Turnkey provider in the Des Moines area?

Question

Hello,

I have some friends that live in the DSM area and have been hearing good things about population and job growth there. Does anyone know of a reputable TK provider in that area?

Chad Daniel · Answer

@Kalen Jordan - Full disclosure - my wife and I own Turnkey Iowa.

Yes, it's realistic. We've proven it. Does that mean it'll happen on every property and in every year in the future - definitely not.

BTW - we have not seen any other Turnkey providers providing properties in Des Moines, but would be glad to know if you find any.

That said, appreciation is a HUGE lever and assumption in any RE returns. 0% appreciation knocks the financed return from 34% down to 20% on 1430 Idaho.

• $950 Uses actual rents - solid
• $835 Taxes - logical that assessed value would jump up to purchase price, but we apply for significant 10 year tax abatement w/ the city to knock them back down, at least for 10 years
• $600 Insurance - actual we've experienced - solid
• 10% Management fees + Leasing/advertising/tenant turns - About right, but does depend on number of tenant turns, and selected manager
• 5% Maintenance - our target, though we've not experienced this level. We are not knocking out the deferred maintenance items with properties in our own portfolio, so expect this to be higher for ours (e.g. we leave 30 year old furnace if it still works with places we keep ourselves, but do proactive replacement if we'd sell as turnkey)
• 80% LTV's at 4.75% have not been a problem with our properties/markets, rates have been at about this level or lower in our experience in 2019
• 5% Vacancy rate - matches our experience w/ our preferred property manager over last 3ish years

People also ask us why the ...heck... we would sell assets that have performed like this. In short, we don't have enough of our own capitol to purchase and hold all the properties we can find and rehab. Why not help some other investors? Yes, we provide this help while making a few $. Our desire is to make the properties cost-neutral vs. you doing the legwork yourself. That is, we source good enough deals and renovate with our systems and contractors so that we can make a profit and you pay same or less than doing all this yourself. Every person's situation is different, so tough to make a general statement (e.g. we'll never be cheaper than you finding the deal by knocking on doors yourself, doing all the renovation work yourself).

Rick Mapes · Answer

Shhh, keep lettiing people think this is all farmland!  :-)

Kalen Jordan · Answer

Syndications sound interesting. What are the downsides? Is there any way to protect or insure your money or are you basically just handing it over and trusting it to the other party?

Lane Kawaoka · Answer

@Peter S. I have one in des moines

Luke Miller · Answer

@Kalen Jordan Take my response with a grain of salt because I am a syndicator. You should always do your own due diligence when making an investment. Also, "Syndication" is just a fancy word for pooling investor funds to buy something bigger. You can syndicate almost anything, but since this is BP, let's stick to commercial real estate properties.

Downsides:

You could lose all of your initial investment (usually $50 to $100k)You give up total control in most cases. (For some this is good though)Usually there's an on-boarding process for most qualified syndicators before they'll take your money.  (i.e. you might not qualify to invest)

I wouldn't be a good salesman if I didn't give a couple Pros too though.

Pros:

MUCH more control over your investment than the stock market.You can invest using most retirement accountsReturns blow the stock market awayIf investing in multifamily, you can take advantage of many tax benefits including depreciation and cost segregation.

Peter S. · Answer

@Lucas Miller thank you for contributing your thoughts. As time has gone on and the market has continued to go up in CO, I've been more inclined to look at alternative investing options. TK and various other online offerings fundrise and roofstock to name 2) are intriguing due to the relative passivity of the investment.

I work full time and earn a great income with my W-2 job but would like to diversify my investment portfolio with more real estate.  I'll have to do a bit more digging into syndications as they sound more like what I'm looking for.

Luke Miller · Answer

@Peter S. turnkey properties have their place for investors who want to stay in control of their investment. Folks who have make the decision that single family homes are the best option for their specific scenario and they understand that there are potential downsides to purchasing at a distance are perfect for TK.

However, my beef with turnkey properties is that they are sold as a "passive" way to invest in real estate. Every person I know who has bought a turnkey property spends a massive amount of time (in proportion to being passive) dealing with problems. Common issues are: rehabs, evictions, management issues, city issues, etc...

The reason you're hearing so much about syndications lately is since private equity offerings were opened up to basically everyone a few years ago, people are finding out that there truly is a passive way to invest. There are obvious downsides to that as well, but for investors looking for true passivity, it can't be beat. From the turnkey offerings I have seen, the returns on my deals are close if not the same. Difference being, much more tax advantaged and total passivity.

Peter S. · Answer

@Lucas Miller I'd still be interested in hearing your thoughts.

Luke Miller · Answer

I was about to add my thoughts, but realized this was from two years ago! Hope you found what you're looking for @Peter S.

Turnkey provider in the Des Moines area?

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