All Forum Posts by: Chris Clothier

 What really sucks for investors, especially out of area investors buying across the country, is that Turnkey does not mean anything!  It is a marketing term that any Tom, Dick & Harry can use to SELL their properties.  That is the real problem.  I - have not looked at that report yet, but I think you would agree that a property like that should never be sold Turnkey.  That is just an existing rental property - not much more.

 Peter - 

I do not know you or the company you are dealing with since you have not identified them, but after having spent years in this particular niche, I can assure you with a high level of confidence that this is not a "one time just me incident".  It is most likely indicative of a bigger problem and that is the size of the company you are working with.  Ask yourself one question:

What would have happened had I not ordered an inspection?

Forget about the fact the property is turnkey and just focus on quality renovations.  There is a process and there are steps that have to be followed on all renovations.  Details are absolutely important and the things you listed go to the very heart of what makes a property quality.  IF the TK company does not have the people or the mentality to focus in on details like dead rodents and over-grown vegetation next to a property, then they most likely are not paying attention to the bigger issues or simply covering them up.

Lastly, you have mentioned on here that you did not think you needed to visit the property (and I assume you have not visited the company in person or their offices) because the point of turnkey is to not have to do that.  The point is that you trust that it is all done for you.  

That is a very dangerous understanding of turnkey.  

You absolutely must make sure that your interests are being watched over closely by the partner company you choose.  Often times that requires you to visit the city, the company and sometimes the actual property itself in person.  Turnkey does not mean that they literally do everything for you and a check arrives in the mail.  Investors who invest that way usually end up losing money and blaming the TK company when they could have avoided the loss by simply visiting in person.  You can tell a lot when you visit in person.

Best of luck as you move forward but hopefully you choose carefully before moving forward with this particular company. 

 Im late to the party everyone and it looks like the thread has gone three-sheets to the wind, but I agreed with your post Ben.  There is a balance that has to be achieved and, in my experience, only gets achieved at a higher price point and with economies of scale.   That doesn't mean higher priced equals better, it just means that at lower price points there is not enough spread for both an owner and a high level manager or TK company.  The dollars are going to go to one or the other, but not both and it is the owner who always loses.  

Same goes with small TK companies.  No scale prevents them from being able to profitably operate their business and provide service to the owner so the owner CAN make money on their investment.    Good management requires people, meticulous processes and systems to improve efficiency.  Without it ---- investors fail ---- which is why many investors in TK properties fail.  There simply are not very many companies out there with the size required to make investors profitable over time and year over year.  

@Edward Hatcher

 RealtyTrac just published their April letter and it was all about Tennessee with a lot of great data about Memphis.  Gives some good perspective on what is happening with the market.  I did write one of the columns for it - so I am a little biased when i say it has great info! - but there are several good articles on Memphis as well as other cities and how the market is shaping up.

April 2015 Housing News Report

Check it out for some insight.

@Alex Filipe

 - Best part of your response is that you are waiting and learning.  Not taking action immediately so you can learn and taking time to gather your resources is an extremely smart decision.  And on this site you can build some fantastic relationships, mentorships and really be ready to have great success as you get started because you took your time.

Best of luck as you enter the military as well.  All the best to you - 

If you are new to real estate and planning to either use property management to manage what you are buying or a Turnkey company, then the answer is no.  You will not save money by going a DIY route and hiring a PM company.  You will pay more in price for service and product as well as the time you spend.  If your time is not worth much, then you might be able to go this route and come close to the pricing a quality TK company can provide.  It has to been my experience over the last 13 years to say that nay PM company offers better service than a TK company.  Even the bad turnkey companies tend to give their clients more attention than many PM companies I have experience with for the exact reason @Curt Davis mentioned.

The real problem with your question is that Turnkey is a marketing term.  It does not really describe anything as referenced even by what @Ryan D had to say on here.  He referenced that Turnkey companies get inflated rents and guarantee first year rent.  That may be true where he is located in MO., but I have not met a TK company that has been in business for any length of time and with any level of success that still uses guarantees to attract buyers or inflates rents.  Both are popular cuts to take at TK companies, but don't actually exist with most TK companies.  

Then again, like I said, Turnkey is a marketing term and there are literally hundreds of companies out there who us the word and yet have their own twist to how they operate.  Turnkey does not really describe an exact way a company does business or offers service.  

@Curt Davisundefined

@Sonya A.

 Welcome to BiggerPockets!  You have found a great site to help you get started as well as a great place to get inspiration and ideas.

You seem to already know where you are going and I am sure there is a reason why.  Just reading through, I wanted to add a couple of thoughts to reinforce what Curt said. 

I think @Curt Davis was spot on.  Low priced properties, which may be all you believe you can budget for, are an extremely risky investment for a passive, out of area investor.  Locals can make the low-end stuff work - but only because they are close to their properties...and believe me - they are work!  I speak from experience that passively investing and sticking to a cheap price point is a tough road to go down.  It does not matter how good your relationship with a company is or how good your team is  - if the property is a low-end junker, even one with decent repairs (quality repairs require more money and drive prices up), it is going to attract a tenant that can only afford lower rents.  

That is a tough road to travel as a beginner and as an out of area investor.  Be careful as you go and if you are not comfortable, there are literally a dozen other ways to get involved with real estate passively and build your resources until you can buy a property with better underlying fundamentals like location, price point, repairs and tenant quality.

If I had to do it all over again - going back 13 years - I would skip the cheap crap.  They took valuable dollars out of my pockets, caused sleepless nights and took years off my life!  I would change my approach and build my portfolio on the back of better properties in better areas with the best teams.  You are not going to find the best in these lower price points.  The ones who succeed with the cheap stuff are the active investors who are local and hands-on.

Hopefully that does not come across as negative.  I want you to have massive success and get stared as soon as possible - just wanted to reinforce a point that may have been missed.  Best of luck to you!  

Hey @Matt R. - I wasn't diggin in at anybody, just wanted to see some data.  Not so much that markets are smoking or builders can't build fast enough types of comments - just searching a little deeper.  And your comments about the foreclosure you bought being 15% below peak value and the one next door selling 7% higher in 30 days - those are great stats about where your buying.  That for me would constitute a fast moving market with lots of room left to continue and that is on the west coast!

Also, your CNN list is probably spot on based on the data points they were looking at.  I just wanted to see some details and sure wasn't digging at you or anyone else.  I love the fact so far that @Karen Margrave has been able to get so many people to reply.

Great comments Jason! 

I think it is funny how every market is HOT, HOT, HOT - if not Super Hot!  I think the details on the Denver market on this thread are great, good examples of what makes that market hot. 

As for the rest, I want to know what makes a market hot?  How is anyone qualifying a hot market?

I love where I invest today, but I'm not sure I would fall over myself to say Memphis, Dallas and Houston are smoking hot markets.  Prices that we are having to pay for properties we want to buy and the rents we are getting both are escalating in all three markets.

It is hard for me to say the markets themselves are hot because we operate a bit differently and our rents have always been higher than other companies.  So the data we have shows rents escalating year over year and price per square foot on both the purchase and sale of the property as higher on a quarterly basis, year over year.

One thing we have noticed in Houston is that there is less competition right now.  Price pressure is still high, but we are able to buy more properties right now than we could 4th quarter last year.  

So I think my particular niche in those markets and my business in particular are hot and I think the markets we are operating in are very positive.