hi TJ I also saw your other thread about funds etc so let me reply to both right here
I will give you a brief history on how I became successful in the residential turnkey business and now I make over 20% a year with low to no hassles
First as a NY female Tax attorney who specialized in tax Strategies for high income individuals so I am no real estate guru etc. I realized a few years ago that there are big benefits in investing in RealEstate but NY prices only made sense if you were going to rehab and resell (flip) the properties because the cash flow did not make sense (but the upside appreciation could be amazing!)
So in search of cash flow, all roads lead me to analyze various Midwest markets and their future trends etc but quickly realized that these analysis were worthless because most Midwest markets for residential cash flow business were practically the same.
Low income people, living in mediocre older homes that were basically rehabbed in the same way (meaning they would eventually start costing you more money in maintenance and capital expenses after a couple of years). And I quickly concluded that it would be very hard to try to put all the pieces together by myself to have a local team on the ground anywhere in the Midwest to truly run it like s successful business unless I was living there or was big enough to afford such a structure
Most companies selling turnkey homes have a bunch of people doing the work and they can afford it because they do a large volume hence keeping everyone on a full time basis. An individual like me would have to fly there quite often to inspect, buy, supervise rehab, verify rental processes etc
I quickly realized I would be better off analyzing those who are offering the actual final product called “turnkey properties” that are rehabbed and producing decent income (net 10% + realistic and not hyped by them) with 25% down payment and had a reliable management company in place.
But then I also quickly realized they were all also practically the same. They sound very professional and will show you statistics and projections about their markets - they will talk about their family and God and all these wonderful things they have done but in reality they were all selling similar older homes, rehabbed basically in the same way, rented to mediocre lower income nice families who could not afford 2 or 3 rent increases in the row etc etc
The difference really became in how big they were and hence they could sell their services better but then again the “services” were basically done before you bought which by definition a turnkey is a property rehabbed and rented - so the key element was the management company and if you truly wanted to analyze if these “wholesalers” were as good as they claimed to be was to verify if they had actual available turnkey homes posted on their websites to choose from at anytime and sadly most did not!
What they wanted was for me to prepay and they would get me what I want!
By the way I attended many seminars to find out all this - some even tried to lure me into what is called bus tours etc
By the way the seminars were awesome. I learned a lot and networked and actually met some decent investors and good teachers etc but what upset me were these companies who pretended to have turnkey homes were in fact wholesalers.
Strange that they talked about how much volume they were doing as turnkey but had no properties that they were holding for themselves or readily available for new turnkey Buyers. That was upsetting.
Since my capital was over a million dollars, I I wanted to buy and receive income right away not wait for a rehab process etc.
So I decided to start searching for companies that were offering syndications and I started analyzing those guys and I had a set of criteria: I wanted to make sure their syndications were filed under Reg D 506 with the SEC -
I wanted a steady 10% return per year, I wanted to be able to cash out my principal in full within less than 2 years.
I wanted my capital invested in similar cash flowing properties in the Midwest so I would have a clear collateral for my money because I value safety and security.
And I did not want headaches or hassles.
Mind you, I figured that 10% net cash flow per year with no headaches in a syndication would be better than trying to do everything myself or even buying turnkey directly hoping for a market value increase over 5 or 7 years (look at the Midwest numbers) that I would have to lose since I would need RJ put money back into the properties to keep them in good condition.
Then I finally found the right syndication for that purpose and went to attend a seminar where the actual CEO was teaching others how to set up their own funds and he basically focused how to invest in large commercial deals. The event was for 3 days. There was no bus tours and the presenter was the CEO which made it great because he answered all kinds of complicated questions. He also mentioned that in one of his syndications they had properties in Ohio that were cash flowing in the fund and they were paying investors 8 and 10% returns based on how much people invested and how long they committed their capital etc - what I liked most is whatever capital I would invest would be cross collateralized between all the properties in the fund, and best of all I could cash out within 18 months etc.
He was transparent (had to be because he is filed with the SEC) - he had well over 2000 video Success Stories given by various investors who made money with Hom through the year and they were all on Youtube - most importantly he made sense, was very detail oriented and held over $50 mil of commercial properties in his own portfolio where he actually showed addresses etc
What I liked is that he was dealing with funds and SEC for a few years. When I challenged him to show me the inventory of properties they had in the Ohio fund that was cash flowing he did not hesitate and showed my dozens of homes with pictures and rental
Income.
So I asked him if he would sell to me directly a couple of the actual homes that they had in their particular fund that was dealing with Ohio as they were less than $100k each
Mind you these were vetted by the fund, fully rehabbed, already rented and they were using a third party local, reliable management company.
He hesitated at first because he did not want to sell them (he prefer to raise capital) but then on the next day of the 3-day live event, he reluctantly agreed and I selected a couple properties. The closing was done fast and the management company continued to handle the day today and after a few months I called the fund manager and bought more properties.
And voila, I had found my turnkey properties and was able to leverage them with 25% down - they cash flow at 12% plus cash on cash
I am leary of seminars, wholesalers, sales people in general and real estate opportunistic investors because I have seen many of them try to take advantage of others while pretending to be good people and they are not.
Well after all this rambling I am trying to convey to you that who you deal with is way more important so focus your analysis on that.
Trying to analyze various markets and neighborhoods is overwhelming. Trying to set up your own team long distance and trying to manage the purchase, rehab and management through staff that would report directly to you is very hard.
It is much more beneficial to deal with those who are offering turnkey properties. But caveat emptor (buyer beware) do not deal with them unless they have at least 10 homes (rehabbed, rented and managed by a 3rd party Mgmt co) and all posted on their website - these must be held by their company, in their own portfolio and they should allow you to select and close on any of them right away ( I am not in favor of the program: “Pay me now and I will go get you one very soon”)
When you look at their inventory, look at price vs rent and deduct:
1) property tax
2) property insurance
3) property Mgmt (should be 8% per year)
4) keep some reserves (calculate one month rent per year if the property is rehabbed - this should cover the maintenance and a vacancy every other year)
Remember that if the property was damaged you can usually keep most of the deposit to fix etc
5) calculate a 25% Down Payment and figure out on calculator.com what it would cost you in Principal and Interest payments then deduct that as well
If your cash on cash brings you over 12% that’s a good buy (again provided the property has been rehabbed)
I decided to retire a couple of years ago because i paid off my own home and I have a good commercial property that I bought after the training I took from this fund manager. I also make some great returns on my turnkey rentals in Ohio
I continue to consult for high income investors to reduce their tax etc but it is interesting to note that the real estate fund manager who was reluctant at first to Sell to me any of his individual turnkey homes in Ohio has evolved his program in that fund from buying, rehabbing, renting and holding these Ohio homes to actually also posting them for anyone who wants to buy these homes directly from his fund.
Since last year I use their “virtual flip”?program whereby I purchase 5 at a time all in cash from their fund (at a discount) and they keep them posted on their website to resell them to other investors individually as turnkey properties. This allows me to get the cash flow on the properties that I buy in bulk at a discount and then I get a call that they have a buyer for this property or that property and I keep an upside profit when they resell each property. Then I repeat the process. This has made me over 20% per year. Again, hassle free since the management company handles the renters and the real estate fund handles the marketing and resale.
In closing choose the right company or people, make sure they have actual real inventory available, make sure they will help you resell without gouging you, make sure the properties have been fully rehabbed, make sure you put all the expenses and the right numbers and do not count on any appreciation
