Is turnkey investing bad or can it be profitable?

Question

So I've done some reading on turnkey property investing (i.e. biggerpockets, google, etc.) and for the most part, people are saying it's a bad investment. However, I really like the concept as I'm someone who doesn't want to make real estate investing a full-time job due to my other commitments. I'm also having analysis paralysis and can't trust my own calculations (fear that I'm missing some variable or not doing the calculations correctly) during the due diligence. I also live in the Bay Area and while there may be some deals here, I don't feel confident enough to fork up the capital here and think it would be better to look elsewhere.

My question is this: can I develop a respectable portfolio of cash flowing properties through turnkey alone? Also, what is a good cash flow range for a turnkey property?

Twana Rasoul · Answer

@Glenn Gillen I would recommend house hacking locally if you can to start off and you can even use fha loan to do 3.5% down on an SFR or 2-4 unit property...even in the high cost of living area you live 3.5% down will be less than the 20% down that you'll probably put on an out of state investment.

Cashflow is only a portion of the overall picture you need to be looking at when investing long term.  Just because a property cashflows does not mean it is a great investment.  Also if you are buying turnkey properties in areas with very little to not much appreciation at all then you are missing a big portion of potential wealth you can be building by investing in real estate.  how much equity will the property gain aside from you paying down principal? Also, in your market even if you start off negative cashflow or neutral, you can make that up relatively quickly overtime due to rent appreciation.

Best of luck

Stephen Akindona · Answer

Yes! You can build a strong performing portfolio with turnkey assets! Of course, if you find the deal yourself (usually distressed), have your own team to do the rehab and then place tenants and manage the property all by yourself you WILL have higher returns! Unfortunately, there are some who don't have the time or the experience to do this and turnkey is a great solution. Just like doing it yourself, its all about the people you work with! Work with reputable folks who you can trust and verify everything! If you do that you can pickup some great properties!

Aigo Pyles · Answer

@Glenn Gillen

As a turnkey provider in Memphis, TN, well I can say that turnkey properties are a good investment but it depends on the location and the property itself. If you are buying a turnkey property in locations where the market prices are high or the market for rental properties is not strong that becomes a problem.

Good cash flow is around 9 to 12 percent and higher than that. You can create a good portfolio with turnkey properties.

Theresa Harris · Answer

Yes you can.  It depends on the property and the market, but turnkey properties can be good.