Rental Property Investor · MA · Member since 2019 · 85 posts · 37 votes
My husband and I are looking for rental properties. We would like to BRRRR but we live in the NorthEast. Prices are SO high here that for our first (well second, we had a 2 family in the past) investment I'd hate to make a mistake on a $600k investment. Turn key out of state seems less risky if you find a good provider. The prices are a fraction and you off load much of the management to the PM.
However, is it possible to scale a turn key?
If you buy for $100k with $20k down. There is no forced equity since you bought it already rehabbed. Can you ever access that original $20k to put toward other properties.
I'm not convinced there will be too much upside left in this market for a good number of years. Some say KC is emerging but that could change.
@James Wise I hear you. Unfortunately, I don't have $25k x 18 to allocate to turn key properties. What I'd like to do is leverage the equity IN the turn key to buy more turn key but there's just no room except for appreciation which seems unlikely for a while in this high market. Or am I missing something?
Why would someone sell you a turnkey property with equity in it? Doesn't make sense. It'd be like selling you a dollar for 80 cents.
Investor · Wichita, KS · Member since 2014 · 47 posts · 15 votes
6y
@Michelle Reid
Hi Michelle, you may want to work directly with a realtor/property management company that doesn’t squeeze all do the equity out before selling like a Wholeseller. We aren’t in the KC market but run a program of this nature for clients that you might be able to take advantage in KC or other locations of your preference. Definitely need someone you can trust and references are always good.
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
6y
Depending on how much capital you have, there's always the BRRRRkey method-- it combines BRRRRing with turnkey. Basically a BRRRR but the turnkey provider does all the work for you so you're just as hands-off as you would be with a turnkey. The upside is you get to have that forced appreciation, but the downside you're money is at risk (versus the turnkey provider's, in the standard turnkey setup).
Only catch with that is I don't know a good provider for that in KC.
Otherwise, your best chance to scale with turnkeys is to buy towards the bottom of the market and let the city/market itself appreciate. I did that with my Atlanta turnkeys...they're all worth double and triple what I bought them for now. But can't do that in today's market anywhere, unfortunately.
My husband and I are looking for rental properties. We would like to BRRRR but we live in the NorthEast. Prices are SO high here that for our first (well second, we had a 2 family in the past) investment I'd hate to make a mistake on a $600k investment. Turn key out of state seems less risky if you find a good provider. The prices are a fraction and you off load much of the management to the PM.
However, is it possible to scale a turn key?
If you buy for $100k with $20k down. There is no forced equity since you bought it already rehabbed. Can you ever access that original $20k to put toward other properties.
I'm not convinced there will be too much upside left in this market for a good number of years. Some say KC is emerging but that could change.
You get 10 residential mortgages. So assuming both you and your husband's name is on your primary residence that leaves you each with 9 available mortgages. 1st step should be to exhaust all 18 of those using 25% down.
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
6y
@Michelle Reid while it's true that you are pretty much buying a turn key at market value because everything is done for you, right now there is good potential for appreciation in Kansas City. Median sales prices in KC were up 11.8% in December YOY and 9% for 2019.
Rental Property Investor · MA · Member since 2019 · 85 posts · 37 votes
6y
@Ali Boone Thank you for that info. Do you recommend any of those BRRRRkey providers? Is that similar to what @Noah Swank mentioned? And yes buying low would be great I just don't know what community isn't already bid up at this point.
Rental Property Investor · MA · Member since 2019 · 85 posts · 37 votes
6y
@James Wise I hear you. Unfortunately, I don't have $25k x 18 to allocate to turn key properties. What I'd like to do is leverage the equity IN the turn key to buy more turn key but there's just no room except for appreciation which seems unlikely for a while in this high market. Or am I missing something?
Rental Property Investor · Tulsa, OK · Member since 2016 · 50 posts · 38 votes
6y
@Michelle Reid If you don't have 20 or 25% down, I'm not sure how you'll do it. If you have some time, you may be able to buy at a deeper discount and rehab from a distance. I know quite a few investors doing this with the BRRRR method. They have a great Property Manager or a great contractor. They'll pay someone a few hundred dollars to check on the status of renovations (like a local realtor) and do video chats with contractors etc. obviously there is plenty of risk doing this from afar. But there's a lot of upside and it's not difficult if you have the right people in place you trust. If you buy at deeper discounts and rehab yourself you can scale with BRRRR in most cities in the Midwest.
Rental Property Investor · MA · Member since 2019 · 85 posts · 37 votes
6y
@Justin Foster we do have 25% for down payment, just wouldn't do it 18 times or $475,000. I do like that idea of hiring someone to oversee construction. Have you done this? I would really like to BRRRR it's just so difficult where I live. How did you assemble a team from a distance?
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
6y
@Michelle Reid to answer your question: can you scale turnkey ? The answer is no. Turnkey is it an investment you don’t want to make. You have no exit strategy and being long distance will make things much much harder.
Lots of people on this thread will try to sell you on the idea of turnkey or something else they make money off of you. I make no money and have nothing to sell.
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
6y
@Michelle Reid BRRR long distance is also a very very risky investment. You're going to trust a stranger you met online to manage your rehab? The minute you start a large rehab, with presumably little construction experience is asking for a lot to go wrong...
yes what you want to do is possible but it’s difficult and extremely risky. Just be aware of that. Nothing about what you’re suggesting is passive
Rental Property Investor · Tulsa, OK · Member since 2016 · 50 posts · 38 votes
6y
@Michelle Reid I only have friends that do this out of state. I invest locally. I’m in a mastermind where half the folks are investing out of state. Up front they put in work and travel to the city they want to invest in. Meet people, find a good property manager and then get to work.
@Michelle Reid BRRR long distance is also a very very risky investment. You're going to trust a stranger you met online to manage your rehab? The minute you start a large rehab, with presumably little construction experience is asking for a lot to go wrong...
yes what you want to do is possible but it’s difficult and extremely risky. Just be aware of that. Nothing about what you’re suggesting is passive
She said her market is too expensive to invest in. So if not turnkey. And not BRRRR. Then what?
@James Wise I hear you. Unfortunately, I don't have $25k x 18 to allocate to turn key properties. What I'd like to do is leverage the equity IN the turn key to buy more turn key but there's just no room except for appreciation which seems unlikely for a while in this high market. Or am I missing something?
Why would someone sell you a turnkey property with equity in it? Doesn't make sense. It'd be like selling you a dollar for 80 cents.
My husband and I are looking for rental properties. We would like to BRRRR but we live in the NorthEast. Prices are SO high here that for our first (well second, we had a 2 family in the past) investment I'd hate to make a mistake on a $600k investment. Turn key out of state seems less risky if you find a good provider. The prices are a fraction and you off load much of the management to the PM.
However, is it possible to scale a turn key?
If you buy for $100k with $20k down. There is no forced equity since you bought it already rehabbed. Can you ever access that original $20k to put toward other properties.
I'm not convinced there will be too much upside left in this market for a good number of years. Some say KC is emerging but that could change.
Turnkeys are meant for the long haul. They are buy-and-hold investments The idea is to invest, earn passive income, and MAYBE sell it in the future if the market has naturally increased enough over time.
Rental Property Investor · MA · Member since 2019 · 85 posts · 37 votes
6y
Thanks everyone for the info. I really want to buy out of state somewhere I may want to partially retire to someday. It sounds like a better strategy to find a few multi-family deals to BRRRR close by for the first few deals to scale. Once tapping equity isn't so crucial, find a turn key, rent it for a few years, then re-assess.
@Ali Boone Thank you for that info. Do you recommend any of those BRRRRkey providers? Is that similar to what @Noah Swank mentioned? And yes buying low would be great I just don't know what community isn't already bid up at this point.
Not sure, can't really tell what his model is exactly. Yes, I do work with a BRRRRkey provider. Shoot me an email (email below in signature) or direct message.
The structure I've been involved with is setup as a every tool needed SERVICE company instead of an INVESTMENT company like a "turnkey" essentially buying and flipping out of the deal.
In other words, a turn key may work as follows:
Turnkey buys real estate, fixes it up, rents it out and sells for a profit in return for their effort. They take a lot of the risk off the table for you, or an investor, which means less return upside too but can still work.
A full-service company could resemble the following:
Work with client as an advisory resource to identify, underwrite (market analysis, construction costs, loan/capital structure), and then manage on-going performance. Market roles are real estate agent, construction company, property management company and financial adviser. All these guys get fee income but never own the real estate, they are taking the other side little risk but not equity upside/tax benefit etc. They also don't have to take every good deal because they aren't relying on the flip profit, which can provide the opportunity for you/investor to get a better overall return.
These are just general comments and providers can vary in services/structure/quality, etc.
Thanks everyone for the info. I really want to buy out of state somewhere I may want to partially retire to someday. It sounds like a better strategy to find a few multi-family deals to BRRRR close by for the first few deals to scale. Once tapping equity isn't so crucial, find a turn key, rent it for a few years, then re-assess.
I started out with turnkeys and think they are a great for certain types of investors. People that invest in turnkey typically do so because they either (1) don't want to put in the time/work, (2) their local market is too expensive, or (3) they don't want to risk messing up on a long distance BRRRR. But if you can find opportunities near by, then I'd pass on turnkeys and do that. Only concern I have is that you mentioned properties are in 600k where you live. That tells me it might be difficult to find a workable deal. You also mentioned you're afraid to make a mistake on such a big investment. Seems like you got some more decision making to do. If you're still considering KC, feel free to DM me, I'm actively investing there as well.
Rental Property Investor · Kansas City, MO · Member since 2019 · 44 posts · 24 votes
6y
@Michelle Reid I’ve been BRRRRing out Properties in KC with less than 20%. The market is hot but even if it cools it’s still a great market to be in. Feel free to message me if you’re looking at KC and want some referrals.
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
6y
@Michelle Reid Although there is no guarantee of appreciation, Kansas City is continuing to see huge appreciation gains. Median sales prices for December year on year were up 11.8% and 9% for the year. There was only 1.9 months supply of inventory on the market in December which is driving prices up.
Danville. CA · Member since 2017 · 313 posts · 220 votes
6y
@Michelle Reid what is your goal? What are you trying to accomplish? Depends on how you are defining “scale”. Over what time period are you thinking?
Sure you can scale turnkey over a longer period of time. If you make the right buys with the right company you can save your cash flow every month until you have enough to buy another property, then repeat. Over the years you’ll compound enough cash flow to buy more frequently and maybe a little appreciation will kick it and you can refi or sell. But you need to define goals and timelines first imo.