Turnkey Rental experience?

Question

Are turnkey rentals worth it? I’ve seen some situations that seem too good to be true. Anyone have any experience with turnkey either positive or negative? Any information would be great. Thank you!

Joseph Crunkilton · Answer

@Kyle Wahl

I would recommend @Zach Lemaster over at Rent to Retirement. They specialize in turnkey rentals in markets that maximize cash flow and appreciation.

I recently closed on a property through them. What impressed me was the quality of property, the cash flow and the ease of closing.

Feel free to reach out to me directly and I can answer questions or tell you more about my experience!

Cassi Justiz · Answer

@Kyle Wahl,

I think there is something to be said for turn-key properties, but like any strategy there are pros and cons. The biggest downside of the turn-key strategy is that you are not necessarily getting "equity" when you buy a rent ready home.

Also, everyone has their own version of "turn key." Some companies actually buy the property, fix it up, rent it out and then resell it. But other turnkey providers are just glorified wholesalers. You can also buy turn-key style homes through the MLS using a real estate agent.

There are some really shady turn-key companies out there. BUT there are also some very transparent and reputable turn-key companies out there. As long as you do your due diligence, turn key properties can be a really straight forward way to get into real estate investing.

A few tips:

-Research your turnkey provider or agent (look for reviews from past clients online. The BP forums have a wealth of knowledge, so you can always ask for recommendations if you don't find reviews.)

-Hire a licensed third party home inspector

-Ask about your costs and know what your options are to get out of the contract up front.

-Compare sales price & rental rates with current market data.

If you are working with a solid turn-key provider, they shouldn't have any issues giving you this information and walking you through their process. Good luck!

Chris Clothier · Answer

I would pay attention to the advice from @Cassi Justiz because she is giving good, actionable advice plus pointing out the very valid argument that the word Turnkey has no meaning any more.  It is simply a marketing tool.  Companies that never buy properties, have no team members working renovations and have nothing to do with management use the word turnkey to advertise their companies simply because they will "introduce you" to those companies.  It is a tougher environment than ever today for an investor like yourself to figure out the right moves for you.  But, you have come to a good place to learn.

@Ali Boone and Account Closed are two actual investors who have purchased properties and have been investing passively for the better part of a decade or longer.  I would reach out to each privately or spend time reading their posts here on the site.

The other thing I would do is read threads on the site regarding Turnkey and reach out individually to them on the BP system.  Many, many investors love the site and consume a lot of the threads, but are not necessarily active in posting.  They may have posted a couple of times that they have purchased and given an account of their experience.  I would reach out to them in the message system and ask if they can give you feedback on companies and experience much the way you will get from Anish and Ali.

Lastly, be patient.  There is no need to rush into buying.  There are plenty of sales companies that will try to get you moving quickly, but the reality you have time to research and learn and when the time is right, make a decision that is best for you.  Best of luck

Zach Lemaster · Answer

@Joseph Crunkilton Thank you for the shout out!

@Kyle Wahl

Please let me know if you have any questions on anything. I typically like to start with an initial phone call to discuss your investment goals/experiences, answer any questions you have, and tell you all about what our company has to offer. Please let me know if this is something you would like to schedule.

Also for your reference, here are some other forum discussions from investors that have worked with us in the past like Joseph. I'm sure you'll find this informative. Looking forward to hopefully connecting in the near future!

https://www.biggerpockets.com/forums/92/topics/808479-rent-to-retirement-experienceshttps://www.biggerpockets.com/forums/92/topics/518583-feedback-on-renttoretirement-and-zach-lemaster

https://www.biggerpockets.com/forums/92/topics/765347-rent-to-retirement-review

https://www.biggerpockets.com/users/ZacharyCole/referenceshttps://www.biggerpockets.com/forums/12/topics/533693-anyone-worked-with-renttoretirement-turnkeyhttps://www.biggerpockets.com/forums/92/topics/581730-rent-to-retirement-zachhttps://www.biggerpockets.com/users/ZacharyCole/references

Account Closed · Answer

@Kyle Wahl There are a ton of opinions on this. All I can say is ignore the opinions of anyone selling anything and anyone who hasnt held multiple properties for over 5 years. The only people who know the real numbers are few and far between. The short answer is yes.they can work but not how most people do it.

Mike D'Arrigo · Answer

@Kyle Wahl what is it that seems too good to be true? Turn key is a good way to go if you don't have experience, have a busy job and family life that doesn't leave you much time and are not local. There's no right or wrong approach. It just depends on your particular circumstances. Like with anything, there are good turn key companies and bad so you need to vet them well. If they sound too good to be true, then maybe it is. Here are some key things to look out for when dealing with a turn key company.

In general, the ones to avoid are the ones that:

• Don't allow      financing or a finance contingency (it can be a good indication they are      selling above market value)
• Don't allow      for your own independent property inspection
• Are not      realistic with their pro forma's (i.e. they don't include vacancy or      maintenance projections or use unrealistically low vacancy factors)
• Require you      to pay for any renovation upfront
• Sell only in      cheap. low end neighborhoods
• Don't      accurately represent the neighborhood/property classification
• Don't have      consistent rehab standards for all properties
• Don't      provide a scope of work for the property
• Can't      provide references of repeat investors
• Require you      to close before a tenant is in place

Brian Ploszay · Answer

I am not a fan of these investments, and have posted some critical thoughts on this niche.  In a nut shell,  many of the properties are in mediocre areas and the true expenses are understated.  And the liquidity (ability to resell) is poor.

I'll focus on the expenses.  You buy the property, it has a cash flow, all is good.  Until the tenant leaves.  The turnover costs are expensive for rental houses.  Also, the maintenance cost per unit is substantial, compared to the cost per unit of an apartment complex.

All is good if you know what you're doing.  But I've seen some serious abuse where "turn key" providers were selling very very mediocre investments.  Especially midwest properties in declining areas.

Lane Kawaoka · Answer

@Kyle Wahl

It depends on where you are at in terms of net worth and income. I had a pretty good salary as an engineer plus I lived in a primary market (Seattle) so buying turnkey makes a lot of sense. But yea you are buying with out equity so I would try to improve on that after the first transaction.

Jason Pabon · Answer

Great way to get started - if you're a W2 employee making good income, you'd want to start investing passively and learn the ropes. Turnkey rentals and house hacking are the two best ways to get started.

Turnkey Rental experience?

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