Turnkey properties

[Jason Burton]

Hey BP just looking for more information about turnkey deals. I'm in the military so I am moving a lot and have limited time off to travel back and forth to visit properties and do landlording myself so I've determined that turnkey deals are the best for me right now. Is this a good idea? I've read a lot about "hands-off" investors here and noticed a few people who are big fans of turkey deals like @Ali Boone so I'm thinking this is a good place to start. The only problem is how do I find these deals? Does anyone know of someone or someway to find legitimate deals that I can purchase. I'm ready to get in the game.

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[Jon Holdman]

I've looked at a number of these deals over the years. So, let me give you a series of assumptions you should make at the start. Then, do your due diligence to invalidate ALL of these assumptions. Then, realize what Will Barnard says is very true. So, if you can invalidate ALL these assumptions and you're willing to pay something of a premium as Will describes, proceed.

1) The value of the property is less than the seller claims. You must do your own assessment of value.
2) The neighborhood is worse than the seller claims. GO THERE. If you are unwilling to get on a plane or in your car and drive the neighborhood, don't buy. Pictures can tell a far different story than what you see on the ground.
3) The true rent is lower than claimed.
4) You're buying a junker that has had a shoddy, cosmetic rehab. You're going to be hit with an ongoing stream of "repairs" that are really the result of a sloppy rehab.
5) Tenants are harder to find than the seller claims.

I've seen too many of these where a junk property is given some lipstick, sold at an above-market price with a tenant in place "paying" above market rent using the seller's management. The rent is being subsidized by the seller. A few years later you discover the real rent is much than you thought. Repairs are never ending. You try to find another PM and they just laugh that you own property in that area. You try to sell and discover you will take a significant loss to be rid of the property.

Now I have seen some deals where my assumptions are not true. Those are OK deals. Never as good as if you really invested your own time, but that's the tradeoff you accept for turnkey. But I've also seen ones where my assumptions are ALL true. You MUST do your own research!