How Time Consuming is Owning Long-Term Turnkey Rentals?

by | BiggerPockets.com

A while back, I came across a topic asking people to elaborate on their long-term experiences owning turnkey rentals. At the time, the number of responses were low, and the few people who did respond had only owned their properties for a short time. Likewise, I had owned two properties (for barely a year) and didn’t feel qualified to weigh in. A couple of years and a few properties later (eight total), I finally feel like I can provide some meaningful input.

The Time Commitment

First off, since I was practicing medicine full time, I wanted to own income property in the least time-intensive way. I recognized that I would sacrifice some degree of return, compared with that of a full-time real estate pro who was sourcing his own deals. After thoroughly researching the concept of turnkey rentals, I decided to take the plunge. As anyone who has followed this category of real estate investing can attest, your mileage may vary significantly depending on the provider, property condition, and location — just to name a few key factors.

Related: Why Turnkey Rentals Might Just Be the Ideal Investment for Real Estate Newbies

I think the intrigue of turnkey stems from the promise to turn the landlord experience into more of a passive investment. This is particularly appealing to the time-starved, high-income professional like myself.

Dealing with Tenant Issues

With that being said, I thought it would be an interesting exercise to share an email correspondences with my turnkey provider for this calendar year. From it, you’ll be able to see how I dealt with certain issues beyond the occasional late payment.

The first message details a routine tenant turnover. Fortunately, my units have averaged nearly two years of occupancy. Tenant turnover has been a relatively infrequent occurrence. The expenses are in line with what I’d been told to expect. As a testament to the quality of our units relative to the marketplace, we were able to bump up the rent and have retained strong interest from rigorously screened applicants, resulting in a vacant period of just about one month.

Related: The Downside to Turkey Rental Properties No One Tells You

I reviewed this email for approximately five minutes in between patients and responded in the affirmative — go ahead with the process. I honestly didn’t think much about it until later in the month when I reviewed the rent roll and noticed the less-than-usual amount. Several uneventful months later, things seemed back to normal. But in late August, another email came through describing issues at two separate properties.

In the first instance, the tenant unfortunately lost his job and fell behind on his rent. He had been rock solid for 18 months before his payments got sporadic and ultimately stopped. The property management team attempted to find alternative lodging for him, which included exploring various social programs and charitable organizations. I believe that in recognition of this, he ultimately decided to make it easier on us and move out, rather than trying to squeeze out more occupancy time through the eviction process. There was no undue damage to the property. This resulted in another routine turnover.

The second half of the email explains that a small section of the kitchen ceiling was falling to the floor, due to water damage from a roof leak. Squirrels damaged a roof vent boot, ultimately resulting in a leak and a $700 repair bill. In my three-and-a-half years of ownership, this was the only instance that required after-hours authorization to move ahead with a repair.

Conclusion

As I came to the end of the calendar year 2017, I characterized these emails as typical in regards to the frequency and scope of issues I’d faced as a turnkey owner with an excellent provider. The communications are concise, but detailed enough to take executive action. There’s also a thorough digital trail, documented via a robust online owner portal. I received an additional seven emails that resulted in either slight delays in rent payment or automatic authorization for minor (less than $150) repairs.

While it is impossible to expect to maintain an income property as effortlessly as a paper asset, with a good turnkey provider, you can come pretty darn close. My experiences thus far have reassured my decision to slowly build my portfolio with confidence that my properties will not be a significant time hindrance as I continue to enjoy practicing medicine full time.

Hear my story on BiggerPockets Podcast episode 219.

What has been your long-term experience owning turnkey rentals?

Do you feel more like a landlord or an investor? Tell be in the comments below!

About Author

kenyon meadows

Kenyon Meadows M.D. is a practicing radiation oncologist and alternative investment enthusiast. He owns a portfolio of single family rentals, does private mortgage lending, and has participated in dozens of real estate crowdfunding projects. He blogs at AlternativeFinancialMedicine.com and is the Author of Alternative Financial Medicine: High Yield investing in a low yield World. Besides real estate, his investment interests include peer-to-peer lending and small business lending among others. His insights have been featured on MSN Money and in The New York Daily News.

12 Comments

  1. Laurel Devine

    Great article doctor! It seems that this vehicle has worked well for you. I myself, am way too much of a control freak for this type of investment but have heard others have success with turnkey investments. Maybe, some day I will try a few to see how letting someone else do all the management and repairs works for me.

  2. Christopher Smith

    While my properties we not Per Se turn key they were very very close. All were relatively new properties when acquired (3 to 5 years old), in middle to upper middle class neighborhoods, required little or no rehab work to put into service, and all are professionally managed with property managers in two different states.

    I think my experience has been similar to yours. I have a professional job so I can’t dedicate too much time to them either, and with professional management in place I have not needed to do so. Typically the only issues I routinely get involved with are participating in the setting of annual rental rate renewals and really major repair events (e.g., water leaks that do significant structural damage). That allows me to focus on my daytime job, the acquisition of additional rental properties and the managing my managers.

    Operationally, I’ve experience no significant vacancies (i.e., less than 1%), and have had no real tenant issues save for 1 that lost his job and had to move to lesser accommodations. My timing was also very good getting in to rental property ownership with most of my acquisitions being made in the 2010-2012 time frame. My CA properties have all doubled (plus) in value with solid annual rental increases over the years, and the Ohio properties have increased in value as well (not as much as CA), with really great underlying cash flow.

    Given the minimal amount of time, energy and grief that I have had to dedicate to this activity things have turned out almost unbelievably well. My major issue now is finding new properties at acceptable pricing levels to acquire, I have only made 1 acquisition (2016) in the last three years and that was in Ohio (I live in CA where prices have totally lost touch with reality – which is great for what I own, but totally forecloses on the possibility of any future acquisitions).

    Ultimately I think the real key was very careful selection of properties acquired during the housing crises (when so many truly great properties were available), and then putting into place diligent, efficient and conscientious professional management teams.

  3. kenyon meadows

    My actual TurnKey provider is a very niche player in the Jacksonville Market that doesn’t advertise for new clients as they don’t have the deal flow and inventory to handle a lot of new inquiries.

    Jacksonville wealth builders and Memphis invest are two companies that I have done business with in terms of lending them private money. I have talked to the management, current investors, and in some cases taken an on the ground look at their newly renovated properties to see the quality of their work.

    Hard to get the 1% rule with them but I am convinced they are quality providers

  4. Chelsea Kennett

    Thank you for this article-I don’t see too much on turnkey properties. What are some of the biggest red flags you look for when vetting turnkey properties and what makes you feel confident when working with a turnkey company? My fear is I will always be hesitant and never take the leap.

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