Disadvantages of investing in Turnkey

[William Wong]

Hi everyone,

I am considering the possibility of investing with a Turnkey provider. Just wanted to hear about your perspectives with regards to disadvantages of investing in Turnkeys?

What were your experiences like? and what turnkey provider might you recommend?

[Joe Bertolino]

No or very little appreciation. Only exit strategy is selling to another investor (often at a loss) after transaction costs. Very little control so you are at the mercy of a property manager who makes money by doing repairs and turning over units while viewing you as a deep pocketed investor (aka a flesh covered ATM machine) from CA or NY or wherever. What could go wrong with that set up? Relying on the local knowledge of people that have a profit motive. Your boots on the ground can't be the guy trying to sell you something. I know my local market almost street by street, so when a wholesaler emails out a very thin deal using comps from a mile and a half away in a much better area I know it's BS. I saw what looked like a great deal last week and couldn't figure out why it was still available after 60+ days. When I drive by I discover it backs up to a methadone clinic and a liquor store. There were 6 hits on the Megan's law website from the apartment complex on the same street. There were dope zombies walking through the neighborhood. Three blocks over the area is really improving and prices are skyrocketing and if you entered from a different direction you never would have seen the issues. Those deals that look good on paper often get pushed to investors from the Bay Area that don't know any better. I can only imagine the lines that are blurred when some turnkey company is sitting on a "challenged property" and some chump from 1500 miles away thinks the pro forma looks great.