Kansas City, MO, Turn Key Advice Please

20 Replies

Hi, this is my first post! I'm looking to buy turnkey properties in Kansas City, MO. Can anyone share pros/cons, good/bad zip codes and personal experiences? I want to hear it all! Thank you!!

Hi @Sara Hodge ,

Welcome to BiggerPockets!

Looks like your my neighbor in OC.

Glad to hear that you want to get started in real estate investing.  It's a great time to be building your real estate portfolio.

Kansas City is a great market.  I invest there myself and  our clients have been investing there for over six years now.  It seems to be a perennial market even though property values have gone up a little over the last two years. 

Be sure to set up some Keyword Alerts so you'll be notified when people mention that which interests you here in the forums.

Also check out my 10 Rules of Successful Real Estate Investing and download The Ultimate Guide to Passive Real Estate Investing.

Continues success!

Hey Sara,

I have been looking at turnkey properties for almost a year now and KC was actually the first area I was looking at.  From my experience and in my opinion you need to be careful in certain areas as there is some very high crime areas and very high vacancies.  Some numbers will look amazing on paper as far as cash flow and with even section 8 tenants.  My first offer was for a property like this and I think I am thankful my offer was rejected.  Again this is just my opinion as another investor grabbed it in an all cash deal and for all I know he may do well with it.

I ended up purchasing something in Cleveland as my first property but for my second property I actually got something in Independence, MO.  I was told Independence is a bit better and indeed according to my due diligence I bought in a better area with less crime and vacancies.  

You can PM me if you want further details.

Good luck in your search!

Originally posted by Shai:
  
I ended up purchasing something in Cleveland as my first property but for my second property I actually got something in Independence, MO.  I was told Independence is a bit better and indeed according to my due diligence I bought in a better area with less crime and vacancies. 

Yes, Independence is a good sub-market with better schools.  Many investors buy there. 

@Shai Neubauer thank you for being so willing to share your experience with me. I will send you a message! I hadn't thought about Independence... If its namesake means anything, then it is worth looking at! :) 

Hi Sara,

I invest in KC myself but am looking to divest from SFH. Investing in SFH is very time intensive and you need to think about how to keep it running. If you are buying just one property is it going to be worth your while and the management companies time? Secondly, having a portfolio of homes is just as time consuming. You will have maintenance issues, late payments, Section 8 inspections, taxes, and if your properties are vacant the city will make sure you comply with grass cutting, etc and bill you for it.

Property management is one of the most important items on your list.  Find a professional company and don't use a realtor/PM.  They are too scattered brain to focus on management issues.

Not to rain on your parade but these are the facts.  This is one reason I am buying multi family buidlings instead.  One roof, one headache.

Sara Hodge Welcome! I am a big supporter of turnkey investing for my situation. I am fairly new to investing and turnkey providers have helped me a lot. Over the past 9 months I have met several and purchased properties in both Birmingham and Indianapolis. Definitely had some ups and downs and it's not walk in the park. PM me if you would like to here more. Good luck!
What is a turn-key rental property?

Some consider a turn-key property to be a house that is remodeled and needs no repairs, but it may not be rented. I consider turn-key to mean the home needs no repairs, has a tenant in place and has property management in place. Make sure you and whomever you are talking to about turn-key properties have the same definition of turn-key! If you are investing out-of-state for a turn-key property you want to make sure it is already rented and has property management in place.

What are the advantages of turn-key rental properties?

Here are a few advantages of buying turn-key rentals and why I am buying a turn-key rental. I go into much more detail on each point throughout the article.

  1. Easy to find: You can buy a turn-key property very quickly from a turn-key provider, because they have a stock of turn-key properties available to purchase. Turn-key companies can have a large inventory of turn-keys because they are providing cash flow and making them money while they own the properties. You do have to know the right turn-key companies to work with.
  2. Less work than a normal rental: Turn-key properties are already rented, already managed and repaired. You don’t have to find contractors, property managers or real estate agents.
  3. Provide cash flow from day one: The first day you buy a turn-key it will have a tenant in place paying rent. You don’t have to worry how long the repairs will take or how long it will take to get a tenant.
  4. Provide a great return: Most turn-key rentals provide returns from 10 to 15 percent. That return begins right away and takes little work to maintain, because a property manager takes care of the house for you.
  5. Provide diversification: Buying turn-key rentals in different markets of the country gives you diversification.
  6. Can be bought for cash: Many foreign investors have trouble buying properties, because they cannot get financing. Turn-key rentals can be as cheap as $30,000 making it easier to buy with cash.
  7. You can invest your retirement savings: You can invest a self-directed IRA or 401k into turn-key rentals.
How can you find turn-key rental properties?

There are many turn-key rental property providers throughout the United States. Some companies are local to specific markets like Memphis, Ohio, Missouri, Florida, Texas, Chicago, Wisconsin and other companies have properties all over the country. Some companies market others properties and are not the actual seller but do help the investor by way of consulting, API owns all that we sell. The properties vary in price, rents, financing options and returns, but a good turn-key property will cash flow. Even with cash flow I would advise investors to spend time researching the area they want to invest in and the property manager, before buying any turn-key property.

How much money do turn-key rental properties cost?

Every turnkey property is different and every location for turn-key properties is different. I have seen turn-key rentals that are repaired, rented and managed range from $35,000 to $100,000 in price. I have not seen turn-key properties in higher price ranges, because it is much harder to cash flow on a higher priced rental property than a lower priced rental property. The lower priced turn-key rental properties usually provide better cash flow and may be a good option for foreign investors who have a hard time getting a loan on properties in the United States.

When would investing in a long-distance, turn-key property be a good idea?

I have many people reach out to me about investing in rental properties, but they do not know how to start because their market is too expensive. When starter homes are $300,000 or more in an area, it is almost impossible to cash flow on a rental property unless you pay cash. When you pay cash your returns are not nearly as good as if you can get a loan (as long as the property cash flows). Rents are almost never high enough on a $300,000 home to cash flow no matter where you live.

The down payments on a $300,000 property are going to be at least $60,000 unless you use a technique to buy with less money down. Then you have to add closing costs, reserves, repairs and other costs associated with buying a rental property. I can buy two or three cash flowing rental properties in my market, where someone in a more expensive area could only buy one rental property that may not cash flow at all. I never invest for appreciation, which is what many people are forced to do in these areas.

If you are in an area with very expensive homes or very low rents compared to home prices, you may want to consider long-distance investing and possibly long distance, turn-key investing.

Diversification with turn-key rental properties

Many people like to spread out their risk when investing and rental properties are no different. If you own all of your properties in one place, it could be riskier if something were to happen to that area. If you have all of your rental properties in one place then the idea of an out-of-state property would provide diversification.

What is the difference between long-distance and long-distance, turn-key investing?

Long-distance investing is simply investing in real estate outside of your local market area. You are still in control of the purchase, the renovation and finding a property manager. If you have a great team that can handle all of these aspects for you, or you are able to travel to handle them yourself this can be a great way to invest. But it takes a lot of time and work to buy a rental property in another state when you have to control the entire process of finding the property, repairing it, renting it and finding a property manager.

Are turn-key rental properties a good option for foreign investors?

Foreign investors can buy homes in the United States, but it is hard for many foreigners to get financing. Traveling to the US, researching markets, finding real estate agents, closing on properties and then repairing and renting properties is very difficult when you live in another country. Turn-key rental properties make it much easier for foreigners or any long-distance investor to invest in rental properties. If you buy a turn-key rental property you might not make as much money as if you did all the work yourself, but the time and money saved will be worth it.

Are turn-key rental properties a good option for self-directed IRAs?

You can invest money from an IRA into real estate, if you have a self-directed IRA. When you use an IRA to buy real estate, the IRA is buying the property and all income and expenses must go through the IRA.

Conclusion

Turn-key rental properties are a great way to invest for cash flow when cash flow is hard to find in your market. Turn-key rental properties are also a way to invest in rental properties without having to repair a house

Hi Sara, I actually live in KC and have been looking at properties this weekend, let me know if you need any advice on neighborhoods...

@James Cho JAMES! Thank you so much. I wish I would have read this comment earlier, I could have taken you up on your offer. If you do have a moment, I would really appreciate any insight or recommendations you have on your favorite turnkey companies if you've ever invested with them. No problem if you haven't. Thank you again!

Originally posted by @Eugene Mar :

Hi Sara,

I invest in KC myself but am looking to divest from SFH. Investing in SFH is very time intensive and you need to think about how to keep it running. If you are buying just one property is it going to be worth your while and the management companies time? Secondly, having a portfolio of homes is just as time consuming. You will have maintenance issues, late payments, Section 8 inspections, taxes, and if your properties are vacant the city will make sure you comply with grass cutting, etc and bill you for it.

Property management is one of the most important items on your list.  Find a professional company and don't use a realtor/PM.  They are too scattered brain to focus on management issues.

Not to rain on your parade but these are the facts.  This is one reason I am buying multi family buidlings instead.  One roof, one headache.

 Eugene,

You make some valid arguments regarding your investment portfolio, but there are counter-points to consider.

Yes, having a bunch of SFHs does present the oportunity for more "roofs" to maintain, as well as other property and tenant issues. I will argue, however, that SFH tenants are more stable than your traditional MFH tenant. SFH tenants typically stay longer and in my experience, take better care of the property. By the simple fact that they signed up to cut their own grass, as well as other single unit needs, versus a tenant that wants to be in a MFH unit where everything is done for them. Statistically, we have average tenancy of 2.5 years for a SFH tenant vs 1.5 for a MFH tenant. Yes, vacant units require grass to be maintained, but in a fourplex for example, its typically the landlords responsibility to maintain the grass all year.

Granted, the per unit cost of MFH can be less, but after factoring for turnover expenses and others, I have found that a SFH yields a better investment over the long term.

Im not certain that MFH will give you just one headache with one roof.  You still have multiple tenants with multiple issues potentially.

One last note, in Missouri, and most other states, a property manager must be a licensed Realtor.  In Missouri, they must be a broker.  Yes, many are "scatter-brained", as you called them, but interviewing and seeking referrals will help find quality partners.

Best wishes with your investments....happy to continue this conversation

Originally posted by @Sara Hodge :

Hi, this is my first post! I'm looking to buy turnkey properties in Kansas City, MO. Can anyone share pros/cons, good/bad zip codes and personal experiences? I want to hear it all! Thank you!!

Hi Sara - I live in KC and have 21 units mostly SFR. I prefer south KC such as 64137 and Grandview and Belton areas. I agree with the advise to be very careful on your location. Be wary of houses inside the 435 loop. I considered getting started with turnkey myself but found the prices were quite a bit higher than even rent-ready MLS properties. Since I am a long term hold investor the slight benefit of having the 'first' tenant in place isn't that big, and I actually prefer to select the tenant. In these particular areas and with the quality of properties I finding tenants is no problem at all. I self-manage a few and have a professional PM company managing the majority, but even where the PM manages I typically advertise and show for new tenants (using Postlets so easy). As I get closer to leaving my day job, I am considering how to offer some consulting and helpful services to out of state investors on a fee-for-service model. The idea is to help investors do-it-yourselves with a local helper instead of going turnkey. Haven't worked it out yet but I have a great network, good analysis skills, and don't need to make a lot of money at it.

@Sara Hodge

Hello Sara,

I live in Kansas City and am also an investor in SFR in the KC market among others. If you need any advice on turnkey companies/PM or where good areas are feel free to send me a message and we can setup a quick call.

Thanks and best of luck!