turnkey rentals?

19 Replies

anyone ever use a turnkey property management company?  If so, where?  How did it work out for you?

NOTE: Any promotions or solicitations by Turnkey providers in this thread will result in account restriction or termination.

Ive looked into Memphis invest and bulldog capitol. They seem decent but I am not sure you are really getting a deal. Bulldog claims they aim for you to make at least 20% profit on your initial investment, barring any unforeseen issues. In my mind that just seems way too high to be realistic. If you like in LA or NYC I think turnkey would be a great idea. the only reason i mention these two is due to their size. their both large enough that they cant really afford to screw people over. their big names give them more incentive to play nice.

It is usually best to go with the TK providers mgnt company but that doesnt mean you are guaranteed any success.  Things can still happen where investors could still have things go wrong.  The TK mgnt company does have more incentive to do what they can to make sure your experience at least from the beginning goes well but nothing is guaranteed long term.  Some of that is based on the quality of tenant. the home and the area. 

I agree with Curt.  The TK companies I have talked to have a vested interest in making sure you have a good experience so you can be a repeat customer.  They also have the scale to run things efficiently.  When you manage a bunch of properties in a small area your crew is always around and can quickly attend to a problem.  

I just bought my 1st property out of state, even though I still own one out of state. It took me 4 years to get to that place mentally where i felt i was comfortable with out of state tk investing. i have to admit that i have been pleasantly surprised with the process. i plan to do more but i am in no hurry. REI will always be there. i used the Jason Hartman investor network and my purchase was in memphis. Good luck to you

Pam  

I have purchased a property in Memphis every quarter for the last year and a half.  The turnkey homes are a little more but the rehab has been completed and the units have tenants in them.  Buying non-turnkey would be great if you could go out there and manage the rehab and get tenants in but I don't have the time for that now.  Memphis has many TK companies but not all are as good as each other.  I flew out there for my first purchase and met with many of them.  Now I buy without going out.

The key, for me, is to focus on the companies that meet my return requirements with the quality of work.  You will find companies investing in all neighborhoods with returns as high as your risk tolerance will allow.

If you decide on Memphis you can message me with any specific questions you have.

What kind of returns do you get with TK in A,B,C,D neighborhoods? I know it's different in every city, but what is the average in markets where TK companies operate?

I have been doing business there too (Memphis).  It's been going good so far, but there seems to be many Tk companies in Memphis and I'm afraid the market is saturated with rentals.

Does anyone do business anywhere else as far ask Tk goes? Has anyone bought in Dallas, Kansas City or any other midwest cities that are lower in price but have decent markets to rentin ?

I work full time so all I can do is invest in Tk or with a partner.

Thanks for all the answers.

Jesse 

@Mason V.

  " disclosure I know bulldog owners"  I don't think they are turn key guys... they buy foreclosures and sherrif sales then sell them as is to investor that want to do rehabs in the Portland market.  you must do your own due diligence on any wholesalers numbers.  The difference with these guys is they DO own the asset.. its not a flip contract type of thing.

They also have the HML set up through a Seattle company so the Cash on cash return is on your down payment not full purchase price.

@Jesse Richardson I don't think Memphis is different than a lot of markets where prices have gone up since the recovery. The Midwest has seen significant appreciation and ROI's being squeezed but returns are still very good in Kansas City, Indianapolis and other markets.

I would view any turnkey operation very skeptically.  Why is it being sold?  Who owned it before?  Is it being resold over and over by the same company? 

If it's a great deal, why is it for sale?

My common sense, as opposed to any real experience with a turnkey operation, is to wonder why they need my money?  They got the property, they got supposed good management, and supposedly great tenants - then why do they need my money?

If it sounds too good to be true, if it walks like a duck....

Originally posted by @Jay Hinrichs :

@Mason Valenzuela

  " disclosure I know bulldog owners"  I don't think they are turn key guys... they buy foreclosures and sherrif sales then sell them as is to investor that want to do rehabs in the Portland market.  you must do your own due diligence on any wholesalers numbers.  The difference with these guys is they DO own the asset.. its not a flip contract type of thing.

They also have the HML set up through a Seattle company so the Cash on cash return is on your down payment not full purchase price.

 Thank you for the clarification.

Would someone buying turnkeys please post their numbers?   Everyone knows you pay a premium for these things but I'd still like to know purchase prices and rents.   

@Chuck B.  

I just bought a house from Memphis Invest.  Purchase price $92,900.  2 year lease - year 1 $895/month and year 2 - $910/month

Accounting for these expenses - mortgage, insurance, property tax, 5% vacancy, 10% repairs, 10% property management  - I cash flow right at $100/month

The numbers are not amazing - but I did no work, which was my goal.  They bought the house, rehabbed it (so hopefully I won't really need that 10% for repairs for several years) and found tenants.   I am sure if I bought it, rehabbed it and found tenants I would have done much better but I don't want to do that work right now, I am too busy with my family and job.

@Sue K.

  Sue I think I can answer your question... this is an industry... TK  its the same reason McDonalds does not eat all their hamburgers.

And most of the TK companies I fund do keep a portion of their inventory.. however their major money source is selling these and making a profit on them just like any other home flipper... The major difference that is hard for someone like you or us to understand and it was for me back in 2001 when I entered the space is why do the TK companies market on the west coast why don't all the locals in INdy buy all the property  like what happens here . I mean there are out of state investors in every state but not to the extent it is in the mid west.

So then you have to look at the demographics of the areas and the customary practices of their citizens.. and in these markets to rent a SFR is the norm not semi rare like on the west coast.. in Memphis for instance over 50% of the citizens there rent.. In Portland in SFR's its less than 10% of the homes are rentals.. in areas of the mid west you have areas were these homes are that are 50% or better rental stock as opposed to out west were maybe 1 home on a block is a rental.

Therefore you have a plethora of inventory.. As well as in many markets more homes than there are citizens to live in them ( think Detroit for an extreme example).

The inventory by and large comes from tired and burnt out landlords. and it is most defiantly recycled.. The Poor sub prime borrower who lost their home is pretty much cycled through the economy.. then you have the hold outs ( owner occ's who are now surrounded by rentals) they are forced to sell for wholesale prices because no owner occ wants to buy in an area of so many rentals..

So in my mind you have this huge shift in demographics and living patterns that are continuing to go in the direction of rentals.. You have turn key companies and their are many selling probably 1 to 2 thousand homes a year just in Memphis that all get turned into rentals.. half are recycled half are new rentals. So it just keeps feeding on its self.

@Sue K. said above. There are no automatic reasons for skeptics just because they are selling a TK package. What's the difference if they just flipped it to you without a tenant in place? The answer is the tenant...and the tenant simply makes the deal more attractive. Out of state investors like them more since they have little knowledge of the market these homes are in, and they have no presence in that market (i.e. powerteam, like rehabber, PM, etc...). What TK companies are delivery is a ,ore convenient way to deliver a property to a REI as a hold property.

The only difference between a flip to an investor that will be renting it out, and a TK "flip" to that same investor, is the tenant is already in place.  How exactly does that make it something to avoid?

The words "sounds to good to be true" never will be part of my vocabulary.  If it sounds that good, it's too good not to look into it further.  It still may not work, but I'm not going to look at it from the start as if I expect it to be a "dog".  If I did, I'd miss out on some of the best deals I've ever come across. 

Originally posted by @David Hutson :

I have purchased a property in Memphis every quarter for the last year and a half.  The turnkey homes are a little more but the rehab has been completed and the units have tenants in them.  Buying non-turnkey would be great if you could go out there and manage the rehab and get tenants in but I don't have the time for that now.  Memphis has many TK companies but not all are as good as each other.  I flew out there for my first purchase and met with many of them.  Now I buy without going out.

The key, for me, is to focus on the companies that meet my return requirements with the quality of work.  You will find companies investing in all neighborhoods with returns as high as your risk tolerance will allow.

If you decide on Memphis you can message me with any specific questions you have.

My experience was very similar. The first one is terrifying, but you go visit the operation, meet the principles and research the numbers. If everything checks out, you're satisfied with the price and the ROI, you buy a house. It's yours and you collect cash flow each month. If the market tanks, you hold onto it and keep collecting rent. Budget it in major repairs so you don't get stuck.

Originally posted by @Shanequa J. :

What kind of returns do you get with TK in A,B,C,D neighborhoods? I know it's different in every city, but what is the average in markets where TK companies operate?

 I've been wondering the same question. In Milwaukee you have plenty of options in the 50-70k range in B neighborhoods and half that in C. On paper the latter looks better but it's hard to quantify the drama and maintenance costs. I'm also curious about how that compares with other cities that are popular on BP for turnkeys.

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