Starting in Turnkey REI

[Sandesh Sapre]

Hi everyone,

I am Sandy. I heard about Turnkey Real Estate investing a few months back. I like the concept of passive income without being an actual landlord. I started researching companies that provide this service. So far I have talked to a 3 of them. American Wealth Builder, Epic and maverick group. Any of you worked with these companies before. I'd love to hear your experiences. I looked at the sample properties from each one of these and they look reasonable on paper in terms of numbers. However when I researched about the neighborhoods, each one of those happened to be lower income neighborhoods with not so great schools and that was the reason ( in my mind at least) for the price to be little cheaper and numbers being attractive (12-15%) I am little concerned about investing in such properties simply from vacancy perspective.

A part of me tells me that they are just trying to make a quick sale as nothing is guaranteed in real estate business. Last thing I want to do is invest in an out of state property that sits empty for the most part. There is also a part of me that says that I won't know it unless I actually do it

Sorry for the long post. Just wanted to provide where I am coming from on the matter. I look forward to expert opinions. Also, if you have any other suggestions in terms of companies, I'd truly appreciate that. 

[Marco Santarelli]

Hello @Sandesh Sapre

Welcome to BiggerPockets!

This is a great question and one that I hear often...

Full disclosure -- I am the founder and president of one of the first turnkey property investment companies in the U.S.  Started the business over 11 years in January 2004.

Here is a VERY brief reply to your questions:

• Not all so-called "turnkey" companies are the same.  I know of several people/entities that do nothing more than make an introduction and nicely "toss you over the fence" to another company that owns property in whatever market.
• A good turnkey provider will have a proven system in place and "hold your hand" through the entire purchase process.
• A full-service provider will have virtually everything you need to assist you with your transaction -- from property managers, to lenders, to inspectors, etc, etc.
• Be aware that some providers are "married" to their market and properties.  We like to say we are Agnostic because we're not attached to any preferential market, service provider, etc.  The client's goals and criteria always come first.
• Numbers will often look better on paper than in practice.  This one point can be a large discuss and a separate post, but be sure that any pro-forma includes a vacancy factor as well as a maintenance reserve in addition to the usual expenses plus property management.
• Often the properties are leased so you can review actual numbers.
• Stick to better neighborhoods ("A" and "B" type) if you want better quality tenants.  Every investor is difference and their investment goals also drive that criteria.  (I wrote a great article on our website blog on this subject.)
• Don't be sold on appreciation (or potential appreciation).  That is basically speculating on the market.  Appreciation is icing on the cake and your property should keep up with inflation over the long-term.  So...
• Make sure the number make sense the day you purchase the property.  Net cash-flow must be positive and the cash-on-cash returns should meet your goals or expectations.

I've been personally investing out-of-state since 2004 and have seen the good, the bad, and the ugly.  I'd be happy to share those successes and war wounds with you. 

I just finished writing an eBook of the subject if you want a copy -- just PM me. 

Hope that helps a little.   I could go on and on... 

Continued success!