Starting Turnkey venture, need tips!

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

7y

Originally posted by @Charles Mitchell:

Good morning BP!

I'm in search of some tips trick or just general advice from people with turnkey experience (whether it be from a provider or consumer). Let me lay the foundation before I go any further.

I'll be operating in the Midwest C-B properties from OOS(Cleveland, St Louis, Birmingham etc.) The goal is do buy cosmetically distressed 3/1 SFH. There will be light to moderate reno's on each unit and every unit will be rented out before sold(PM will be handled by smaller PM's and not in house) and I will be incurring the costs of renting the units out so we can truly be turnkey. Sales prices will obviously differ based on multiple factors but were aiming for each project to retail between 70-110. Aiming for 15-25% margins and unit that are bought with mortgages will have ROI's between 15-20%.

Does anyone have any input, tips tricks or just general advice/thoughts?

Finding realtors for 20-40k properties is obviously tough. I've been writing offers on properties where the numbers will work with our goal but have so far been unsuccessful. I do have a PM lined up as well as contractor in our main market as of now but getting contractors to walk these projects where the total bill is 10-20k has been tough. I'm plugged into some wholesale providers but I'm a bit hesitant to use one until we at least get our first deal done.

Thanks in advance!

I suggest getting your footing in 1 market before attempting to expand into multiple markets. I spent years & millions in Cleveland alone building up my infrastructure & downstream businesses before ever looking to do anything further out. If you go brand new into 3 new markets all at once & have to rely on other agents for everything what value proposition do you really have to offer to clients?

6 Reply

OP

Member since 2018 · 103 posts · 48 votes

7y

@Jay Hinrichs

First and foremost thanks for the reply as well as being so active on BP I see you commenting on a ton of posts and have gotten tremendous input from you.

Secondly, I wanted to keep my post intentionally vague in order to not sound like I was promoting something so BP wouldn’t take my post down. Our primary market is Cleveland where the inventory is high. Appreciation is lower in Cleveland than other cities so the idea is deals may be a bit easier to find.

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

7y

Originally posted by @Charles Mitchell:

@Jay Hinrichs

First and foremost thanks for the reply as well as being so active on BP I see you commenting on a ton of posts and have gotten tremendous input from you.

Secondly, I wanted to keep my post intentionally vague in order to not sound like I was promoting something so BP wouldn’t take my post down. Our primary market is Cleveland where the inventory is high. Appreciation is lower in Cleveland than other cities so the idea is deals may be a bit easier to find.

OK got it.. you should hit me off line I have set up a court house buying team there we are buying every week.. you can get first looks I am sure you can built your inventory with our help. B ham though super tough. Cleveland as you said not so much

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2 Reply

OP

Member since 2018 · 103 posts · 48 votes

7y

@James Wise Very good point. I kept the post intentionally vague so BP doesn’t flag my post as me trying to advertise something and take it down. My primary market is Cleveland where there tends to be more 3/1SFH and a larger market where margins could be hit.

Also, thank you for your content, especially your neighborhood guide! It was a great resource when I was research specific zips in Cleveland!

OP

Member since 2018 · 103 posts · 48 votes

7y

@Jay Hinrichs I’ll send you a message later in the day! I’d love to chat! Thanks again!

OP

Member since 2018 · 103 posts · 48 votes

7y

@James Wise sorry just realized I didn’t answer your last question. I’m going to address it based on Cleveland. The value add is turn key rental that is truly turn key. Tenants and pm in place first check come first month of ownership. No having to find a tenant like some other turnkey operations. I’m also exploring warranties for first 3 months (ie. if there’s something behind the walls we didn’t see we will fix but it will obviously be limited). I’m also exploring rental insurance which would guarantee rent for the 1st year. It’s just a thought now and truth be told I’m not sure how valuable it would be to consumers.

Account Closed

Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes

7y

Cleveland already has McDonalds (Wise) and Burger King (Smartland) what are you going to do thats better so people will want CM Burgers?

4 Reply

Jason Hendrickson

Rental Property Investor · Park City, UT · Member since 2019 · 84 posts · 149 votes

7y

Success is always easy and ideas make perfect sense when it's just ideas written down on paper. Instead of trying for a home run right from the start (i.e. turnkey investment company promising all sorts of things), try starting with buying one property and seeing if you can generate the ROI and hit all the milestones/deliverables you have defined. Work out the kinks there, with your own money, before you go any further. If you're asking for tips/advice on a message board you're likely not ready for prime time, especially if it involves taking other people's money for a business model that hasn't been tested and proven in the wild.

5 Reply

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

7y

Originally posted by @Jay Hinrichs:

YUP right now this is a tall to impossible order especially in B ham inventory is simply not there.

you have hedge fund competition that you cant beat U have my partner there who you wont beat

you have The red roof guys who you wont beat.. its late in the cycle to start this..

and unless your on site to watch rehab this is a receipt to get killed financially..

Red Roof guys are Spartan invest you will have a very difficult time beating them to the wholesale deals..

We've been doing business with the Spartan Invest folks for a little while now. Good group of people down there.

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

7y

Originally posted by @Charles Mitchell:

@James Wise sorry just realized I didn’t answer your last question. I’m going to address it based on Cleveland. The value add is turn key rental that is truly turn key. Tenants and pm in place first check come first month of ownership. No having to find a tenant like some other turnkey operations. I’m also exploring warranties for first 3 months (ie. if there’s something behind the walls we didn’t see we will fix but it will obviously be limited). I’m also exploring rental insurance which would guarantee rent for the 1st year. It’s just a thought now and truth be told I’m not sure how valuable it would be to consumers.

Well I guess the 1st of a few questions that I've got is who is going to do the property management? Do you have your own management company here in Cleveland or will you just be sending it off to 3rd party property managers?

As for the warranties & rental guarantees & such I don't think you need to offer those. Kinda gimmicky. At the end of the day if you've got a good top down product they aren't necessary. You can take the funds that you'd loose on those & build out your infrastructure to make your product better. Also it gets very convoluted if you aren't handling the property management yourself.

Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

7y

@Charles Mitchell do you have a lot of money to throw behind this endeavor? Every market you just mentioned already has very well

Established turnkey operators

Account Closed

Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes

7y

Originally posted by @Jay Hinrichs:

YUP right now this is a tall to impossible order especially in B ham inventory is simply not there.

you have hedge fund competition that you cant beat U have my partner there who you wont beat

you have The red roof guys who you wont beat.. its late in the cycle to start this..

and unless your on site to watch rehab this is a receipt to get killed financially..

Red Roof guys are Spartan invest you will have a very difficult time beating them to the wholesale deals..

AND the Good News Is . . . there is no good news on this one. Lol

Ian WalshBusiness Member

Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes

7y

Make sure you allocate funds properly. Sub accounts for construction on each property goes a long way.

OP

Member since 2018 · 103 posts · 48 votes

7y

Originally posted by @Jason Hendrickson:

Success is always easy and ideas make perfect sense when it's just ideas written down on paper. Instead of trying for a home run right from the start (i.e. turnkey investment company promising all sorts of things), try starting with buying one property and seeing if you can generate the ROI and hit all the milestones/deliverables you have defined. Work out the kinks there, with your own money, before you go any further. If you're asking for tips/advice on a message board you're likely not ready for prime time, especially if it involves taking other people's money for a business model that hasn't been tested and proven in the wild.

I completely agree @Jason Hendrickson . The goal is not to scale to 4-500 units yearly tomorrow. We are 100% starting small, with my own money. Our goal is to down 1 at a time to work the kinks out and then scale. I'm not expecting to be the largest provider in the Cleveland area any time soon but rather start small and scale when ready.

OP

Member since 2018 · 103 posts · 48 votes

7y

@Jason Hendrickson tagging you here, not sure why my post above didn't hyperlink your username

OP

Member since 2018 · 103 posts · 48 votes

7y

@Account Closed The goal is not to become the Amazon of turnkeys tomorrow. We're looking to start with 1, iron out the kinks and slowly scale from there. At scale, we would like to be doing 100 deals per year, but to be very clear that is not what we are expecting in the immediate future.

OP

Member since 2018 · 103 posts · 48 votes

7y

@Caleb Heimsoth "a lot of money" Is a bit relative but yes we have funds and no it is not hard money or PM. Again, we are looking to provide a turnkey investment with a solid ROI. The basis of what we are trying to do is providing a good stable product. We are not looking to become the biggest turnkey provider tomorrow.

It seems that for some reason people are thinking of this post in absolutes. We will be starting small and slowly scaling at a pace that is comfortable to us.

Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

7y

Originally posted by @Charles Mitchell:

@Caleb Heimsoth "a lot of money" Is a bit relative but yes we have funds and no it is not hard money or PM. Again, we are looking to provide a turnkey investment with a solid ROI. The basis of what we are trying to do is providing a good stable product. We are not looking to become the biggest turnkey provider tomorrow.

It seems that for some reason people are thinking of this post in absolutes. We will be starting small and slowly scaling at a pace that is comfortable to us.

I just don’t see how you could compete with the established players. You’re talking about millions of dollars usually.

OP

Member since 2018 · 103 posts · 48 votes

7y

Originally posted by @Caleb Heimsoth:

Originally posted by @Charles Mitchell:

@Caleb Heimsoth "a lot of money" Is a bit relative but yes we have funds and no it is not hard money or PM. Again, we are looking to provide a turnkey investment with a solid ROI. The basis of what we are trying to do is providing a good stable product. We are not looking to become the biggest turnkey provider tomorrow.

It seems that for some reason people are thinking of this post in absolutes. We will be starting small and slowly scaling at a pace that is comfortable to us.

I just don’t see how you could compete with the established players. You’re talking about millions of dollars usually.

Thanks for the input.

Again, the goal is not to surpass the big players tomorrow. We're looking to do 10 turnkey flips this year. Ideally, 50-60 next year once we get the ball rolling. We're looking to start a business and start small. Burger King wasn't competing with Mcdonalds their first year. As silly as that sounds, I think you may be thinking in absolutes. I'd guess the big players are doing are doing 500+ turnkey sales per year.

Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

7y

Originally posted by @Charles Mitchell:

Originally posted by @Caleb Heimsoth:

Originally posted by @Charles Mitchell:

@Caleb Heimsoth "a lot of money" Is a bit relative but yes we have funds and no it is not hard money or PM. Again, we are looking to provide a turnkey investment with a solid ROI. The basis of what we are trying to do is providing a good stable product. We are not looking to become the biggest turnkey provider tomorrow.

It seems that for some reason people are thinking of this post in absolutes. We will be starting small and slowly scaling at a pace that is comfortable to us.

I just don’t see how you could compete with the established players. You’re talking about millions of dollars usually.

Thanks for the input.

Again, the goal is not to surpass the big players tomorrow. We're looking to do 10 turnkey flips this year. Ideally, 50-60 next year once we get the ball rolling. We're looking to start a business and start small. Burger King wasn't competing with Mcdonalds their first year. As silly as that sounds, I think you may be thinking in absolutes. I'd guess the big players are doing are doing 500+ turnkey sales per year.

Several of the ones I’m thinking of do 2-300 a year.

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

7y

Originally posted by @Charles Mitchell:

Originally posted by @Caleb Heimsoth:

Originally posted by @Charles Mitchell:

@Caleb Heimsoth "a lot of money" Is a bit relative but yes we have funds and no it is not hard money or PM. Again, we are looking to provide a turnkey investment with a solid ROI. The basis of what we are trying to do is providing a good stable product. We are not looking to become the biggest turnkey provider tomorrow.

It seems that for some reason people are thinking of this post in absolutes. We will be starting small and slowly scaling at a pace that is comfortable to us.

I just don’t see how you could compete with the established players. You’re talking about millions of dollars usually.

Thanks for the input.

Again, the goal is not to surpass the big players tomorrow. We're looking to do 10 turnkey flips this year. Ideally, 50-60 next year once we get the ball rolling. We're looking to start a business and start small. Burger King wasn't competing with Mcdonalds their first year. As silly as that sounds, I think you may be thinking in absolutes. I'd guess the big players are doing are doing 500+ turnkey sales per year.

There is definitly room in the Cleveland market for you to accomplish this. Essentially it sounds like you want to flip houses, just houses that investors buy. Small outfit like that I recommend keeping costs & overhead low. Buy house, rehab house, then get out. Move onto the next.

2 Reply

David Beckley

Investor · Saint Louis, MO · Member since 2015 · 204 posts · 37 votes

7y

Hello Charles,

May I ask why you are opposed to turn key? I know here in St. Louis, inventories are tight with what you’re looking for.

Melissa Nash

Rental Property Investor · Orange County, CA · Member since 2016 · 740 posts · 529 votes

7y

Originally posted by @Charles Mitchell:

Finding realtors for 20-40k properties is obviously tough. Thanks in advance!

I have been doing this Brrr/hybrid method in Birmingham and it works for me. I am doing 2 refi's now both in Birm and renovations done.

I have cheated a little bit--- I found a team that does everything for me. They bring me the wholesale properties, use their HM lender, their contractors do the bids and the work, use their PM and then I refi when done. The difference with this program is that because I did nothing, except put 10% down- I don't expect a huge equity play. At the end of the day and after the final refi and the hard money lender is paid back I walk away with a finished property w/ a tenant and I only put about 10-12% down total including all closing costs have a tenant in place - left about 20-25% equity in property, it is cash flowing over 10% and I did none of the work. So for me its worth it and I can repeat.

Brrrr isn't for everyone, and I think that is the big "red caution sign" If you are really passive you should just buy rent ready properties and the rehab has been done. If you are a stressor or someone who will freak out if appraisals come in a little low or have really high expectations, then Brrrr isn't for you. If you want to be really passive-- then don't do brrrr. Even the Brrrr that I am doing --I call it a hybrid brrr-- there is still involvement and management and following up, I don't exactly fall asleep at the wheel- but its a less time than if I did everything on my own and time is money. I would recommend first deciding what type of investor you are and what you actually have time for and how passive you want to be. Don't follow the hype. DM me if you want to chat more or if you want an intro.

OP

Member since 2018 · 103 posts · 48 votes

7y

Originally posted by @Melissa Nash:

Originally posted by @Charles Mitchell:

Finding realtors for 20-40k properties is obviously tough. Thanks in advance!

I have been doing this Brrr/hybrid method in Birmingham and it works for me. I am doing 2 refi's now both in Birm and renovations done.

I have cheated a little bit--- I found a team that does everything for me. They bring me the wholesale properties, use their HM lender, their contractors do the bids and the work, use their PM and then I refi when done. The difference with this program is that because I did nothing, except put 10% down- I don't expect a huge equity play. At the end of the day and after the final refi and the hard money lender is paid back I walk away with a finished property w/ a tenant and I only put about 10-12% down total including all closing costs have a tenant in place - left about 20-25% equity in property, it is cash flowing over 10% and I did none of the work. So for me its worth it and I can repeat.

Brrrr isn't for everyone, and I think that is the big "red caution sign" If you are really passive you should just buy rent ready properties and the rehab has been done. If you are a stressor or someone who will freak out if appraisals come in a little low or have really high expectations, then Brrrr isn't for you. If you want to be really passive-- then don't do brrrr. Even the Brrrr that I am doing --I call it a hybrid brrr-- there is still involvement and management and following up, I don't exactly fall asleep at the wheel- but its a less time than if I did everything on my own and time is money. I would recommend first deciding what type of investor you are and what you actually have time for and how passive you want to be. Don't follow the hype. DM me if you want to chat more or if you want an intro.

Hi Melissa! Sounds like you've been having some success! Congrats! I'm a bit confused though. Are you a turn key provider? Please correct me if Im wrong but I get the sense that what you're doing is hiring a team who manages everything from Hard money lending, to finding deals to managing rehabs to PM etc. If this is the case and after all the costs incurred you're walking about with 25% equity for 10% down I'd say you have a pretty good gig set up!

In terms of identifying what kind of investor I want to be I think I'm a bit beyond that. This post is about starting a turnkey venture. I'm looking to start a full on 100% hand on business. Looking to scale to 50 units next year. Nothing passive about it. Sorry if my post didn't make that clear but the goal is not to be hands off or identify if this was not actually for me.

I'll shoot you a message offline, I'd love to chat more in depth about what you're doing!