The Perfect Turn Key Company

Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes

Hello BP member,

I hope your well.

After contributing to the forum over the last 8 months with my own comments and feedback I thought I would compose a post and get you guys give me some comments and feedback lol

I would very much appreciate responses from all investors that have bought turn key , looking at buying turn key and also from the actual turn key operators themselves.

In your experience what are some components that "The Perfect Turn Key Company" would or should have???

For example: prompt at communicating, above average returns, great locations, in house property management, etc....

Thanks for reading my post and your time is much appreciated.

Have a great day.

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Curt DavisBusiness Member

Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes

12y

My word of advice for investors who buy out of state: If you are listening to podcasts/radio shows or on some semi well known wanna be guru's email list and you see they sell homes all over the country, learn what you can and then go seek out the actual companies in that specific market.

If you do this you might get a discount or better pricing. If you dont do this and the guru people with a site slinging deals all over help you out, it is 100% they are making a killing of the turnkey provider.

You will get better service if you find a solid company in a market and do repeat business with them giving them your loyalty. It works both ways.

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Andy Luick
Real Estate Investor · atlanta, GA · Member since 2013 · 456 posts · 237 votes
12y
@Jerry W. - Real estate agents spend a ton of wasted hours chatting and sending out information to tire-kickers so most can't be responsive to everyone. It's just not possible except for perhaps with the newbie agent who is just trying to do something. The average agent nationwide probably makes less than $20k a year. That's why most take your information and then autosend anything that hits the parameters of what you are looking for.
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Engelo RumoraBusiness Member
OP
Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
12y
Originally posted by @Andy Luick:
The thing to remember is that every model and every operator is different. Most pro formas you see are best case scenarios. In our model, our JV partners don't care at all about appraisals because the property will appraise for about what we have in them....but we're turning single fams into multi which are then valued strictly on the net cashflows & rents. We have all had to shift our perspectives over the past 6 years as appreciation just isn't possible in most markets...and where it is, it's on a negatively geared property. The better cashflows are usually still to be found inner city and on sub $40k properties, unless you are employing a model like ours where we get 3Xs net rents. I rarely buy inner city Atlanta anymore but am now doing a few select inner city houses to apply our model to and we'll see how they perform. If it works, we will gradually license the model in other cities where we can partner with people boots on the ground.

Property management is the true weakness in all turnkey models and most of us are forced to do it in-house as a cost of doing business. I can't stand managing our properties and anyone who says otherwise is full of it. I love renting properties and am rock solid at it...fortunately I have an assistant who has taken over the day-to-day on management. I bought a dozen turnkey properties from various providers a number of years ago...and that's with years of experience in the business...and I still got burned on most of them. In fact, after about a 2-year run, I sold them all off for break-even or losses. While real estate investing & rehabbing is fun...I'm here to create wealth. My poor experience with turnkeys led to the creation of the model we now use. As a turnkey provider, we don't really profit unless we perform and the JV partner is safeguarded as much as possible. Look for turnkeys where the providers either have skin in the game or have a financial incentive to perform beyond the sale. If you can stand on their shoulders then chances are you will get a good performance.

Don't be so concerned with appraisals....you can always tell a newbie from a seasoned investor. First thing the newbie does is run to "zillow" or the like to comp the property. If you are planning to flip retail then that might be a good idea. If you are buying a rental property or the model you are using is rental...just determine as accurately as possible what the net rents are, apply your cap rate and you'll have a pretty solid idea of what the property is worth or what another reasonable investor buyer would be willing to pay for it. Value and worth are exactly that...what is a reasonably prudent investor willing to pay for it. BP is an awesome place to share and grow.....Happy Investing!

Thanks Andy,

I would love to talk to you in more detail sometime about your model.

Thanks and have a great day.
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Brie SchmidtBusiness Member
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Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
12y
@Engelo Rumora - I thought I would update you.... We went under contract to buy 9 properties out of state from a "turn key" company we just finished inspections yesterday and I am so glad we took the time to go out there and see them. Total lipstick on a pig. We found multiple foundation, mold, roof, electrical issues. Our definitions of "turn key" was very different than theirs.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Brie Schmidt

Renegotiating or are you passing? Were they fresh rehab or just tenanted properties that needed maintenance?

Many times its the deal that you walk from that makes you the most money:)
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Mike D'ArrigoPro Member
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
12y
@Brie Schmidt One thing you might want to do is ask for a scope of work for the rehab that was done before even having an inspection done. Of course it won't show problems that weren't taken care of (i.e. foundations, roofs, etc) but it will give you an idea if they did more than just lipstick on a pig before you spend money on inspections. If you see a scope that just has paint, carpet and changing a few light bulbs, you know they didn't do anything more than the bare necessities.
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Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
12y
Originally posted by @Brie Schmidt:
@Engelo Rumora - I thought I would update you.... We went under contract to buy 9 properties out of state from a "turn key" company we just finished inspections yesterday and I am so glad we took the time to go out there and see them. Total lipstick on a pig. We found multiple foundation, mold, roof, electrical issues. Our definitions of "turn key" was very different than theirs.

Who is this and where are they out of? Wondering if that would be a warning for others to stay away.
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Engelo RumoraBusiness Member
OP
Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
12y
Originally posted by @Brie Schmidt:
@Engelo Rumora - I thought I would update you.... We went under contract to buy 9 properties out of state from a "turn key" company we just finished inspections yesterday and I am so glad we took the time to go out there and see them. Total lipstick on a pig. We found multiple foundation, mold, roof, electrical issues. Our definitions of "turn key" was very different than theirs.

Thanks for sharing Brianna.

I am sorry to hear this bit it doesn't surprise me.

How long did you spend building a relationship with this turn key company?

Besides the plain obvious repairs there are many little things that should be done during rehab which the potential buyers would never be able to see.

For example:

Something that we would do in C class areas of Kansas City is spend around $1,000 insulating the roof and walls. During the winter it keeps the tenants bill cheaper by around $100pm and due to most of the tenants living month to month it makes the property more desirable and also they won't short the rent to pay the heating bill.

Then you also have more higher ticket items like the plumbing and electrical which also aren't visible in some instances.

If you spend enough time talking to someone and building that relationship you will find out if they are genuine or not and if they do repairs that the eye can't see or just lipstick on pigs.

Thanks and have a great day.
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Brant Richardson
Investor · Santa Barbara, CA · Member since 2013 · 658 posts · 315 votes
12y
I would like a turnkey to be absolutely honest about the quality of the neighborhood. First off they would not even have D's or C-'s in their inventory (they all claim they don't but its not necessarily true). The ROI looks so good on those properties that its tempting to use them to draw investors in. If an investor wants to take the risk on D's, too bad, it just wouldn't be available at "The Perfect Turnkey Inc.". Secondly, the C neighborhood properties would not be marketed as B's. An out of state investor can do some pretty good due diligence on confirming the rent and purchase price range, but neighborhood is something they have to trust somebody about. Thirdly, if it is being sold at full market value, it should have an awesome rehab, every inch of it, granite/hardwoods, roof etc.
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Brie SchmidtBusiness Member
Moderator
Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
12y
@Jay Hinrichs - As of this moment 6 are dead and 3 are possibly dead

@Mike D'Arrigo - I did not ask beforehand. We had a strong inspection clause put in because they would not let us disturb the tenants for an inspection without a contract.

@Dawn Anastasi - These are in Milwaukee. To some people I am sure the properties are fine, we just had different definitions of the word turn key. To me, if I am paying a premium for a rehabbed property I expect there to not be significant repairs in the first year and these had roofs that were already causing water damage

@Engelo Rumora - we had no prior relationship. We just started looking in this market a few weeks ago. A lot of the properties had recent city inspections and passed, but the company has 3 members and each have a specific job and the guy working with buyer has not even seen the properties or knows what was done. So we have run into communication problems where answers are taking a lot longer than they should and then it becomes third party communication.

@Brant Richardson - I couldn't agree more. I understand buying turnkey = paying a premium. But that premium is also usually worth the time I save having everything done.
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Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
12y
Originally posted by @Brie Schmidt:
@Jay Hinrichs @Dawn Anastasi - These are in Milwaukee. To some people I am sure the properties are fine, we just had different definitions of the word turn key. To me, if I am paying a premium for a rehabbed property I expect there to not be significant repairs in the first year and these had roofs that were already causing water damage

Roofs causing water damage is DEFINITELY not "turnkey" in my opinion. I don't even know who the turnkey companies are in Milwaukee (or that there were some -- sounds like there really "aren't" based on your definition!). Hopefully they are not steering you toward bad neighborhoods.
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Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
12y
I think this recent blog post of mine (with a picture of a Milwaukee property I visited in person) tells a good story of what good photography can do to "trick" investors who don't visit the property in person.

When good photography masks a bad rehab
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Brie SchmidtBusiness Member
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Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
12y
@Dawn Anastasi great post!
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Ed Riggenbach
Property Manager · Milwaukee, WI · Member since 2014 · 65 posts · 38 votes
12y
Last year I managed a duplex in Milwaukee for an out of state investor who got taken by either the same company or a similar company in town. This investor did not do his research as @Brie Schmidt did and was caught in a very bad spot. When I looked up the property, the company had bought it for $10 K and sold it to him for $30 K within 2 months. It didn't look like they put more than $5 K into it and shoved it the first people they could find off the street. It was littered with code violations and needed at least $20 K to make rent-able. I felt bad for him but when he couldn't admit to himself that he was scammed, there wasn't much we could do to help.
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Brie SchmidtBusiness Member
Moderator
Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
12y
@Jay Hinrichs - we backed out of the entire thing... way too many repairs for the returns.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Brie Schmidt sometimes you make the most money by walking on a deal :)
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Engelo RumoraBusiness Member
OP
Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
12y
Originally posted by @Brie Schmidt:
@Jay Hinrichs - As of this moment 6 are dead and 3 are possibly dead

@Mike D'Arrigo - I did not ask beforehand. We had a strong inspection clause put in because they would not let us disturb the tenants for an inspection without a contract.

@Dawn Anastasi - These are in Milwaukee. To some people I am sure the properties are fine, we just had different definitions of the word turn key. To me, if I am paying a premium for a rehabbed property I expect there to not be significant repairs in the first year and these had roofs that were already causing water damage

@Engelo Rumora - we had no prior relationship. We just started looking in this market a few weeks ago. A lot of the properties had recent city inspections and passed, but the company has 3 members and each have a specific job and the guy working with buyer has not even seen the properties or knows what was done. So we have run into communication problems where answers are taking a lot longer than they should and then it becomes third party communication.

@Brant Richardson - I couldn't agree more. I understand buying turnkey = paying a premium. But that premium is also usually worth the time I save having everything done.

Thanks for clarifying Brianna,

Just a heads up that's its not too difficult to establish relationships with certain city inspectors and sway their decision on work that shouldn't pass the inspection.

Thanks and have a great day.
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Engelo RumoraBusiness Member
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Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
12y
Originally posted by @Brie Schmidt:
@Jay Hinrichs - we backed out of the entire thing... way too many repairs for the returns.

There is always another around the corner.

I don't think I was ever disappointed on missing out on a deal.

I do get buyers remorse sometimes where my mind plays tricks and I start thinking I could have bought it cheaper or I did this and that wrong haha

Thanks
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