Entire portfolio as turnkey

[Account Closed]

I've been considering a couple of options: house-hacking and turnkey properties.

I've been really turned onto the idea of turnkey investing after hearing the podcast with Engelo Rumora, and I'm interested in his company and Holton Wise's company out in Cleveland.

Is having your entire portfolio as turnkey properties a viable way to start investing in real estate?

How hands off is turnkey investing?

Is most turnkey investing cash-only, or can I use conventional or ARM mortgages to dip my toes into the pool?

Can I tap into a HELOC as a downpayment for a turnkey investment in another state?

I am putting this out there as I do more research.  Any help is appreciated!

[Chris Clothier]

Hi Andrew, great questions here.  I threw out a few answers for you to review and think about.

I've been considering a couple of options: house-hacking and turnkey properties.

Just as an aside, what is house hacking?  I have never heard that term before.

I've been really turned onto the idea of turnkey investing after hearing the podcast with Engelo Rumora, and I'm interested in his company and Holton Wise's company out in Cleveland.

Is having your entire portfolio as turnkey properties a viable way to start investing in real estate?

I think the better way to think about this, is not if TURNKEY is a viable option in real estate (because it is), but is is a viable option for you.  Some investors are not comfortable with giving up control or responsibility within their portfolio.  Others have no problem with it.  As a way to get started investing, you have to decide how much time you have to contribute to your endeavors and what level of comfort you have with allowing another company to make all of the decisions about your property for you.  If you are comfortable with the process, the area you are investing, the future of the area, the TK company, their process, the property management company and the on-going communication and service you are going to get, then starting off your real estate investing endeavors with a TK company is absolutely a viable way to get started.  Your comfort with the idea, process and company is what will really dictate how viable it is for you personally.

How hands off is turnkey investing?

Well, it should be hands-off from the standpoint of doing the heavy lifting such as locating property, providing the funds to purchase the property, providing the funds to renovate the property or physically doing any of the labor.  That is my opinion only, but after having done this for a long time and seen a lot of companies come and go, the ones who provide you with a finished product without you having to commit any of the funds are where I would look as an investor.  

Then your hands-on responsibility really comes down to due diligence.  You need to investigate the area, the company you are going to do business with and their track record.  Some choose not to go see the company where they operate or their properties, but I think most of us would agree that you absolutely should go for a site visit before buying.  You should be hands-on with your monthly statements from your property management company and you should be hands-on with your detailed scope of work.  You need to be hands-on with holding the company accountable for properly managing your property(ies) so they perform to your expectations.

Is most turnkey investing cash-only, or can I use conventional or ARM mortgages to dip my toes into the pool?

There is not a right or wrong answer here.  Buying a Turnkey property is no different than any other transaction.  You should be able to choose how you purchase the property.  Some companies will want you to use approved lenders if you want to go the financing route and mostly that will be due to customer service and speed of work issues.  That could be a red flag if they only want you to choose one lender and the rates are not competitive, but I have not seen that.  You can use private financing, hard money (not advisable ---ever!!!), cash, self directed IRA, 1031 exchange.... Mostly you need to know that you can use any method for purchase that you want to use.  Just because it is TK does not mean that special rules will apply.

Can I tap into a HELOC as a downpayment for a turnkey investment in another state?

Yes you can.  Should you - I can't answer that one - only you can.  The source of your funds however, for purchase or downpayment, is entirely up to you so long as you can show where they from (if you are using a lender) and are comfortable leveraging your personal home to purchase investment property.  

I am putting this out there as I do more research. Any help is appreciated!

I think you are off to a great start having already researched some areas and some companies.  Hopefully you get some good advice to make sure you have an investment plan in place and are making some good decisions with your money and your equity in your home.  I'm sure the people you are talking to will give you this same piece of advice, but I want to stress it to you....

You do not need to be in a hurry.  Take your time.  The opportunity has not passed you by and is not going to disappear anytime soon.  You can get great deals with really good companies if that is the route you decide to take.  Be patient and make sure you have a great plan put together and you follow that plan.

Chris