Has anyone bought from a Turnkey Rental Company?

Question

I have been learning about real estate the past few months and am looking to purchase my first rental property in the near future. I am more interested in cash flow so turnkey companies really caught my attention. I was wondering if anyone has had any experience with long distance investing using a turnkey company. The company I am most interested in is Rent To Retirement (renttoretirement.com) which has been featured on the bigger pockets podcasts many times. They offer newly renovated cash flowing properties that already have a tenant and a property manager. Thanks!

Account Closed · Answer

Hello Adam!

This is actually a topic that has been covered here on the forums many times.  I'd be happy to share with you some of the other threads that you can review as well to jumpstart your assessment!  Feel free to reach out with any questions you may have as well!

https://www.biggerpockets.com/users/ericw536/references

https://www.biggerpockets.com/forums/92/topics/518583-feedback-on-renttoretirement-and-zach-lemaster

https://www.biggerpockets.com/forums/92/topics/765347-rent-to-retirement-review

https://www.biggerpockets.com/forums/850/topics/895660-my-first-investment-property-an-out-of-state-deal

https://www.biggerpockets.com/forums/92/topics/893621-rent-to-retirement-review?highlight_post=5222888&page=1#p5222888

https://www.biggerpockets.com/forums/311/topics/915728-experience-with-rent-to-retirement-turnkey?page=1#p5345200

https://www.biggerpockets.com/forums/92/topics/808479-rent-to-retirement-experiences

https://www.biggerpockets.com/forums/12/topics/533693-anyone-worked-with-renttoretirement-turnkey

https://www.biggerpockets.com/forums/92/topics/581730-rent-to-retirement-zach

https://www.biggerpockets.com/forums/48/topics/874096-reviews-on-r2r-and-nch?page=1&utm_source=Iterable&utm_medium=email&utm_campaign=Transactional:%20topic_notification&utm_content=Transactional#p5123754

https://www.biggerpockets.com/forums/311/topics/883772-turnkey-investing-renttoretirement-feedback-reviews?highlight_post=5171720&page=1#p5171720

https://www.biggerpockets.com/users/ZacharyCole/references

Todd Rasmussen · Answer

@Adam Thomas Welu

Turnkey is great for a small percentage of people throughout their investing careers. If you are starting out, you will typically grow in competence to not need them after a few deals. If you have more money than time, they are great to continue with past that point. Great way to start, but using one is not a reason not to perform your own due diligence.

Properties # 1 and 3 for us came from a turnkey provider.

Eric Janson · Answer

I used to work with a Turn Key Company years ago and I would say to do your research on the company.  There are many aspects to this and many things can go wrong.  Try to talk with several others that have done business with the company.  I am not saying they are all bad, but as a Turn Key Company it is hard to meet all client's expectations. Many things can go wrong with the transaction, rehab or repairs, tenants, and property management.  A company that will take care of their clients is what you want.

James Wise · Answer

I like to hand out this punch list to turnkey investors and really anyone doing the out of state thing in general. Follow these tips and you'll probably be making a pretty safe investment.

• 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.
• Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estate
• Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.

Mike D'Arrigo · Answer

@Adam Thomas Welu the quality of turn-key companies can vary a lot, Here are some key things to look for.

In general, the ones to avoid are the ones that:

• Don't allow financing or a      finance contingency (it can be a good indication they are selling above      market value)
• Don't allow for your own      independent property inspection
• Are not realistic with their      pro forma's (i.e. they don't include vacancy or maintenance projections or      use unrealistically low vacancy factors)
• Require you to pay for any      renovation upfront
• Sell only in cheap. low end      neighborhoods
• Don't accurately represent the      neighborhood/property classification
• Don't have consistent rehab      standards for all properties
• Don't provide a scope of work      for the property
• Can't provide references of      repeat investors

Aristotle Kumpis · Answer

I have purchased several turnkey properties. It's a great way to have a hands off approach. If you are into rehabbing homes yourself, it's not for you. You are paying the turnkey company to rehab the home in exchange for sweat equity. But if you are holding the property for many years, I don't see it being an issue. A lot of people think they need to have equity in the home after they buy it in order for them to feel like they got a good deal. For me, if I find a home that has had a lot of work done to it and it cash flows good, that's a good deal to me.

Dan Thomas · Answer

@Adam Thomas Welu

I've bought three properties from two different turnkey companies, both post on here regularly.  I have had a few hiccups here and there but overall it has been a positive experience that has been very passive. My 4th property I sourced and manage on my own, much more time consuming but much more cashflow too.  Feel free to message me with any specific questions.

Lane Kawaoka · Answer

I started with turnkey remote rentals in 2009-2015 while working my engineering W2 job. Then went into syndications once my net worth went over 500k. Let me know if I can help with any specific questions.

Drew Sygit · Answer

Search here and on Google for "Morris Invest" to understand what may go wrong. Learn from it so you don't make the same mistakes.

Has anyone bought from a Turnkey Rental Company?

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