Exit strategy with turnkey investing

[Aaron M.]

I've considered turnkey investments (provider buys property, totally rehabs it, then sells the property with a tenant and PM service in place) but I can't see a the viable exit strategy with this type of investment. My concern is that the provider gets the benefit of the forced appreciation from the rehab, and the buyer receives a nicely cash flowing property whose ARV exceeds the local market making a later sale very difficult (unless appreciation is rock solid and consistent). Perhaps the circumstance is far more dynamic than how I'm thinking about it. Ntl, I'm curious if turnkey investors feel they do have a reasonable exit strategy? Turnkey providers feel free to chime in also, if you like.

[Mike D'Arrigo]

@Aaron M.turn key is simply a method of acquiring a property and has nothing to do with your exit strategy. There's an assumption that you will pay above market value for a turn key but that's not true with most good turn key companies. Turn key companies make their profit through the equity gained by improving the property, not by charging above market prices. Unless they are selling to all cash buyers, they can't charge over market value since lenders require an appraisal so don't automatically buy in to the notion that you pay more for a turn key. And don't buy in to the notion that you will automatically have built in equity if you do everything yourself. There are a lot of moving parts and a lot of people involved and a lot of things can go wrong. The advantage that turn key companies have that an individual doesn't have is 1. The turn key company is buying further upstream at better prices. They are not buying off the MLS
2. Turn key companies have significant economies of scale when it comes to buying materials and things like HVAC systems
3. Turn key companies usually employ the same crews full time and have much more control over their labor costs. 

Like any strategy, turn key isn't for everyone. If you're buying in your local market, have some experience and know how and have the time to manage and oversee a project, then doing it yourself might be the way to go but if you're doing it remotely, have no experience and have a demanding job and family life, turn key is probably the best way to go.