I have not bought turnkey, so I will tell you how I would check one.
Run their house against your own numbers, not their sheet. I buy single-family in Memphis under $100K, I need an ARV of $180K to $265K, and for a 3BR I want rent in the $1,395 to $1,950 range Section 8 pays here. Then the 1% rule: rent at least 1% of what you have in it.
Most turnkey is priced at retail, which means the equity and the easy refinance are already gone on day one. If a house they show you still clears those numbers after their markup, look hard at it. If it only works on their pro forma, pass.
Anyone used a turnkey company that was successful?
@Amanda Clark, I think a turnkey company can be worth considering, but I'd want to see how the property actually performs before calling it a good investment. I agree with James about checking the numbers yourself instead of relying only on what the company provides. I'd also want to know what repairs were completed, whether there are existing tenants, and what happens if something goes wrong after closing.
I'm a real estate attorney, broker, and investor based in Maryland, and I work with clients on property purchases, contracts, and rental property matters. I've seen how important it is to review the documents and understand exactly what you're buying before making a commitment.
Thanks for asking this, @Amanda Clark! Are you looking at turnkey properties in a particular state? Happy to stay connected!
Welcome Amanda. One thing I'd ask any turnkey company for is the actual rent and expense history on properties they've already sold, not just the projected numbers on their sheet. I'd also find out who manages the property after closing and whether it's the same company selling it, since that's where interests can get mixed. Then compare their price to what a local agent says the house would sell for, because with turnkey you're usually paying extra for the finished product. If it still works for you after that markup, it's worth a closer look.
The company that sells you the house is rarely what decides the outcome. The management after closing does. We run 236 doors in Memphis, mostly single-family, and the turnkey deals that hold up here share three things: the rehab was done to a rent-ready standard you can verify with your own walk and dated photos, not just their scope sheet; the tenant was screened on verified, repeatable income and a story that matches the paperwork, not placed fast to close; and the first-year numbers include turnover and vacancy, not just rent minus mortgage. For a Memphis 3BR, Section 8 rents run $1,395-$1,950, so test their pro forma against that range. Ask who manages it on day 31 and how turnovers get scheduled. That answer tells you more than the sales sheet.
Turnkey can work, but the stories that go badly usually skip the same step: checking the numbers independently of the company selling the property. Get your own inspector, call two or three local property managers who have no tie to the turnkey company to sanity-check the rent, and ask the company for past sales you can look up and verify. Also find out whether they'll manage the property too, because then the same company is grading its own work. What market are you looking at?