Turnkey questions by novice high income investor

[Gary Miller]

I had started a forum earlier regarding high income investor and some recommendations that might work for someone like me who has little time but good income. I am a physician looking for passive investment at least initially. I have reviewed the forums and have looked at Turnkey investment including single family and multifamily investments. I read one of the forums described as "Turkey Disaster", essentially a turnkey disaster. I have also looked at mobile home investing as a potential investment vehicle but realized after responses and having purchased Frank Rolfe's and Dave Reynold's outstanding course (and listening to the excellent podcast by Bupp and DeHart) that it would require more learning and more involvement and more time just trying to find the right property than I have time for.

With regard to turnkey investments, I have looked at several. The turnkey disaster involved c rated apartments in which the property manager failed to screen tenants properly. You can search for that "Turkey Disaster" to read the forum on that. I have been in touch with several providers but have not yet begun the process. There are, of course, risks with any real estate investment, but my dealing with Memphis Invest thus far suggests that they may be a really good fit for someone like me. It is always good, however, to hear from investors that have had issues with properties with their Turnkey company and determine how that company resolved the issue. In the "Turkey Disaster" case, it appeared that the Turnkey operator did get involved but there were issues that came from this experience that left a reader like me concerned. For example, if the property manager allowed this to happen, why are they still working with the turnkey operator. My understanding is that the screener essentially let anyone who walked through the door rent the properties. If there was no oversight by the PM, that should have been screened by the Turnkey operator. 

My understanding about Memphis Invest is that they do their own property search, their own, rehab and their own property management. Any problems with regard to screening proper tenants is on them. They seem to reduce risk by purchasing the right property in the right area and only do Single Family investment. Having looked at the market, these factors are reassuring but I would like to know from the community what their experience has been with. Has anyone worked with them or others and what is your experience with them? You can email me privately if you would like.

Thank you

[Jay Hinrichs]

your talking about the rental business.. your only as good as your tenants.. tenant selection is paramount but nothing can 100% insulate you .. and I am sure MI does not warrant the tenant.. they do their best in placement just like any really good PM would do.. Some Turnkey companies will place a tenant for free if the first one flakes say in the first 12 months..  And I know Chris at MI very well and he preaches rental guarantee's are BAD for the industry. 

The single best way to mitigate your down side risk is to buy at the very top of the food chain  IE A class with a sprinkle of B.. but I have had an A class home I owned totally trashed by a tenant as well. There is no guarantee's when your talking about the actions of another... 

FOR certain though C and D class are much tougher to manage for anyone and for the owners to have consistency in the performance of the asset... 

The reason many folks jump into the lower class rentals is simply chasing pro forma returns on paper.  IE they want to make that levered 10 to 20% Apr and they are willing to take the extra risk.. when in fact ( check out the Morris invest thread) low end D class like this company sells rarely runs smooth or rarely makes pro forma returns over a 3 to 5 year run.

And for many just buying a rental in your home town that makes say 4 to 6% return on cash flow but has better upside can be a smart play as well... Unless you plan to really scale rental business IE buy 10 to 50 of them.. you want to balance appreciation into the mix.. the money is made when the homes go way up in value.. and most turn key markets that simply does not happen especially at the lower price points..