How do you vet an out of state turnkey company?

Question

backstory- I'm looking to become a first time investor. My wife and I have a very small nest egg set aside that is allocated for property aquisition, and that egg grows by the month, so we're not in any hurry.

That said, like many other areas around the country, real estate prices are climbing and finding houses on the mls that meet our criteria seems to be going nowhere, which has me looking elsewhere.

Looking through the bigger pockets marketplace, I see adds for a few turnkey companies,  and have gone so far as to email a couple in hopes of talking with them this week. The properties listed have price tags in my range, and a quick glance at their proformas indicate that they fit my criteria and are worth looking into.

So, if you've found turnkey companies that you want to look into... how do you go about that? I've googled these guys and have found nothing but their website so far.

Chris T. · Answer

@Ryan Tuleja

In additional to what was suggested, search on BP, the cities and TK providers you're interested in. Chances are you will find several investors who have invested or considered them.

Reach out to these investors, as they will usually help a fellow investor, like yourself, and give you a more unbiased opinion.

After you have gone through all that, then definitely fly out to those cities and meet them. If you decided to invest, remember to always set up different check points throughout the buying process to protect you such as

1. Use a reputable home inspector, that you found yourself. Not the TK's referral

2. Seek out a couple of local realtors to give you comps of the properties you're looking at.

3. If you need financing, find a lender, that is NOT referred to you by the TK providers. The lender will use their appraiser, which will evaluate the property based on their underwriting.

Good luck in your search!

Tom Ott · Answer

Investing out of state with a Turnkey company can be a great way to earn a decent ROI. Watch out, there are many companies who just use that word and do not know what it means.

I would suggest looking at:

How to Find the Right Turnkey Real Estate Investment Company for You

and

What to Ask When Working With a Turnkey

Good luck!

James Wise · Answer

There are many turnkey operators out there. Some big, some small. The bigger ones will have many more google results than just their websites so it's possible you have just been talking to some smaller or newer shops.

After doing your preliminary online research I would suggest talking to the company and getting a feel for their operation then making a trip out to see everything live.

Ali Boone · Answer

It can actually be a lot trickier to decipher the good turnkey companies from the bad than most think. I've been buying and dealing with turnkeys for 6 years now and I still get tricked by them. A lot of people will present a company to me and all looks good but then when I send it to my cohorts (who are way smarter in turnkeys than I am), they are able to pick out really sneaky red flags that even being an experienced turnkey person, I didn't catch.

The way I did it is work with people smarter than me :) There are people out there who vet turnkey companies and then work with them directly for a living. Market stats, testing consistencies with the rehabbing, vetting the property management side, identifying the red flags, etc. I'm pretty much interested in none of that and just want to own good turnkeys, so I rely on them to help me out.

Not sure that's all that helpful, but happy to share resources and my turnkey experiences anytime if you want to message me, either on here or my email on my profile.

Account Closed · Answer

Hi Ryan,

I think the two most important things for me buying properties out of state.

1. Make sure you analyze the property offered using YOUR pro-forma, not theirs.

2. Get the scope of work and have a non-affiliated, reputable property manager who deals with out of state investors frequently inspect the property against the scope, & tell you about the location/property (preferably this person is referred by another local investor).

These two factors have helped me pass on many out of state deals, and now that I've got some of my own rental portfolio that I'm selling, I'm able to find buyers because the properties check out from a due diligence standpoint.

Good luck! The first step is the hardest.

Ryan Scott Isacksen · Answer

@Ryan Tuleja,Not sure if this counts as a sales pitch.. It is for Bigger Pockets.  There is audio from the 2012 Bigger Pockets conference about doing due diligence that includes what to ask and look for in a turnkey company along with red flags.I got the audio in a pack as part of the pro membership, but they may have it available in other forms as well.

Tom Ott · Answer

I 100% agree! That is why it is important that the Turnkey company does the management in house. Of course it still needs to be amazing service, but this way they actually know the home inside and out and this isn't some company you were dumped over to after the sale. Some providers will only sell the turnkey and not stick around for the management.

Brian Foster · Answer

I think the most important research you can do is for Property Management. Long after the excitement and fun of investing in a turnkey property has passed you will be married to a partner who will be managing your new investment. Make sure they are VERY Good. I know I have a seasoned investor on the phone  when the majority of the questions about my company and the property are in regards to property management.

Hank Keller · Answer

I've used a Turnkey company and purchased homes in Indianapolis and Charlotte over the past 3 years. I now have 8 homes with them with consistent returns. They have over 2000 homes under management in 4 markets. Feel free to pm me or check out my website for more info.

Larry Fried · Answer

@Ryan Tuleja There is a lot you can do at a distance to vet turnkey companies, but ultimately I always advice that when you've narrowed it down to certain companies or markets to make a visit and do a face to face, a tour of properties and neighborhoods.  It is surprising what you can learn.

How do you vet an out of state turnkey company?

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