Out of state -turnkey done better

[Joe Kim]

After heated discussion about difficulties working with Out of state Turnkey investing (https://www.biggerpockets.com/forums/88/topics/351...)

On a positive note I want to highlight 3 properties I bought this year which I think can show some of the positive ways to buy from turnkey companies.   This does not mean all problems disappear but there is no perfect rental property.  I looked at properties that have big advantages that outweigh some of the downsides (like nearly all property managers suck..)

Property #3  Cash flow in Memphis with built in equity

Memphis (B/B+ neighborhood for memphis) - TK provider -Memphis Cash Flow (NOT Memphis Invest)

Purchase price  $154,900   $54/sqft !!!!   Appraised at $163,000 at purchase

25% downpayment at 4.25% 30 year fix  

4 bed 2.5 bed, 2860 sqft SFR, 1993

Rent:  predicted $1600 but actual $1700!

PITI $787/month

Management fees  $132/month

Maintenance 5%  $85 (predicted)

Vacancy 8% $136 (predicted)

Net Cash Flow:  $560/month

Here is my thinking when I bought this house.

#1 $54/sqft is pretty darn good even for memphis.  Some built in equity on the house at purchase which is a nice cushion for any downturn

#2 $1700/month - that kind of high rent can help identify better quality and hopefully longterm tenants

#3 Low cost! PITI (principal interest taxes insurance) PI = $571 TI (escrow tax/insurance) = $216/month!!! that's super super low for 2860 sqft home!

#4  Very good cash flow $560/month - this is not your typical cash flow in 2016 for turnkey properties.

Here are the 2 other properties I listed previously in other posts (https://www.biggerpockets.com/forums/88/topics/351...)

Property #1 5/2016

Location: Atlanta suburb (Buford - A property)

Brand new construction single family home. School district 8,9,10 rating!

4 bed 2.5 bath, 2330 sqft. Purchase price $195,000

Rent $1600

PITI : $964/month (25% down, 30 year fixed at 4.25%)

HOA: $38/month

Maintenance: $0 (projected for first year)

Vacancy: $130 (although tenant already put 3 month deposit!)

Management cost: $0 (SELF- Managed!)

First year cash flow is currently $600/month or minimum $470/month if vacancy.

Property #2 

Chicago (B property) (not a big fan of the chicago area but you will see why I bought this property - see below) -"MACK" TK provider

when: 3/2016

$200,000 purchase price, Rent $2000

5bed, 2 bath, 2161 sqft living area, 1117 sqft basement

Sale price: $92.51/sqft Comps: 116.75/sqft, 94.85/sqft, 128.44/sqft Final appraised at $215,000 at purchase.

25% downpayment at 4.25% fixed for 30 years. Downpayment from HELOC loan (so essentially 100% financed)

TK company : MACK (one of the largest operations in Chicago)

Guaranteed Rent for 1 year and No maintenance fees for 1 year - worry free for 1 year.

"Fully" renovated - new electrical, new plumbing, new hardwood flooring addressed all the issues on home inspection except for HVAC...which was 18 years old!!! I fought hard to get HVAC replaced but seller refused but then got it "certified" that it's functional and good life for 5+ more years!

Cash FLOW:

Rent: $2000/month

PITI : $1029/month

property management: $95/month! (super cheap fees)

Maintenance: $0 (1st year)

Vacancy: $0 (1st year)

Positive cash flow: $876/month!!!

Performa predicted cash flow: $732/month! (given to me by TK provider), predicted IRR 22%, Cap rate 9.25%  

I don't like chicago due to high costs - taxes.  But it is offset by the high rents.

I'm hoping for regular cash flow around $700-$800 in the coming years.

So currently maximal net cash flow from just three properties = 560 + 600 +876 = $2036!

I'm hoping for $1700-$1800/year consistently after year 1.

Next post coming - Why i'm selling some of my properties in my portfolio in 2016-2017