Turnkey and Out of State Investing

[Riley F.]

Hi all,

Since everyone was so helpful on my first post, I thought it'd be interesting to hear from folks who do turnkey or out of state investing, or both. For those of you who have done turnkey, a couple of questions :

Turnkey

1) What was your experience like, positive or negative?

2) What turnkey provider did you work with?

3) Would you do it again, or hear you done it again?

4) What were tour biggest hurdles, and what advice do you have for those interested in turnkey investing?

For out of state investors

1) What was your experience like, positive or negative?

2) How did you build your team and purchase your first property?

3) What were tour biggest hurdles, and what advice do you have for those interested in out of state?

4) Where did you invest?

Please just consider the above guidelines, because any insight that you can offer would be very helpful. Those who have not invested in turnkey or out of state, but have informed opinions, feel free to share. I'm sure @Ali Boone and company will have some insights. Not that it hasn't already been said, but I'm curious to hear the discussion around the charges of inflated rent in turnkeys and how endemic this actually is.

Looking forward to seeing everyone's responses! Thanks in advance.

[Marco Santarelli]

TURNKEY INVESTING

1) What was your experience like, positive or negative?

I’d say my experience was similar to dealing with a real estate agent because back when I was investing heavily, there were very few turnkey providers. For the most part you would find real estate agents and rehabbers operating as islands but trying to work together as one virtual business. It was fragmented and clunky and you still find this today.

2) What turnkey provider did you work with?

The two companies I worked with went out of business after the housing market imploded but the experience was invaluable! It gave me plenty of ideas on how to “raise the bar” in this industry, how to truly define what turnkey real estate investing is, and how to do it right.

3) Would you do it again, or have you done it again?

I would not work with the same providers I worked with in the past, nor would I ever work with a company similar to them again. My past experience, good and bad, has defined what turnkey investing should be for me, both from a provider’s perspective as well as an investor’s.

4) What advice do you have for those interested in turnkey investing?

• Look beyond your backyard. Most of the time your best deals will be found elsewhere.
• Do your due diligence: on the markets, the neighborhoods, the properties, the providers, the managers, etc.
• Find a reputable full-service provider. Ideally a company that can provide you with strategic advice and a tactical plan while “holding your hand” throughout the investing process.
• Always, always, always ask for recent client references.
• Treat your investing like a business.
• Take action!

OUT-OF-STATE INVESTING

1) How did you build your team and purchase your first property?

My first out-of-state property was purchased through a real estate agent referred to me by another real estate investor. The agent wasn't very knowledgeable when it came to investing in income-producing real estate, but she was willing to spend the time I needed to show me whatever I wanted. She was also willing to give me access to the MLS using her account. I ended up educating her on investing as much as she educated me on the various neighborhoods. I guess you could call it a win-win.

As for the rest of my team of contractors and property managers in the early days, I had to keep asking for referrals until I found trustworthy people I could work with from home. Back when I started investing there were very few, if any, true turnkey providers so it was on me to do the leg work and bring together all the resources I needed. I made it happen after several months of traveling and meeting with various people, but I figured out everything that was needed and created my systems.

3) What were your biggest hurdles?

• Determining the best market(s) to be investing in back then. There were too many speculators preaching “their” market was the hot market to be in. The problem was these “investors” were speculating and flipping; they were not thinking about where the solid long-term buy-and-hold markets were. I had to eliminate the noise and educate myself.
• Finding trustworthy property managers. I’ve been ripped off by several of them. One of them stole $6,000 from me and claimed she mailed it to me via UPS.
• Separating fact from bias. Recognizing that whenever you speak to real estate agents or someone referring you to a builder or turnkey provider, there is almost always a commission or referral fee being paid. That financial incentive almost always guarantees a market bias, provider bias, or property bias. I’ve learned to step back, ask questions, and look at “the forest” objectively.

4) What advice do you have for those interested in out-of-state investing?

1. Educate Yourself
2. Set Investment Goals
3. Never Speculate
4. Invest for Cash-Flow
5. Be Market Agnostic
6. Take a Top-Down Approach
7. Diversify Across Markets
8. Use Professional Property Management
9. Maintain Control
10. Leverage Your Investment Capital

I’ve elaborated on each of these points in my article 10 Rules of Successful Real Estate Investing.

5) Where did you invest?

California, Florida, Georgia, Michigan, Nevada, and the great state of Texas.

Continues success!