Turn key properties good or bad for new investors ?

Question

Dean Letfus · Answer

This debate will never end. A true turnkey who has rehabbed everything to a high standard is selling you an awesome property BUT you are paying a lot of money for it. Often, (in fact I would say pretty much always),  above retail.

SO only buy turnkey in areas that have good appreciation. Otherwise you have actually bought negative equity. Even if the home appraises on the day you buy it it will DEVALUE in the first 12 months if it's in a market that has no or little growth.

So you have to decide is the peace of mind of a full rehab worth paying a large premium for.

I would say that is usually a bad idea but providing the turnkey has great management in place then sometimes the comfort of top quality rehab and top quality management is worth paying top dollar for.

I'll never understand it and would never do it but I don't always think it's a bad idea for a newbie.

Gordon Starr · Answer

Perhaps a nice 1950's built bungalow.

That is a very good idea. The key in or out of state is to have a strategy where someone else takes care of all the work and you collect passive income. Another approach is have someone find you such a solid brick and hardwood you know low maintenance... little rental sf from the 1950s or just as good the 60s... carpenters guilded. You can also buy them from landlords who have them all set up and then go to a good local pm. Tha'ts two contracts away from the passive prize income machine. little more work up front but you can get a lower price that way.

James Wise · Answer

You can make or loose money with most any product or in any market. Many go the turnkey route because they are looking out of state so they can get cheaper real estate than what they are used to at home. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. Likewise it's not complicated to buy turnkey. Just buy it smart. Whenever you are buying a turnkey property out of state you should do a few things to ensure it's as smooth as possible.

• Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
• Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
• Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
• Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
• Make sure your property manager is a licensed real estate brokerage.
• Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.

Tom Ott · Answer

it depends. Are you looking to invest OOS with a Buy and Hold? If so, it can be great for first time investors. The Turnkey Provider should own, renovate, and manage the property in-house. Nothing should be done by a third party aside from the inspection.  That make its really hands off for you and can be good for someone who works a 9-5 or can't get to the property quickly.

Mike D'Arrigo · Answer

@Felicia Gauthier it depends on a number of factors but if you are an inexperienced out of state investor,  turn key is usually the easiest and safest way to go. There are a lot of moving parts that you need to get right when buying investment property, especially if it needs renovation.

Ali Boone · Answer

If you do them right, I say good.

https://www.biggerpockets.com/renewsblog/turnkeys-...

Larry Fried · Answer

There is no doubt that doing well with turnkey properties in today's markets is far more challenging than it was even a couple of years ago.  As a new investor you have to be extra vigilant in your due diligence of the markets, the team you are considering, and the particular properties.  Include in that a visit to see for yourself, and make sure you are working with a property management that has an excellent record.

Alyssa Paros · Answer

It truly depends on the property and your comfort level. First, the numbers needs to work for you and you need to understand ALL the numbers. Will the turn key company be managing? What are their fees? How do they handle repairs, etc?

You need to do extensive due diligence to make sure the turn key company is legitimate and a good business decision. Being a new investor, you can imagine that it may be more difficult to do this as you don't have as much experience as a seasoned investor. Not impossible, but more difficult.

Also, there is something to be said with getting your hands dirty and learning the ropes of investing. Personally, I want to learn the ins and outs and grow out of the position of being "on call." We're gaining more profit by self managing and growing quicker than if we did turn key.

However, there are plenty of people who make money and succeed buying turn key. So, again, it isn't good or bad. It's looking at what you want your margins to look like and what you want your portfolio to look like.

Turn key properties good or bad for new investors ?

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