Keys to purchasing the right turnkey?

9 Replies

Weighing the options of buying turnkeys due to a full time job taking up the entirety of my work week. I’ve heard a lot of bad things about turnkeys, but there has to be some good to them.

Nothing inherently wrong with Turnkey IMO. Just have to do your due diligence like any other deal.

Stick around long enough & you'll hear good things & bad things about every type of deal.

@Lucas Schneider not all turn key companies or properties are equal. Don’t get lured in by cheap prices as they can be headaches. 

Also if your going turn key you should check out short term resort rentals like on the Outer Banks of North Carolina. These are the best turn key properties you can find. No collections, evictions or vacancy. People book in advance and the PM companies handle everything.

Downside, they usually are not cheap. Most markets you will need to start around $300k and up but the larger properties are like multifamily without the headaches and competition to maintain occupancy.

Originally posted by @Lucas Schneider :

Weighing the options of buying turnkeys due to a full time job taking up the entirety of my work week. I’ve heard a lot of bad things about turnkeys, but there has to be some good to them.

Some best practices for you to keep your money as safe as possible when going the turnkey route are as follows

  • Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
  • Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
  • Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
  • Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
  • Make sure your property manager is a licensed real estate brokerage.
  • Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estate
  • Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.
  • @Lucas Schneider . Hello Mr. Schneider , If the number are good and appreciate a little in value and you are coming out with a nice net profit , why not. Also suggest you learn a little about electrical, plumbing , carpenter, everything about the property that you can . You would be surprised how many times there is a service call that you would be able to fix on the phone , and I am not saying you need to fix everything yourself , but by being educated in those areas, can help deal with your professionals . Always ask the professionals what was the fix and how they fixed it will help you a lot . It is really not rocket science , and never , ever let someone tell you cannot do it . If you are sincere, tell the truth , you will also find old men like me that would give a young , hard working person a chance and help you with a deal, so never give up . Thanks

    @Lucas Schneider   There are good and bad in every industry.  Aside from the obvious checklist items that @James Wise points out, it's also a good idea to actually meet the people you want to do business with.  WHO you are doing business with is just as important as WHAT you are buying. 

    A couple of other items of note... if the TK company offers some sort of guarantee on their rehab, that's a good thing. It means they stand behind their product. If they offer a rent guarantee, they are guaranteeing human behavior, which is not something anyone can/should be doing... it just means they have enough markup in their product to cover it.

    Lastly, learn the difference betten a TK PROVIDER and a TK PROMOTER.  One will typically come with an additional layer of markup.

    Good luck!

    There can be a lot of good to them, for sure. I started buying turnkeys in 2011 and mine have been great. Not flawless, as few rental properties ever are, but plenty profitable and if I compare the headaches I've had with them to the headaches I would've had if I had not gone turnkey, I'll take turnkey headaches all day long. The key is in your due diligence. I've heard of very few horror stories that couldn't have been determined if proper due diligence had been done. If you combine a solid turnkey provider (oftentimes that's the hardest part) with solid due diligence on your part, you should be off the races. Happy to help with anything along the way if you ever need it!

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