Turnkey Investing Questions...

[Lynn Dickinson]

Hello Bigger Pockets!

This is my first ever post here. As a late-middle-aged woman, brand new to real estate investing, with a sick husband, living (in a rent controlled apartment), in a very expensive real estate market, with a full-time job and not a whole lot of money to invest, I've been considering some out-of-state turnkey possibilities as my initial foray into the world of RE. (I believe I have enough for a down payment on a home in one of the less pricey markets.)

But of course I have questions... (I apologize if they sound silly.) I hope you'll be willing to help me with some of these? Thanks!

1. Is the price listed on a turnkey property, "THE price?"  Or do they expect to negotiate? I ask, because when I look at some of these exact properties on Zillow, they are valued at $40k-$50k less than what the turnkey provider is asking. Is that normal? Is it wise to pay that much more for a home than the area/market is estimated to be worth?

2. What is the usual, general, non-turnkey range of costs for a management company to manage one's distant rental properties? I know what the turnkeys are asking, I just don't know if that's in line with the norm, or if what they are asking is considered a high price. And is this fee ever negotiable?

3. I've been reading articles and listening to podcasts, and there seem to be mixed feelings about turnkeys - including some people who feel they have been "scammed" or "ripped off" by a turnkey provider. How does that happen and how can I avoid it happening to me?

4. Given my situation described above, does it sound like turnkey investing is a good RE starter strategy for me? (I can't really spend a lot of time/energy fixing up a place, and can't afford to buy locally - but I need to start generating some residual income and soon. My husband is not going to get well, and his care is starting to get expensive.) 

If you have RE investing experience, I would very much appreciate any feedback or suggestions you may have on any or all of the questions above. Thank you SO much for sharing your time and expertise!

[James Wise]

Originally posted by @Lynn Dickinson:

Hello Bigger Pockets!

This is my first ever post here. As a late-middle-aged woman, brand new to real estate investing, with a sick husband, living (in a rent controlled apartment), in a very expensive real estate market, with a full-time job and not a whole lot of money to invest, I've been considering some out-of-state turnkey possibilities as my initial foray into the world of RE. (I believe I have enough for a down payment on a home in one of the less pricey markets.)

But of course I have questions... (I apologize if they sound silly.) I hope you'll be willing to help me with some of these? Thanks!

1. Is the price listed on a turnkey property, "THE price?"  Or do they expect to negotiate? I ask, because when I look at some of these exact properties on Zillow, they are valued at $40k-$50k less than what the turnkey provider is asking. Is that normal? Is it wise to pay that much more for a home than the area/market is estimated to be worth?

2. What is the usual, general, non-turnkey range of costs for a management company to manage one's distant rental properties? I know what the turnkeys are asking, I just don't know if that's in line with the norm, or if what they are asking is considered a high price. And is this fee ever negotiable?

3. I've been reading articles and listening to podcasts, and there seem to be mixed feelings about turnkeys - including some people who feel they have been "scammed" or "ripped off" by a turnkey provider. How does that happen and how can I avoid it happening to me?

4. Given my situation described above, does it sound like turnkey investing is a good RE starter strategy for me? (I can't really spend a lot of time/energy fixing up a place, and can't afford to buy locally - but I need to start generating some residual income and soon. My husband is not going to get well, and his care is starting to get expensive.) 

If you have RE investing experience, I would very much appreciate any feedback or suggestions you may have on any or all of the questions above. Thank you SO much for sharing your time and expertise!

 Welcome to the site Lynn. Some answers for you below.

1. All things in real estate are negotiable so you won't know if it's the price until you make an offer that is lower than the price or not. It very may well be the bottom dollar, but it might not. Never know till you try.

2. 10% of the rents + 1 months rent every time a unit is leased are the most basic charges. There are of course other charges beyond that such as lease renewals, lawn care, service calls, repairs etc....Any Property Management company you reach out to should have no problem giving you a copy of their contract which should outline all the products & associated prices.

3. Best way to avoid being ripped off or scammed is to get a 3rd party inspection & appraisal on any property you buy.

4. If you want to go out of state you'll need to work with a company who can do the work for you. Whether it's turnkey or a Property Management firm that also sells investments. Either option should be fine.