"Biggest mistake" was to do out-of-state turnkey investing

[Alex Silang]

So I'm in the process of looking at turnkey investing. I even made a post about it on BP but it didn't get many responses. 

A blogger I follow is "FIfighter". He's pretty reputable in the financial independence blogosphere and has a decent following. He achieved financial independence around the age of 30 through real estate investing. 

He used to be a big fan of turnkey investing, owning a smattering of turnkey properties. He's owned them for maybe 5 years, which is nice for information because on BP you only getting the newbie turnkey investors.

This is what he said (DGI is investing in stocks with high dividends):

• Dividend Growth Investing (DGI) >>>> Turnkey Investing. DGI is 100% passive, Turnkey Investing is a pain in the ***. Again, don’t fixate on Day 1 numbers. The best DGI stocks start off at 4% yield but the growth rate will surpass turnkeys in no time so your Yield on Cost (YoC) starts to outperform only after a few years down the road. With turnkeys, properties need to be maintained and you can only defer maintenance for so long before those costs come due. Newbies never factor this into mind when doing their initial Day 1 analysis. 12% cash-on-cash return on Day 1 will NOT be 12% in Year 5 (probably)! A property will NEVER perform as well as on Day 1/Year 1! Dividend growth stocks get better with time, turnkey properties don’t! My biggest investment mistake ever was going out of state and buying turnkey properties.

http://fifighter.com/financial-independence/though...

What do you guys think of this? I found this a bit shocking as this is someone who I look up to. He's maybe a top10 financial independence blogger.

Thanks!

[Jay Hinrichs]

Alex this is simply landlording  does not matter how you come about it or where you choose to do it.

houses take maintenance  they take effort to keep on top of .. .tenants trash places.. tenants skip on rent etc etc all of this effects the bottom line.. no matter how you bought them where you bought them etc.

Just think of those poor investor who flocked to Houston and have no flood insurance.. they are about to get totally wiped out.. never will be able to recover .. as cash flow will never equal there loss's or it will take 30 years..

how was anyone to know that was a poor investment at the time..  you simply can't predict whats going to happen in the rental business. and anyone who thinks running or landlording is hands 0ff and passive I can flat tell you .. It could be for about 1% of the folks other wise it takes time and effort to be successful

All turnkey is  .   its a moniker that was coined back in about 2001 when I got into funding these deals for flippers who instead of flipping to locals flipped to Californians..   no mystery.  to it..

real estate is a long game .. tenant pays off the house that's the ultimate goal get those houses paid for.. not all full of debt and run our numbers at 200 a door times 100 and your going to retire.. some pull it off but not many.. the real profit in rentals is someone else paying your house off for you and at the end of a 15 or 20 year run you have a paid for asset that hopefully went up a bit.

For those in CA well you can truly get rich on appreciation and other markets in the US... not so much in areas of historic non appreciation.

then you get the Houston thing were act of god wipes you out.. sad but true.