Turnkey, brrr, or what? Suggestions for my situation?

Question

Hello all!

I am excited to have such a large knowledgeable community to ask this out to:

I am coming into a chunk of money from an inheritance sort-of-speak. I have the money and time but little-to-no experience. I'm also not exactly a hustler/deal-maker, so I just assume tasking this out to the pros would be smart to get in the game.

I would like to buy a multifamily to generate passive monthly income. However, I am in the Seattle area and house prices are higher here, so I was thinking of looking out-of-state. A turnkey deal seems to meet my needs of bringing the experience but I don't want to get taken advantage of either.

What would you suggest is the best way to go?

1. turnkey or work with wholesalers on finding a deal?

2. stay local or look out-of-state?

I appreciate your input!

Forest Skufca · Answer

@Leela Weiss First of all, welcome to BP! And, congrats on taking the first steps into real estate investing!

You are on the right track and asking all the right questions, so keep it up! If investing out of state is an option, what markets are you interested in? Also, have you thought about higher-quality SFH instead of multi-family?

I know there are amazing deals to be found in the multi-family space, however, something I often ask investors weighing the pros/cons of single-family and multi-family is this - When is the last time you drove by a tri-plex or quad-plex and just thought, "Wow, what an amazing house! I would love to live there!"? The response I usually get is a chuckle. Because they know those properties aren't always the nicest, they often aren't in the best neighborhoods, and they ultimately wouldn't want to live there either.

What can make or break your investment is the quality of tenant(s) you attract and put in the property. Again, I know there are great multi-family deals out there and tons of success stories, so I'm not saying they can't be found or that they aren't successful.

However, if you could achieve the same results with one or more higher-quality single-family homes that cost just the same with less risk, are in nicer areas, and attract a better quality tenant that pays on time, doesn't trash the house, and is pleasant to work with - which would you choose?

Additionally, I know there's some hesitation with using a turnkey provider, however, the key is to do your homework to select a great company that checks all of the boxes and operates in the markets you want to be in. When you do that then you get security in your investment because the properties have often been rehabbed to address potentially large capital expenses, you get the right to be picky and choose an investment that meets your goals, you earn passive income as they should manage the property, and a great company will stand behind their "numbers" and guarantee the rent and maintenance for 1-2 years. You can also choose to go with a provider who only works in class b neighborhoods as those properties tend to have higher quality homes with better tenants.

Again, you have the advantage here and you have the opportunity to be picky and take your time! There are great deals and strategies for markets all across the country. It really comes down to your goals and what you wish to achieve from your investments.

Let me know if you have any questions! I'd be happy to help in any way I can!

Andrew Hogan · Answer

@Leela Weiss Great question!

I think your first step is to educate yourself thoroughly on different passive investments that produce consistent income. You've mentioned a few. Another option would be a multifamily syndication. From there you'll need to learn how to evaluate managers/sponsors of those types of assets. Doing this will greatly reduce your risk of losing capital. Mitigation of that risk should be your chief aim!

Happy Hunting

Jonathan Oh · Answer

Hard to fully answer this question without knowing how much capital you're working with. BRRRR prob isn't for you since you want to hire pros to do it. Turnkeys are a great option for you. It's very hands off and you get the benefits of being a direct owner. You might also want to consider syndications, but make sure you vet the sponsor. I have money in both so feel free to message me if you want some more info. Good luck!

Chris Coleman · Answer

@Leela Weiss

You really need to decide how active you want to be in the whole process.  It’s great that you have the time, but is sourcing real estate how you want to spend it?

I recommend checking out the Articles, Forums and reading more on here about BRRRR and Turnkey, and then decide which approach you think you would really enjoy more.

There are very reputable Turnkey providers and very reputable agents, both of whom could help you meet your goals.

Brandon Sturgill · Answer

@Leela Weiss I think you may have answered your own question...there are reputable turnkey businesses everywhere...it's all relative. And skip the wholesalers...

A secondary thought is to stick with a great agent and do some deals your comfortable with...helps to have a pro in your corner.