Turnkey Properties Worth it & why?

[Jonathan Rivera]

As an out of state investor, my goal is to purchase properties long term for cash flow to start off. I know there’s pros & cons against this turnkey strategy.

For me i personally felt since I'm investing remotely, cutting out the rehab part, dealing with contractors would be less of a headache going into my first rental.

I also understand that I won’t have any appreciation to start off or built in equity.

I just need some advice here regarding turnkey properties and the best way to go about it.

To me I feel like this can be a smart move starting out until get comfortable in the market I’m in & I’m able to build connections overtime and eventually I can really do the whole BRRRR strategy.

Please let me know your thoughts whether it’s good or bad. Peace ✌🏻 

[Marcus Auerbach]

Quote from @Jonathan Rivera:

As an out of state investor, my goal is to purchase properties long term for cash flow to start off. I know there’s pros & cons against this turnkey strategy.

For me i personally felt since I'm investing remotely, cutting out the rehab part, dealing with contractors would be less of a headache going into my first rental.

I also understand that I won’t have any appreciation to start off or built in equity.

I just need some advice here regarding turnkey properties and the best way to go about it.

To me I feel like this can be a smart move starting out until get comfortable in the market I’m in & I’m able to build connections overtime and eventually I can really do the whole BRRRR strategy.

Please let me know your thoughts whether it’s good or bad. Peace ✌🏻 

Traditional turnkey refers to someone else doing a BRRR (R) for you - except the refinance: that's you buying it. Subpar work and poor tenant screening are common, unfortunatley.

But I think you are referring to buying a move in ready property, which is what I have been doing lately - instead of BRRRRs, which were our main strategy did for a decade. Our market is so tight that getting 20k doscount for a property that needs 50k of work does not make sense to me. Inventory is so low in Milwaukee, that sellers don't need to give much of a discount. Some first time home buyer with overoptimistic DIY skills and a gross underestimation of how to fit 500 man hours of rehab into a few weekends will pay list price. 

So we have bought properties that are really well taken care of by a long term owner and need minimal work before being put in service. We typicall upgade lighting by popping in recessed LEDs on dimmers where previously lamps on switched outlets were used, maybe some paint or LVP, but usually not much. Instead of 6 months of work and holding cost we have it rented in 2 weeks and I let apprciation generate the equity, which is frankly something we did not have much of in the past. BRRRR was the way to get equity.

I still try to get a good deal. We look for things like overpriced listings that sit or deals that fell through before on financing. Sellers sometimes have a nightmare experience with a shakey buyer - we come in with a no-contingecy offer and that's attractive to a seller, who has been burnt before and just wants it to be over with. You also have to finance only once, with a BRRRR you typically finance twice (or all cash up front).

Finally Rent. We are very picky with tenants and we can be, because we offer a premium product and will usually find a tenant to match. We put probably as much effort into screening tenants as we put in finding the property. If you think about it the tenant is the real cash flowing asset.