Are Turn-Key Companies Worth It?

Question

Hey All,

I am still in the learning phase of investing and just heard about companies selling turn-key properties to out-of-state investors that already cash flow. This seems like such a great deal, but then why wouldn't everyone do this? Aside from the obvious reason that you could increase your returns if you put in the work up front. I'm curious, what are some other down sides to this option? Thanks!

Chris Clothier · Answer

Like every industry - there are companie and people out there that are unscrupulous.  Today, the word Turnkey has a super loose definition and is used by just about everyone to describe what they are doing.  That is done precisely because of your question.  Investors make assumptions that everyone advertising "turnkey" is doing the same thing.  Unfortunately that is not the case.  @Ryan Muska is a good example of that scenario.

If you want to own property and do not want to find it, renovate it, manage it or build the different layers of team required to do that, then buying a semi-passive investment from a company that does all three of those things - Turnkey - is a great way to go about investing.  You will get bombarded here on BP with posts about how you should jsut be doing it yourself or investing in passive syndications, which are the right ways to go for some but not all investors.

This style fits well with people who want to invest in real estate and own the assets, but have no interest in learning the real estate game.  No different than anyone who owns a 401k invested in the stock market and couldn't tell you what a PE ratio is.  We all have our interests and plans and if you are attracted to this semi-passive style of real estate investing, then you can absolutely be successful.

Be patient.  Research here on bp some of the top brand that provide turnkey properties.  Look for companies that are actually buying, renovating, selling and managing.  JWB in Jacksonville, FL, Spartan in Birmingham, Bridge in Kansas City, Pinnacle in Kansas City and Indy, REI Nation (my families company in the Southeast US), Texas Turnkey in Houston, plus several other companies in Memphis are all good places to start your research.

Read about them and testimonials both good and bad.  There are several really good companies out there.  Many specialize in areas or price points, so you should have no issue finding one that meets your specific needs and makes you feel comfortable moving forward.  Did I say to be patient?  No need to rush.  A good company will spend as much time as you need to feel comfortable.  We have had investors buy within days of us first talking and others who purchase 6 months after first meeting.  It is all about meeting you and your expectations and helping you feel comfortable.  I think several companies on that list operate that way.

Best of luck!

Malorie Moore · Answer

Hi Jen,

This is a great question! From my experience working with investors, most invest in turnkey to be able to do the least possible while gaining passive income. I would say the trust factor plays a big part in keeping some investors from doing it. My advice is to search all of the companies you are looking at on BP, google, and schedule a call with each to get a feel for their processes and their experience in the markets they are in. There is alot to consider, but once you get your feet wet with a reputable company I know you will be happy to have some turnkey properties in your portfolio.Good luck!

Ryan Muska · Answer

I bought a "turnkey" investment property that needed merely "cosmetic" work.

After the purchase, a new roof, new subflooring, and a new ceiling later, I'd now call it a turnkey.

Beware of false advertisements. Just because someone says they did the work, does not mean they actually did. People don't care about the person after them, so make sure you are fully aware that the work they say they did could, in fact, have been done, but in a poor/ineffective fashion or not at all.

Eric Gerakos · Answer

Good question, Jen. Just know that turnkey companies are selling you properties at above market value for the convenience so they will not be as profitable as properties you find yourself. Also there are unscrupulous turnkey operators and legitimate operators. Always do your own due diligence and get your own appraisal on any property. In this market I think there are better options for you.

Dave Foster · Answer

@Jen Menchaca, from the perspective of a 1031 investor good turn key properties can be a great way to mitigate some of the angst with the short timelines of the 1031.  Turn key companies will generally have multiple properties to choose from.  And the ability to time your closings to meet what you need with your 1031

Lane Kawaoka · Answer

I did it when I started working and did not have much money but a good W2 job. It depends on your higher and best use. Most people don't make 100k a year and they do more active stuff. Turnkeys is a good way to start on the passive side - most investors graduate out of it.

Travis Biziorek · Answer

It really depends on how much you value convenience.

At the end of the day, that's what's being sold. And like others have mentioned, it's usually sold at market or slightly more.

If you don't mind that and it aligns with your goals, yes it makes sense.

Are Turn-Key Companies Worth It?

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