PM vs Turnkey Companies

5 Replies

I'd like to start off by saying sorry if this in question is in the wrong category. My question involves PM vs Turnkey. I understand they both have there pros and cons but what about money? In theory wouldn't it be cheaper to hire a PM and find companies your personally to do the work needed to your properties? This seems also safer since PM companies tend to provide better service overall than Turnkey companies when it comes to managing the  property. Please correct me if I'm wrong, I feel as if I might be missing something here.

Turn Key Companies: They have the house, the tenant, the lease, and the management. You typically pay a higher premium and they "guarantee" the property rented for one year. 

In my area they tend to have over priced junk in C- areas. They get lucky with the rent to charge you more and you'll have a hard time getting your next tenant. 

Property Management: You have the house. They can find a tenant but at a premium. They will handle the calls in the middle of the night. You give them a budget. They take 8-12% of your gross monthly income.

Usually the TK company who has the in-house mgnt has their own repair people who work mainly for them.  This should offer better pricing.  Most stand along PM companies are outsourcing all repairs and it is usually higher then what a TK company can get it done for. 

Also the stand alone PM company doesnt care if you are being hammered with repairs or not.  The TK companies usually care as they want you to have a good experience so you will buy again.

Disclosure: I own a Turnkey provider and two Property Management companies

Originally posted by @Alex Filipe :

I'd like to start off by saying sorry if this in question is in the wrong category. My question involves PM vs Turnkey. I understand they both have there pros and cons but what about money? In theory wouldn't it be cheaper to hire a PM and find companies your personally to do the work needed to your properties? This seems also safer since PM companies tend to provide better service overall than Turnkey companies when it comes to managing the  property. Please correct me if I'm wrong, I feel as if I might be missing something here.

If you are new to real estate and planning to either use property management to manage what you are buying or a Turnkey company, then the answer is no.  You will not save money by going a DIY route and hiring a PM company.  You will pay more in price for service and product as well as the time you spend.  If your time is not worth much, then you might be able to go this route and come close to the pricing a quality TK company can provide.  It has to been my experience over the last 13 years to say that nay PM company offers better service than a TK company.  Even the bad turnkey companies tend to give their clients more attention than many PM companies I have experience with for the exact reason @Curt Davis mentioned.

The real problem with your question is that Turnkey is a marketing term.  It does not really describe anything as referenced even by what @Ryan D had to say on here.  He referenced that Turnkey companies get inflated rents and guarantee first year rent.  That may be true where he is located in MO., but I have not met a TK company that has been in business for any length of time and with any level of success that still uses guarantees to attract buyers or inflates rents.  Both are popular cuts to take at TK companies, but don't actually exist with most TK companies.  

Then again, like I said, Turnkey is a marketing term and there are literally hundreds of companies out there who us the word and yet have their own twist to how they operate.  Turnkey does not really describe an exact way a company does business or offers service.  

@Curt Davisundefined

Okay thank you all for the replies very informative.I was not aware that PM were that bad. @Chris Clothier Yes I'm an aspiring REI(if you couldn't tell), entering the military next month and plan on getting started RE, in about 2 years. As of now I'm just learning as much as possible and saving up in the process. Its a lot to take in when your first are getting your feet wet so just bare with me. Thanks for the help once again.

@Alex Filipe

 - Best part of your response is that you are waiting and learning.  Not taking action immediately so you can learn and taking time to gather your resources is an extremely smart decision.  And on this site you can build some fantastic relationships, mentorships and really be ready to have great success as you get started because you took your time.

Best of luck as you enter the military as well.  All the best to you - 

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