Survey for out-of-state turnkey investors
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Well, let me get this party started for you Jon.
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1. How many out of state turnkeys have you purchased?: Two
2. Do you still own these properties or were any sold?: Yes, still own.
3. How involved are you with the management of the property?: Not directly, each is managed by a separate PM company.
4. What kind of cap rate, COC, ROI are you getting?: It's negative to the point that I am not even tracking it right now.
5. Was the estimated rent, cap rate, ROI that was advertised close to what you are actually getting?: uhhh, no...
6. Overall, are you happy with the investment?: I will be, eventually. Right now each property has a mortgage which makes breaking even hard with vacancies and repairs. Once those are gone, they will be less stressful. At least I bought low.
7. Which turnkey companies would you recommend or warn against?: I have no comment here, it was my choice to buy the homes and honestly they are what they were advertised as. I am more disappointed in the property management side of both homes.
8. If tenants were already in place, how long did they last and what caliber tenant were they? One was in place, the other came on board shortly after purchase. I will say this, both properties were purchased in May of 2012 and neither has had a tenant in place for more than 6 months at a time. Several have been one or two payments and out. I have also had a 7 month vacancy on one of the properties and there was very little communication at all from the PM during that time.
9. Were you satisfied with the PM that came with the deal?No. Both companies are horrible at returning calls and e-mails, neither seems to put any effort into managing or using propertyware software correctly. The companies are Marathon Property Management in Memphis and Premier Property Management, also in Memphis.
10. Do you have any advice for others looking to venture into out of state turnkeys?: Yeah, go ahead, just throw the traditional estimates for vacancy and repairs out the window and double them. If I had to do it over again, I would buy one "A" class home instead of two B/C homes. Buy with cash, do not borrow.
24 Replies
- Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes11y
Hey @Jon S. -- I would love to answer some of you questions above as I feel they would be material to the information you're looking to acquire. I've started investing at age 18 and started invested out-of-state in late 2003. However, per your "note", I am barred from doing so. :-\
Anyway, let me know if you change your mind. I'm always happy to help out.
Continued success!
Hey @Marco Santarelli thanks for the reply. Yes, I was hoping for replies to be from those less biased when it comes to turnkeys. I would certainly welcome your reply in a private message though. Thanks!
@Jon S. - Asking for unbiased advice is a great idea! Hopefully you get the feedback you're hoping for. Please let us know if you are solicited by any vendors via private message or otherwise as a result of your post. We have a ZERO tolerance policy for that kind of activity here. Good luck!
- 11yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
one way you can probably get this information from the horse's mouth is to go to any one of the plethora of RE investing clubs in the greater LA basin and just network with other attendee's there will no doubt be many who have purchased out of state and would be able to give you feedback.. FIBI is one group that I have paneled on and there were definitely many TK buyers in the audience along with the other REIA's
Hopefully though you will get some good feedback to your post.
Originally posted by @Jon S.:
Thanks for the replies guys. Unfortunately it doesn't look like many investors care to share their experience with out of state turnkeys.
That might be a clue. I've been on BP for a couple of months and after learning how to really crunch the numbers I quickly realized that buying retail in California doesn't work for buy and hold. I then started looking at turn keys out of state then transitioned to talking to RE agents to buy my own properties since it seems turn key operators want to charge a premium.
I wanted to invest, not work, in real estate. However, my business plan/model has completely changed, hard to believe the path i'm planning to take. I'm going to start marketing for local properties here in California with exit determined by the deal (wholesale, wholetail, LO, buy and hold). I decided that even with marketing costs, if i'm able to close on just 1 deal a year i'll be way better off then closing on 5 out of state turn key deals.
I hope to close on more than 1 however, just being super conservative for comparison.
Yes Jon, this sort of survey question has been brought up before and in particular the duration of the hold part....we seem to only get crickets on out state turnkey or not. It is anecdotal but seems like an unspoken issue from my take.
Perhaps your disclaimer left out the marketers which are typically the only popular posters on the subject....hmmm. Hopefully some investors can come out of the wood work as I know there are tons on BP who invested turnkey. Good luck with your search!
@Lee S. Good luck on your venture. What markets are you looking at? I haven't done much research in IE but that might be a good area.
@Matt R. Yes, the exact reason I put that disclaimer is because all of the previous posts about turnkeys I read were pretty much filled with replies by the marketers. I was hoping to get some insight from investors but so far no luck. We'll see...
- Real Estate Investor · San Antonio, TX · Member since 2014 · 785 posts · 190 votes11y
Also, consider owner financing so you don't have to bother with property management from CA. Why do that? Let the end buyer maintain it.
Well, let me get this party started for you Jon.
---
1. How many out of state turnkeys have you purchased?: Two
2. Do you still own these properties or were any sold?: Yes, still own.
3. How involved are you with the management of the property?: Not directly, each is managed by a separate PM company.
4. What kind of cap rate, COC, ROI are you getting?: It's negative to the point that I am not even tracking it right now.
5. Was the estimated rent, cap rate, ROI that was advertised close to what you are actually getting?: uhhh, no...
6. Overall, are you happy with the investment?: I will be, eventually. Right now each property has a mortgage which makes breaking even hard with vacancies and repairs. Once those are gone, they will be less stressful. At least I bought low.
7. Which turnkey companies would you recommend or warn against?: I have no comment here, it was my choice to buy the homes and honestly they are what they were advertised as. I am more disappointed in the property management side of both homes.
8. If tenants were already in place, how long did they last and what caliber tenant were they? One was in place, the other came on board shortly after purchase. I will say this, both properties were purchased in May of 2012 and neither has had a tenant in place for more than 6 months at a time. Several have been one or two payments and out. I have also had a 7 month vacancy on one of the properties and there was very little communication at all from the PM during that time.
9. Were you satisfied with the PM that came with the deal?No. Both companies are horrible at returning calls and e-mails, neither seems to put any effort into managing or using propertyware software correctly. The companies are Marathon Property Management in Memphis and Premier Property Management, also in Memphis.
10. Do you have any advice for others looking to venture into out of state turnkeys?: Yeah, go ahead, just throw the traditional estimates for vacancy and repairs out the window and double them. If I had to do it over again, I would buy one "A" class home instead of two B/C homes. Buy with cash, do not borrow.
- Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes11y
Originally posted by @Chad W.:
Well, let me get this party started for you Jon.
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Thanks for sharing. Have you thought of hiring out a different PM?
I invest out of state (though it is only a 2 hour drive) and I would be nowhere without my PM. We meet monthly to discuss the properties, but also discuss my and his goals to make sure they are in line.
Second City Real Estate4.821 Reviews - Investor · East Bay, CA · Member since 2014 · 156 posts · 48 votes11y
1. How many out of state turnkeys have you purchased? 1
2. Do you still own these properties or were any sold? Yes
3. How involved are you with the management of the property? I'll contact the PM once in awhile, to clarify various things (accounting, recently 1099 stuff, maintenance items)
4. What kind of cap rate, COC, ROI are you getting? it's only been a couple of months, but projecting 17-20% COC (financed)
5. Was the estimated rent, cap rate, ROI that was advertised close to what you are actually getting? Rents were a nudge higher than advertised and so far the cap rate is as advertised, but still early.
6. Overall, are you happy with the investment? I'd say 7/10...contract to close ime was later than expected, one of the tenants has been late on their rent once so far, more maintenance items coming up than expected.
7. Which turnkey companies would you recommend or warn against? not enough experience to comment
8. If tenants were already in place, how long did they last and what caliber tenant were they? too soon to say
9. Were you satisfied with the PM that came with the deal? so far yes
10. Do you have any advice for others looking to venture into out of state turnkeys? ask every question imaginable for the PM...get things in writing, they can promise you the world but if they can't back it up, it's moot
@Chad W. Thanks for sharing your experiences. Did the turnkey companies recommend the two property management companies? You mentioned one of the properties already had a tenant in place. Was it the turnkey company or PM that placed this tenant? I wonder if they did their due diligence and qualified the tenant properly.
Originally posted by @Thai Foo:
@Chad W. Thanks for sharing your experiences. Did the turnkey companies recommend the two property management companies? You mentioned one of the properties already had a tenant in place. Was it the turnkey company or PM that placed this tenant? I wonder if they did their due diligence and qualified the tenant properly.
I'm not sure. This was almost three years ago and I have been through several tenants on both properties since then.
I do want to clarify some things I mentioned in my post since one of the turnkey companies reach out to me, I assume, after reading this thread. That home, has actually had a tenant in place since July of 2014, which is longer than 6 months, and I am very happy right now about that. Also, both PMs I mentioned have been improving in communications recently so some of these complaints are legacy complaints.
Still, my cautions stand for anyone looking to invest out of state. You really need your PM to be in your corner 100%. If what feels like an emergency to the investor isn't an emergency to the PM, that is a problem.- System Administrator / Investor · Eugene, OR · Member since 2015 · 144 posts · 29 votes11y
Stumbled across this thread and got excited by the title and first post... sort of a bummer only 2 investors have posted (Marco could have been a 3rd, but I understand why you don't want him to). I agree, I can't believe with all of the turnkey buyers posting to the forums there were only 2 replies.
I'm going to follow this thread in case anybody else responds. :)
Hey Jon!
I'm only going to jump in briefly because I do now market turnkeys, so I don't qualify to answer your questions :) The reason I wanted to jump in real quick though is to let you know why I think more people aren't answering your questions, just based on my experience.
I work with a ton of turnkey buyers now and of all of those people who end up buying, I see very few of them still around on BP. The turnkey buyers are more often folks who don't really want to be that heavily involved in real estate investing (as in the hands-on type), so once they get rolling with their properties, they go on about their lives in non-real estate types of ways. Most of them were only on BP originally to scout out investing options, they found the turnkey options, went for it, and then no longer needed BP. BP is an excellent resource for so many methods of investing and with so much detail needed for those methods, but turnkeys just don't really have that much detail behind them once you are done with your first purchase and know the process. I'd say easily 90-95% (maybe more) of turnkey buyers I know are no longer active on this site.
I have bought lots of turnkeys myself, but since I do now market them I won't answer any questions. My only input in regards to them is to realize that it is a very fluid industry so a lot of the answers for your questions may or may not be applicable to what you could buy today for a turnkey. If that makes sense...
Good luck!
Ali
- System Administrator / Investor · Eugene, OR · Member since 2015 · 144 posts · 29 votes11y
@Ali Boonegreat point, didn't even think of that, but it does make a lot of sense.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes11y
Since you are out of state you will be dependent on the relationship with the sponsor provider.
The property could be A,B,C in quality and if an issue arises will the PM be there to handle it?? You are buying into the company just as much or more so than the property itself and many investors do not realize this.
I believe the real data with turn key is over a long history of time say 2 years or so minimum. People that just bought it's not really a good amount of time to know how the asset and management will perform.
I don't like residential turn keys but I am not big on residential anyways so probably biased. I became tired of residential tenants life issues and all the excuses that go along with them.
I have another theory being on here for a very long time about turn keys. My profile says 2010 but I rejoined when the old system was cleaned out with the site upgrades. People come on here wanting to buy turn keys and then buy a few and go silent. I believe just as many go silent from now not wanting to post the nightmare experience they have had with it. That the numbers didn't pan out as planned and now they have a headache. That the management company didn't handle the issues.
The thing about turn keys is the providers are MOTIVATED at a high level of service to sell and make the profit. The management is just offered to get the sale and it is not where the big chunk of money is made. So this is why often the PM companies selling turnkey are slow to respond. They are focused on more turn keys to sell for bank.
I am sure there are great turn key providers out there but I see and hear about a majority are nightmares. Here today and gone tomorrow.
What I always tell potential clients with my commercial real estate is to ask if a company is in it for the long haul or are they just capitalizing on the next trend to hop in and out of for a quick buck and when you need them they are gone.
A great answer from a company might be that what they are focused on is their passion and life's work and they see themselves doing this throughout their career. Knowing someone is in your corner you can depend on for the long haul is HUGE to the long term success of your investing career. When you get into larger money and deals it's all about credibility and relationships over the long haul. I get calls monthly from people on turn keys they bought and it hasn't performed well for them. I could see an area with an A property in an A area where you cash flow little to start but it has strong rent growth and is a newer property with a good chance of appreciation and a better tenant class of renter possibly working out.
Do not believe everything a turn key person says. Try to connect with a local investor who is unbiased and will tell you the real deal about an area without a "dog in the hunt". Verifying for yourself is very powerful. I am just not a fan of people buying out of state with cheap properties and low income tenants to get started. That is a recipe for disaster. If you want to buy a turn key to diversify and you can eat a 10k loss to get out and have 500k in the bank that is different.
The problem I see is people take a large percentage of available cash or net worth and plop it down on these suspect properties with a high chance of failure. Dealing with a C property in your back yard is way different than states away.
- Flipper/Rehabber · Brooklyn, NY · Member since 2015 · 41 posts · 19 votes11y
Originally posted by @Jon S.:
Hey all. I would like to ask those of you who have invested in out-of-state turnkeys several questions.
1. How many out of state turnkeys have you purchased?
2. Do you still own these properties or were any sold?
3. How involved are you with the management of the property?
4. What kind of cap rate, COC, ROI are you getting?
5. Was the estimated rent, cap rate, ROI that was advertised close to what you are actually getting?
6. Overall, are you happy with the investment?
7. Which turnkey companies would you recommend or warn against?
8. If tenants were already in place, how long did they last and what caliber tenant were they?
9. Were you satisfied with the PM that came with the deal?
10. Do you have any advice for others looking to venture into out of state turnkeys?
*** NOTE ***
If you are employed by, owner of, or affiliated with a turnkey company PLEASE DO NOT REPLY.
Hey Jon,
Ive been a member here for just a couple of months and I have been experiencing the same exact issues. Any time something about turnkeys gets posted its always the marketers answering the questions and never the actual investors. This might have something to do with these investors not really being hands on and involved as much but I wouldn't buy that. I have a full-time job that I am consumed with and this is just an investment for me but I am still able to spend a few minutes a day checking out BP.
I may not have what you are looking for but I can definitely start the process here and hopefully keep this up to date as time goes on. I started looking at TK about 8 months ago and I bought my first property 2 months ago using HomeUnion. I now have a 2nd fixer upper property I bought independently with a friend out of state. I will hopefully update that one as it finishes getting fixed and I find a PM to manage it. I will answer the questions so far regarding the first TK property:
1. How many out of state turnkeys have you purchased? 1
2. Do you still own these properties or were any sold? Yes still own.
3. How involved are you with the management of the property? Not at all. HU took care of a few issues that came up first month.
4. What kind of cap rate, COC, ROI are you getting? Been paid 1 month so far and so far as expected.
5. Was the estimated rent, cap rate, ROI that was advertised close to what you are actually getting? Yes so far but only 1 month in so far.
6. Overall, are you happy with the investment? Yes
7. Which turnkey companies would you recommend or warn against? Would recommend HomeUnion but im sure this goes for any TK you choose you really have to do your homework. Check the area, check comps, talk to local people and make sure you know what your getting into.
8. If tenants were already in place, how long did they last and what caliber tenant were they? I bought mine on contingency that tenant be in place because I wanted to start off on the right track. So far so good.
9. Were you satisfied with the PM that came with the deal? Homeunion is now doing there own PM and so far so good.
10. Do you have any advice for others looking to venture into out of state turnkeys? Sane as #7.
Would be great if there were others who could contribute here. I have my keyword reminders set to turnkey and to Homeunion so I can easily track when something new gets posted.
- Investor · Indianapolis, IN · Member since 2015 · 143 posts · 82 votes11y
Okay Ill bite and answer your questions. Hopefully it will help some people out. Answers in bold.
1. How many out of state turnkeys have you purchased? 3
2. Do you still own these properties or were any sold? Yes
3. How involved are you with the management of the property? Other then collecting payments and approving a repair or two, not much involvement yet.
4. What kind of cap rate, COC, ROI are you getting? Currently 20%+ COC on all 3.
5. Was the estimated rent, cap rate, ROI that was advertised close to what you are actually getting? Yes, actually got higher rent in 2 of them then what was advertised. Bonus!! So far, the ROI has been on but only because I have had them all for less then 1 year. The proper realization of these numbers will come years later. So we'll see.
6. Overall, are you happy with the investment? Extremely happy so far.
7. Which turnkey companies would you recommend or warn against? I'd rather not advertise or call people out online but I have tried working with 5 different turnkey companies and only ended up buying from 2 of those and out of those 2, only 1 of them I would recommend. PM me if you want details.
8. If tenants were already in place, how long did they last and what caliber tenant were they? Tenants were in place at closing, so far zero tenant issues all 3 houses.
9. Were you satisfied with the PM that came with the deal? Completely satisfied one two of them, somewhat satisfied on one of them but they are growing on me. But overall, yes.
10. Do you have any advice for others looking to venture into out of state turnkeys? Dont be afraid to pull the trigger, make sure you get the purchase agreement with contingencies on appraisal and inspection. Dont be afraid to back out of a deal after you've signed the purchase agreement. Visit the city and turnkey provider first hand, get a feel for who those people actually are selling, a feel for their operation, property examples and get to know the city you are looking to invest in.
- Real Estate Agent · Madison, WI · Member since 2015 · 328 posts · 88 votes11y
@Larry Friedshould be good for a review:)
- Investor · Dallas, TX · Member since 2013 · 619 posts · 128 votes11y
1. How many out of state turnkeys have you purchased? 4 - all SFR - I would classify one as A class property, 1 B class and 2 C class.
2. Do you still own these properties or were any sold? Still hold them.
3. How involved are you with the management of the property? Professional property management is in place to deal with tenants/toilets/trash; I primarily review/approve new tenants and repair requests.
4. What kind of cap rate, COC, ROI are you getting? 8-17% lower end for the A class higher end are the C class properties.
5. Was the estimated rent, cap rate, ROI that was advertised close to what you are actually getting? The estimated rent was on target. I have since got an increase in rent for the A class property. I never based my purchase decisions on the advertised cap rates/ROI because all proformas, in my opinion, are just a starting point you need to really get to know the area, the insurance rates (flood insurance?), property taxes (city taxes?), HOA fees (how often has it increased in the past?), meet your team/boots on the ground, budget for capex items even if it is a brand new house because you will eventually need to replace, budget for yearly tenant turnover, etc. If the numbers still make sense after your conservative proforma take action!
6. Overall, are you happy with the investment? Yes
7. Which turnkey companies would you recommend or warn against? There are a few turnkey operators who are active right here on BP - I would start with them.
8. If tenants were already in place, how long did they last and what caliber tenant were they? A class property - current tenant has been in place 3 years; B class property - current tenant has signed 2 year lease and will be completing one year in Aug; C class property #1 - current tenant signed 2 year lease which will end Feb 2016; C class property #2 - tenant moved out on 7/15 at end of 1 year lease, out of pocket turnover $500 (remainder covered by security deposit) for all cosmetic repairs, PM has started marketing for new tenants.
9. Were you satisfied with the PM that came with the deal? I interviewed 5 different PM companies and chose 2 based on their responsiveness and patience guiding me through the learning process. They have performed as advertised.
10. Do you have any advice for others looking to venture into out of state turnkeys? Visit the area, interview the PM companies whom you are trusting to run your RE portfolio, trust but verify everything (get a home inspection, ask for the scope of work for rehab performed, verify taxes/insurance/etc.) and finally run it as a business not a hobby. If you have the resources scale up as quickly as possible to spread out your risk.
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