what do you think about turnkey properties?

Question

Hi guys,

I am very new to RE. Currently I am working in California and think about investing out-of-state since the housing price is too high in my area. Turn-key seems the most hassle-free option and works well for me as a newbie and given this covid situation and stay-in-shelter. I found some people in the BP have turnkey business themselves and the deals look good, like a $80k house brings $280/mo cash flow as the report says.

What do you think of the deals like this? How realistic are the numbers in the report if you have experience buying the deals from the turn-key companies? What factors do you consider for a turn-key deal? Do I still need to find a real estate agent? What companies do you get your turn-key deals from? Will you recommend a newbie to do turn-key or other things?

Thanks

Drew Sygit · Answer

@Yippi Jim Turnkey companies are NOT your friend or looking out for your best interests. They are trying to profit from you, so should not be trusted any more than any other seller.1) Qualify the area2) Qualify the company3) Qualify the propertyMake sure you independently validate any information they provide or that is important to your success.

Ali Boone · Answer

Hey Yippi! (cool name!) I mostly started with turnkeys myself and have now been working with them for almost a decade. As far as whether I think they're good for newbies, I do:https://www.biggerpockets.com/...Most important factors: who you work with, where you buy, doing proper due diligence on the property before you close, and the property management. You don't need an agent, no. Reach out anytime if I can be of any help!

Tom Ott · Answer

Many people who live in expensive markets such as CA or NY invest inward into the Midwest where they can get a better return. Since they are investing OOS, many decide to go with a Turnkey Provider this way everything is done for you beforehand. They should own the property first (not be a listing agent) They should renovate the property in-house. They should also place a tenant PRIOR to closing and stay on as the property manager. They should also be local and not selling you property from states away. Good luck to you!

Will Fraser · Answer

Hi @Yippi Jim! Turnkey can be a great resource for investors, both in state and out of state. The key value proposition of a turnkey provider is simplicity. You buy, it works. Viola! Now that being said, the key things to consider is how does this purchase fit into your overall real estate investing goals? Do you want to buy four properties that rent for $1,000/month, pay them down ASAP, and have the $4k coming in every month from your free-and-clear properties? That's a cool play! Turnkey products from a quality provider could be a perfect route to that!Do you want to amass a sizeable portfolio and pay it down only as you have to? Cool plays to be made with this, too! Turnkey could be a good way to get started, but IMO you'll want to move away from it as soon as possible unless you have a very high income job and a relatively low cost of living (i.e. you have a high savings rate) -- in this case you might be able to plug away for a decade, saving 80-90% of your income and plowing it into turnkey and still amass quite the stable of properties!

Kiera Underwood · Answer

@AJ Singh it's a great way to keep cash in your pocket! The trick is locking these properties down without headache. I've got some solid systems though that keep things easy. Did you work with a provider in Memphis or a normal agent?

AJ Singh · Answer

@Kiera UnderwoodThats the perfect model. we have built a portfolio in memphis using similiar strategy with inherited tenants and solving maintenance work orders along the way.

Theresa Harris · Answer

Turnkey can work, just be careful and make sure you see the place in person before you buy it. There are some companies that promise cheap houses with good returns and they are nothing like advertized.

Todd Rasmussen · Answer

@Yippi JimTurn key providers have to be managed the same as realtor and property management members of your team. We have fired 3/6 of our turnkey providers before building our own team. It's a great way to start, but agree with the advice that you'll want to graduate to your own team quickly.

Andrew Syrios · Answer

If you're buying turnkey, it's highly unlikely you'll get much if any of a discount. After all, why would they leave any meat on the bone? Also, you want to be very careful to vet the turnkey company and get referrals as while there are plenty of good turnkey companies, there are also some unscrupulous ones out there.

Kiera Underwood · Answer

@Yippi Jim I prefer homes that have not been fully flipped by a provider but that are performing as-is. This allows you to purchase at a much lower purchase price. There will of course be more maintenance along the way, but as long as you factor that in and the numbers still make sense, you can purchase a lot more for a lot less. Happy to chat more about my strategy! Good luck getting started.