Turnkey Companies
Los Angeles, CA · Member since 2014 · 18 posts · 7 votes
Turnkey Companies
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Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes
12yBased on the ones that I've looked into in the past, you're going to essentially be paying retail for properties which limits your upside and actually creates some risk should you want to sell them since - with all the fees/closing costs - you'll have to come out of pocket to sell.
But the key is in their property management service. Thats what would really determine whether they're a good deal or not. And thats probably the toughest part of out of state investing in my eyes - finding good property management.
If it were me, I think I'd skip the turnkey places and find another investor or possibly a realtor and tell them what you're looking for. Maybe even a wholesaler. Buy the house from them as they know they typically need to sell a house to an investor at around 70 to 75% of the ARV.
So if the house is worth 160k, you should be able to get it for an all in price (i.e. purchase plus rehab costs) of about 120k. Thats much better than the 160k you're going to pay to one of these turnkey companies.
Then get your PM to lease it up and manage it. Its a lot easier to make money on houses that you're all in at 75% or even 80% than the ones you're all in at 100%.
Not to mention the fact that many of them tend to over estimate the actual rental amounts too.
58 Replies
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Gioconda Sanders from a lender who finance's these folks let me give my perspective
depending on the company the margin between what they pay for a property IE you pull it up on public records if its a full diclsoure state ( some states are not like TExas)
here is how It goes buy it for 50k put 25k into it .. 10k in financing an carrying cost to get it to market so into it 85k.. sell for 110k pay market 5k to 10k depending on how much marketer wants vary's in the industry. so in it 95k they make 20k net profit. I would think the top echelon companies in the US make this but most make half of that by the time it s all said and done 10k is a great day as a turn key provider. they work on volume .
and PM unless your huge like Memphis invest is not a profit center just FYI .. PM becomes profitable in any appreciable income number at about 1,000 units unless you want to kill your self for 100 to 150k a year.. then you can do a little less on management side
- Leander, TX · Member since 2014 · 6 posts · 2 votes10y
Thanks Jay Hinrichs , I do appreciate you opinion in this one since I've been reading your replays here in this post and now I understand better how a Turnkey Provider works.
I just want to make sure and want to do my vet in a TK provider and don't want to be in this category "And I think so many folks get lulled into the idea of getting started in RE and hey I can do that for very low amount of dollars OUT of state ( speaking of West coast or East Coast investors) they get blinded by the sales pitch. Only to learn about the reality of the asset class, And the Demographic of the tenant base etc etc way down the road."
So thanks again I learn a couple new things today I like that..
Gioconda Sanders.
- Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes10y
@Gioconda Sanders I have evaluated about 100 or so turnkeys. Here are what issues I found for many and not all. You can find the good ones on BP like you are now.
1. Bad hoods and demos with the lower price points or even higher. I mean real bad sometimes....like you would not get out of your car bad. Like murders are common bad. Like shootings are weekly bad. Like vacancies are double digits bad. Like abandon properties surround bad. BTW I have seen none of this is disclosed upfront before.
2. Generally priced much higher than the other non turnkey properties.
3. Challenging exiting scenarios if you want to bail.
5. Some proformas have no history, could be misleading or down right BS or at least pure speculation.
6. Straw man arguments are heavy on the marketing end.
Like, who said every house needs a full rehab to be a good rental? I can understand the value with a full rehab but most homes for sale don't need a full rehab to be a good rental.
I would agree whatever TK you buy make sure the seller or coordinator is the actual management company. There are also hybrid versions and lip stick is all that is needed to make rent ready and or some will have tenants and in house management in place.
Keep in mind if you over pay on the front end you most likely broke investor rule number 1, don't lose money.
The good news is you will be able to find a good match on BP or on Jay's site.
Good luck with your search!
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Gioconda Sanders yes good points and Texas is a classic for those coming from the coasts and not understanding that market.. IE not figuring that the property tax's will be substantial and need to be quantified up front. and foundation issues that in many parts of Texas its not a if its a when... and a few relevels of your rental will wipe out a few years of cash flow.. so there are regional aspects that are not talked about in the sales pitch's I mean who is going to be selling a turn key in Texas and lead with hey your tax's are double compared to most other markets and OH by the way you really have to watch your foundations because of expansive soil issues and concrete slab houses LOL.. you learn that either the hard way after the fact or by getting a little more edumacated about a market.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes10y
Originally posted by @Matt R.:
@Gioconda Sanders I have evaluated about 100 or so turnkeys. Here are what issues I found for many and not all. You can find the good ones on BP like you are now.
1. Bad hoods and demos with the lower price points or even higher. I mean real bad sometimes....like you would not get out of your car bad. Like murders are common bad. Like shootings are weekly bad. Like vacancies are double digits bad. Like abandon properties surround bad. BTW I have seen none of this is disclosed upfront before.
2. Generally priced much higher than the other non turnkey properties.
3. Challenging exiting scenarios if you want to bail.
5. Some proformas have no history, could be misleading or down right BS or at least pure speculation.
6. Straw man arguments are heavy on the marketing end.
Like, who said every house needs a full rehab to be a good rental? I can understand the value with a full rehab but most homes for sale don't need a full rehab to be a good rental.
I would agree whatever TK you buy make sure the seller or coordinator is the actual management company. There are also hybrid versions and lip stick is all that is needed to make rent ready and or some will have tenants and in house management in place.
Keep in mind if you over pay on the front end you most likely broke investor rule number 1, don't lose money.
The good news is you will be able to find a good match on BP or on Jay's site.
Good luck with your search!
Some good points Matt.
A common theme I see on this site is investors thinking that there are houses and there are rental houses. Like they are somehow different from one another.
A house is a house is a house. You do not need to limit yourself to a house that was totally run down to the point that it is such a dog it needs a gut job rehab. Investors need to ask themselves what kind of area is the property in that it was able to get to that point?
- Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes10y
@James Wise 100% agree. Should be warning sign really.
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