to be good enough bargains that you would add them to your personal portfolio.  You rehab them to your standards (assuming your standards are high).  Then you rent them out, hold them and enjoy the passive income.  Build a website and offer your properties for sale at a price that makes you want to sell.  If they sell great, more cash for acquistiions.  If they don't sell, great you have excellent buy and holds.  Sold properties can be transferred to a management company with your excellent tenants in place.  The quality of neighborhood, rehab and tenants is top notch, good enough for you personally should be good enough for a passive investor.

Brant - Add one more revenue stream to that by negotiating with the management company to compensate you - even a small amount - as you transfer high quality renovated properties with good tenants in place.  I think your business plan is a great one for part-time or side style business.