Smartland Properties turnkey

[Khemaro N.]

Hi All, Has anyone worked with Smartland properties currently or in the past? I'm looking into the Cleveland area for a turnkey rental investment.

[Mike D'Arrigo]

Originally posted by @Brian Garlington:

@Neil Kamdar   I'm in Oakland and I invest in Cleveland. Just like what @Matt Thompson says, I considered turnkey......then I bought off the MLS because the returns are better. It's actually not more money out of your pocket either. Turnkey companies are GREAT if you want to be "almost" completely hands off....but the price you pay for the property is going to be at least a 20% Markup because you are paying for what they have "renovated". I flew to Ohio a couple of times last year and looked around the Cleveland Area....I also utilized a VERY GOOD guide that @James Wise put out on neighborhoods to invest in that are in the Cleveland Area.....Then purchased property off the MLS....

Simple math...........pay $100,000 for a turnkey property?

Or pay $80,000 for one you find on the MLS,....when you include a couple of $700 round trip plane tickets, plus food and lodging for a few days each time you end up "paying" $82,000 and get better cash flow.....vs. $100,000

Brian, I have to disagree that you pay more for a turn key property than buying off the MLS. If that was the case, than the BRRRR strategy which many people on here have successfully employed would not work. That equity that people retain by doing it themselves is simply the profit of the turn key company. The big difference is that most individuals trying to do it themselves, especially from out of state, can't get the same kind of equity that a turn key company can. Turn key companies have much lower acquisition costs. They aren't buying off the MLS. They are buying further upstream at the courthouse steps, tax sales etc. They also have economies of scale in their construction costs and labor. A turn key company can replace a furnace, AC and roof for half the cost that an individual can do it on their own and since they generally employ the same construction crews, have much better control over their labor costs, get projects done sooner and with better quality. Then let's not forget the taxes, insurance and utilites that are being incurred while someone is renovating the property and waiting for it to get rented. On top of that, they will generally have to pay a 1 month lease up fee for the first tenant. These are all soft costs that people forget when they are looking at turn key vs do it yourself. I don't know how anyone can expect to pay $82,000 of the MLS for a $100,000 property. Isn't that $82,000 property going to need renovation? Isn't it highly possible that it will have deferred maintenance or high CAP Ex expenses in the near future because it has an old HVAC system or roof? Having said all that, some turn key companies do put big mark ups on their properties and are selling for over asking price but you can tell who those are. They're the ones that require cash purchases or don't allow a finance or appraisal contingency. If someone is financing then the bank will require an appraisal. If it doesn't appraise, you should be able to get out of the deal. Good turn key companies have no problem with that because they aren't selling over market value. If that's the case, you'll be hard pressed to buy something that is renovated off the MLS for less.