What do you look for in a turnkey company?
I've seen posts about whether people should use a turnkey company or not, but for those of you who have used a turnkey company for out-of-state investing, what KPIs do you pay the most attention to? Do you focus more on the front-end stuff like how many properties they look at vs. acquire, how often major items like roofs/HVAC etc. are replaced? Or is the back-end performance more important in your analysis—days on market, occupancy, eviction rate, maintenance costs, etc.?
Curious what experienced investors look at when evaluating a turnkey company.
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I come at this from the construction side rather than the buyer side, so take it for what it's worth, but the KPI I'd care about most isn't on either of your lists.
It's what they replaced versus what they cleaned.
Every turnkey rehab has a moment where somebody stands in front of a 19-year-old furnace that still fires and decides whether it goes in the number. Same call on a roof with a few years left, a water heater from 2009, cast iron drain lines that flow fine today. Cleaning those and calling the house renovated makes the pro forma look great for about 30 months. Then the buyer eats them all at once, and it lands as "maintenance costs" in year three, which is exactly the metric that looks fine on the company's own back-end reporting because it happened after the sale.
So the question I'd ask is simple: for the last five houses you sold, what's the age and condition of the roof, the HVAC, the water heater, the panel, and the sewer line, and which of those did you replace? A good operator has that in writing and will hand it to you. A marketing operation will talk about their process instead.
Two related ones. Ask what percentage of their sold homes have had a capital item replaced within 24 months of closing, and whether they'll say it out loud. And ask to see the actual line-item scope from a finished job, not a sample or a summary. Anyone doing the work themselves has hundreds of those and can send one in five minutes.
On your front-end versus back-end question, back-end wins, but I'd weight it toward maintenance cost per unit in months 12 to 36 rather than the first year. Year one looks good on almost everything. Year two is where the rehab tells the truth.
For context, I run a construction company and do investor rehabs and turns, so I'm the guy on the other end of those decisions, which is why that's the metric I'd chase.