Start of my TK Journey - Studying Various Areas

[Chinmay J.]

So recently I have taken interest in expanding OOS. I live in Loudoun County, VA and OOS deals, if done properly can provide lucrative returns. Also TK model allows me to invest even by keeping my full time employment.

So far I am nothing but somewhat disappointed in finding someone reputable company to connect with that can make the numbers work.  Found real good company in Cleveland, OH in Smartland, and thanks to @Tom Ott for reaching out to me and following through like he said he would, but the property taxes in Cuyahoga county seem astronomical, with no added value for me, as an investor.   I am a little hesitant to pull trigger on Cleveland properties due to that.  The property worth $90,000 is being taxed around $2,400, a whooping 2.66% real estate tax.  Places like Columbus,OH. Indianapolis, IN, Jacksonville,FL  all seem to have around 1 to 1.5% tax. 

So my recent experience with "reputable" providers is that they seem too busy to take new clients. Had a brief conversation with a very well renowned TK Provider in Indy, and was informed by one of their associates over IM (chat) that they are currently NOT taking new clients. I emailed this husband/wife team anyway to find out from husband that they are taking new clients (that was after my 2nd email), and the husband asked me to propose a time in the afternoon, which I promptly did.  Never heard a word back from the guy again ! Sent him another email a few days later... NOTHING !!.. What gives !    Some people pride themselves to be Full Service (FS).. That's hardly any service.. Just sayin'... 

After the horror stories, not even going to reach out to people like Morris Invest. I remember this dude from Fox News (Fox and Friends Weekend). Now did he become real estate guru after quitting FOX NEWS or was he first a real estate guy then became a media personality? He is charismatic and all, but he ain't no Tom Brady. Sorry I digress. 

Right market for me would be a place with strong job market, lower tax bill and low crime with rent around $850 - $1000

Right company for me would would following characteristics. 

• Efficient communication and prompt email responses. Should always be reachable.  I am the kind of guy who never takes advantage of anyone. If you respect my time, I will respect your's 10x 
• Should own the property. No middle men brokers sending MLS listings.
• Should have In House PM. 
• Properties should be in B neighborhood with price point of $80,000- $90,000
• Should be willing to take me to the property. I plan to fly down once I am done researching and ready to pull the trigger. 
• Should have good reputation in the industry with verifiable 3rd party references.

If any investors have any recommendations, please post or PM me privately.. Both work. 

[Rahul Bhatt]

Ok what I was trying to say those profarma are marketing materials it does not mean  every deal will go like that.and also compare with any REIT whether it is worth getting in to hastle.

Also Keep in mind you have to build your team in the market anyway with turnkey you are delaying it for couple of years (if you got honest turnkey provider). so you have to do it from thousand miles once all the shiny upgrades are vanished.

Again it is individual preference i prefer built in equity or force apprreciation depending on the market where I am in.wish you luck

Originally posted by @Chinmay J.:

Originally posted by @Rahul Bhatt:

I dont get the turnkey concept because numbers never works. you are paying almost market value or sometime more than market value. you want to build the equity as a real estate investor.If you really want to invest passively than REIT or online platform makes more sense.I have analyzed and still analyzed tunkey property but none of them makes any sense to me.

What do you mean by "numbers  never works [sic]"  Proforma statements on any TK providers' website will show you exactly how the numbers work. Not to mention testimonials from hundreds of people that they are making consistent returns is enough for me to believe in validity of business model. 

Of course, the fact that you are not having any equity in the property and its entirely a cash flow game is not lost on me.  I have properties in Virginia that have plenty of equity, mostly because I bought them cheap during the depth of the Great Recession. Those days are long gone. If I were living in a market that is conducive to Turnkey operations, I'd never buy a TK property.  I would buy them cheap, rehab them myself, and benefit from the equity.  However, sitting 1000s of miles away I am unable to do it, and I don't live in a turnkey market, so why not invest in a provider who can do it for you and enjoy the cash flow ! Its as simple as that. 

[Sean Walton]

@Chinmay J. I agree those property taxes are shocking but as you say if the numbers still work with that built in I wouldn't avoid a good market for that reason unless you are worried about the city's finances and that they might raise the rates in the future.

[John Horner]

I'm curious what kind of discounts you are looking for?  I know you are looking for $80k-$90k properties in B neighborhoods with $850-$1000/month in rent.

So for the price of $80k-$90k, are you looking to gain equity in the purchase as well?

[Lane Kawaoka]

Chinmay J. Bob Okenwa I started buying turnkeys in Birmingham Atlanta and Indianapolis. Great way to start investing. You are paying retail and capping your returns but it starts the learning process. Reach out if you have any questions.

[Chinmay J.]

Originally posted by @John Horner:

I'm curious what kind of discounts you are looking for?  I know you are looking for $80k-$90k properties in B neighborhoods with $850-$1000/month in rent.

So for the price of $80k-$90k, are you looking to gain equity in the purchase as well?

The best deal, where both the parties walk away from the table happy is what I consider ideal.  I understand that TK providers need to make money, and I understand the TK business model. 

But at the same time, I don't want to be in a hole, with negative equity, making up for the difference should the appraisal come below the agreed price. 

[Chinmay J.]

Originally posted by @Lane Kawaoka:

Chinmay J. Bob Okenwa I started buying turnkeys in Birmingham Atlanta and Indianapolis. Great way to start investing. You are paying retail and capping your returns but it starts the learning process. Reach out if you have any questions.

Interesting. I haven't seen Atlanta thrown around that much in same conversation as TK. What was your experience in Atlanta like. Whom did you use as a TK provider. If you want to share privately that's fine too. 

I have sent you a colleague request. 

[John Horner]

Originally posted by @Chinmay J.:

Originally posted by @John Horner:

I'm curious what kind of discounts you are looking for?  I know you are looking for $80k-$90k properties in B neighborhoods with $850-$1000/month in rent.

So for the price of $80k-$90k, are you looking to gain equity in the purchase as well?

The best deal, where both the parties walk away from the table happy is what I consider ideal.  I understand that TK providers need to make money, and I understand the TK business model. 

But at the same time, I don't want to be in a hole, with negative equity, making up for the difference should the appraisal come below the agreed price. 

 I would encourage you to decide what discount you are looking for.  The property is worth what someone is willing to pay for it.  Just like a wholesaler has to decide how much of a discount to give their buyers, the buyers have to decide what is their equity threshold for buying.

Typically you won't know what the TK provider paid for it, so the "best deal" scenario won't work.  They are going to sell it for the highest price you will pay.

[Chinmay J.]

Originally posted by @John Horner:

Originally posted by @Chinmay J.:

Originally posted by @John Horner:

I'm curious what kind of discounts you are looking for?  I know you are looking for $80k-$90k properties in B neighborhoods with $850-$1000/month in rent.

So for the price of $80k-$90k, are you looking to gain equity in the purchase as well?

The best deal, where both the parties walk away from the table happy is what I consider ideal.  I understand that TK providers need to make money, and I understand the TK business model. 

But at the same time, I don't want to be in a hole, with negative equity, making up for the difference should the appraisal come below the agreed price. 

 I would encourage you to decide what discount you are looking for.  The property is worth what someone is willing to pay for it.  Just like a wholesaler has to decide how much of a discount to give their buyers, the buyers have to decide what is their equity threshold for buying.

Typically you won't know what the TK provider paid for it, so the "best deal" scenario won't work.  They are going to sell it for the highest price you will pay.

I think you are mixing lot of issues here.... 

I disagree that in turnkey business, or in any business as a matter of fact, the property is worth what the buyer is willing to pay for.  The property is worth what the comps say its worth. That's why there is a 3rd party appraisal, especially if financing is involved.  A single buyer might be willing to pay more (for whatever reason)... Doesn't make it worth more automatically. In fact when doing comps for a future sale, that would be considered as an outlier and ignored

This is not a play for equity. Anything I get is a nice little bonus. So, I am not going to answer your question in terms of hard numbers.  Only thing I don't want is paying more than it's worth. (again based on appraisal). 

Lastly, how do I NOT know what TK provider paid.. I can very easily find that information on county assessor's website.  It would be difficult, if not impossible, if the county doesn't make the information available, but in most cases it is available very readily. 

[Jay Hinrichs]

@Chinmay J.  some states are non disclosure states .. all deeds that are recorded will say 10 dollars..

Texas  MS and a few others.. Just FYI...

if your financing appraisers have to pull comps from somewhere and come up with a value.. now in some markets that can be hard because not much gets sold on MLS other than old houses that need lots of work.. and because in some markets were the turn key folks work there simply is not many if any sales happening to homeowners..

although things are firming up in that regard.. IE turnkey companies are putting things on MLS so they can establish good comps.

As for what is a deal.. its all across the board but as someone how has literally financed a few thousand of these turn key homes.. its nothing different than any flipper would do.. they want to make a profit

so you have the wholesale price what they pay for the asset in as is condition.. this is a cash sale since these are not financeable.. then you have the SOW which ranges from 7k to 40k.. depending on the home.. then you have carrying costs.. REMBER YOUR Not carrying the home during the construction and very few of these companies do this with cash they all have their money source's like myself.

Then you have marketing fee's many times .. the marketing folks are well represented on BP you know who they are.. then you have the profit for the flipper.. or turn key operator.. profits are usually 10 to 20% of gross and sometimes a little more if they get a good one..

So if you do it yourself.. you stand to buy wholesale and hire contractor you pay cash you eliminate the carrying cost although you will have tax's and insurance while your under construction.. and you eliminate a brokerage fee be it a local MLS broker or a turnkey marketing company.. and you eliminate the profit the turnkey operator is wanting to make.

now the key is can you get those wholesale deals and what happens when that nice rehabber walks off with your rehab money LOL or does a crappy job.. this is what turn key will insure against.. it takes a ton of work to put a team together some folks like to gloss over that or the new BP book building a team.. but I can tell you from 2 decades of doing this.. that is SO much harder than it appears.. UNLESS yoru doing volume if your buying 1 or 2 houses in a year its going to be a challenge.

Now I know when I build new construction I do maybe 35 homes a year personally.. we look at lot cost vertical cost of money to build  sales cost and what our profit we can make.. we factor that in before we bid on the lots you have to back into it based on end sales price.. you can't just build it and they will come and or it will appraise.. with the goal to make 10 to 15% on gross and if we do better than 15% that is a huge win for us.. but of course these are 400k and up.. so numbers are bigger but so is the risk. and we can't be like a high volume turn key company that does our yearly production in a month or two.

I fund a few VEndors that do a turn key light ( is what I call it) they will let you pay cash for the house and they will charge you a fee to use their rehab crews and coordinate it all. then hand you off to PM.

the reason PM is critical in turn key is you have a tenant base that is some what of a challenge to manage.. other wise none of these turn key guys would be in the business of PM unless they were going nuclear and growing it so big that it becomes a profit center in its own right.

I hope some of this makes sense. its simply not a big mystery you have certain components that go into bringing a product to market and make it financeable.

[Chinmay J.]

Originally posted by @Jay Hinrichs:

@Chinmay J.  some states are non disclosure states .. all deeds that are recorded will say 10 dollars..

Texas  MS and a few others.. Just FYI...

if your financing appraisers have to pull comps from somewhere and come up with a value.. now in some markets that can be hard because not much gets sold on MLS other than old houses that need lots of work.. and because in some markets were the turn key folks work there simply is not many if any sales happening to homeowners..

although things are firming up in that regard.. IE turnkey companies are putting things on MLS so they can establish good comps.

As for what is a deal.. its all across the board but as someone how has literally financed a few thousand of these turn key homes.. its nothing different than any flipper would do.. they want to make a profit

so you have the wholesale price what they pay for the asset in as is condition.. this is a cash sale since these are not financeable.. then you have the SOW which ranges from 7k to 40k.. depending on the home.. then you have carrying costs.. REMBER YOUR Not carrying the home during the construction and very few of these companies do this with cash they all have their money source's like myself.

Then you have marketing fee's many times .. the marketing folks are well represented on BP you know who they are.. then you have the profit for the flipper.. or turn key operator.. profits are usually 10 to 20% of gross and sometimes a little more if they get a good one..

So if you do it yourself.. you stand to buy wholesale and hire contractor you pay cash you eliminate the carrying cost although you will have tax's and insurance while your under construction.. and you eliminate a brokerage fee be it a local MLS broker or a turnkey marketing company.. and you eliminate the profit the turnkey operator is wanting to make.

now the key is can you get those wholesale deals and what happens when that nice rehabber walks off with your rehab money LOL or does a crappy job.. this is what turn key will insure against.. it takes a ton of work to put a team together some folks like to gloss over that or the new BP book building a team.. but I can tell you from 2 decades of doing this.. that is SO much harder than it appears.. UNLESS yoru doing volume if your buying 1 or 2 houses in a year its going to be a challenge.

Now I know when I build new construction I do maybe 35 homes a year personally.. we look at lot cost vertical cost of money to build  sales cost and what our profit we can make.. we factor that in before we bid on the lots you have to back into it based on end sales price.. you can't just build it and they will come and or it will appraise.. with the goal to make 10 to 15% on gross and if we do better than 15% that is a huge win for us.. but of course these are 400k and up.. so numbers are bigger but so is the risk. and we can't be like a high volume turn key company that does our yearly production in a month or two.

I fund a few VEndors that do a turn key light ( is what I call it) they will let you pay cash for the house and they will charge you a fee to use their rehab crews and coordinate it all. then hand you off to PM.

the reason PM is critical in turn key is you have a tenant base that is some what of a challenge to manage.. other wise none of these turn key guys would be in the business of PM unless they were going nuclear and growing it so big that it becomes a profit center in its own right.

I hope some of this makes sense. its simply not a big mystery you have certain components that go into bringing a product to market and make it financeable.

 Not a mystery at all. Its pretty clear. 

Just had call today w/ Spartan and Maureen went over lot of stuff.. Good information. Definitely good people to work with based on my interaction so far, and stuff I have read on BP. 

[John Horner]

Originally posted by @Chinmay J.:

Originally posted by @John Horner:

Originally posted by @Chinmay J.:

Originally posted by @John Horner:

I'm curious what kind of discounts you are looking for?  I know you are looking for $80k-$90k properties in B neighborhoods with $850-$1000/month in rent.

So for the price of $80k-$90k, are you looking to gain equity in the purchase as well?

The best deal, where both the parties walk away from the table happy is what I consider ideal.  I understand that TK providers need to make money, and I understand the TK business model. 

But at the same time, I don't want to be in a hole, with negative equity, making up for the difference should the appraisal come below the agreed price. 

 I would encourage you to decide what discount you are looking for.  The property is worth what someone is willing to pay for it.  Just like a wholesaler has to decide how much of a discount to give their buyers, the buyers have to decide what is their equity threshold for buying.

Typically you won't know what the TK provider paid for it, so the "best deal" scenario won't work.  They are going to sell it for the highest price you will pay.

I think you are mixing lot of issues here.... 

I disagree that in turnkey business, or in any business as a matter of fact, the property is worth what the buyer is willing to pay for.  The property is worth what the comps say its worth. That's why there is a 3rd party appraisal, especially if financing is involved.  A single buyer might be willing to pay more (for whatever reason)... Doesn't make it worth more automatically. In fact when doing comps for a future sale, that would be considered as an outlier and ignored

This is not a play for equity. Anything I get is a nice little bonus. So, I am not going to answer your question in terms of hard numbers.  Only thing I don't want is paying more than it's worth. (again based on appraisal). 

Lastly, how do I NOT know what TK provider paid.. I can very easily find that information on county assessor's website.  It would be difficult, if not impossible, if the county doesn't make the information available, but in most cases it is available very readily. 

 Understood.  When you answered my question you said "the best deal", when it sounds like you really meant that you will pay retail.  It was my assumption you were looking for some equity.

As for what they paid, they could buy from auction or land bank (where auditor's website will show a $0 purchase price) or get a quit claim where all their expenses are outside of the closing or they could be wholesaling the property or they could have purchased so recently that it is not updated in the auditors page yet (can take weeks to get updated in my county).  Even when you CAN see what they paid, that doesn't account for rehab, so the all-in price would be even more skewed. 

[Chinmay J.]

I have an update for the whole community on this thread that I started Mid-December. 

Before, during and following this thread, I had phone conversations with 3 TK companies. 

a) Smartland - NE Ohio

b) Memphis Invest - Memphis, TN, DFW and Houston, TX.

c) Spartan Invest, Birmingham, AL. 

All three are very professional companies to do with, so they all pass that aspect with flying colors, at least in my books. 

However, at this time I have decided not to go forward with buying a TK property at all for various different reasons.  This is not a criticism of the TK companies at all, but overall limitations of the business model. 

• First of all you are buying the property at market price, sometimes at more than the appraised value. One of the TK companies, when asked if they would do price improvement if the the appraisal comes lower than the contract price, flatly declined.  I have seen (from various posters) at times the appraisal comes way below, if the appraiser has used properties that haven't been renovated recently. It's one thing if the difference is couple of thousand dollars, but what if its $25K/30K? It's a better idea to buy a beat up property in a decent area than try to get a better appraisal for better property, if the area is not all that great. Other TK company informed that in cases like these, they usually split the difference.  Given the influx of money pouring into the TK business, I don't find it hard that they can find another investor (sucker) if I back out. So really the deck is not stacked in my favor is not news to me

• I found the calculations that all the TK companies use to be very aggressive (especially when it comes to CAPEX and Vacancy Rate). In the spreadsheets I got 4% of CAPEX and 4% of Vacancy Rate was used, and granted in first yr or two years, you will not have any any CAPEX or Vacancies, but when you do, all your previous profits will be wiped ou

•  Let's say, a tenant stays for 2 yrs, and at the end of the lease they leave. That is 2 months of lost rent right there.  One month to get the property rent ready and rented out, and  another month's rent as the realtor fee.  For 4% number to work, tenants will have to stay for 4 yrs.  If it takes slightly longer to get the property rent ready, or slightly longer to get it  rented out (for whatever reasons) that's 3 months worth of lost rent right there. Most decent people (unless they are getting kicked out) don't rent in the middle of the month.

• To mitigate the aforementioned losses, I asked the TK companies if they were willing to sell me Duplexes and have Sec 8 tenants Negative on both the counts.

• I am a type A personality. Sometimes it does show from my posts.. I am by nature not a passive person. I am active even in my sleep. Constantly fidgeting and tossing and turning..lol.. There is nothing, absolutely nothing, about me that's passive. In fact if I were to sit in a corner waiting for the PM to send me email or waiting on their phone call, it would drive me nuts.  Working w/ TK providers I will not even get chance to review and approve or disapprove the tenants.  Seems all that's needed of me is signature and money.

• Additionally, I am not new to the real estate. I have bought and sold properties for myself and others. I have rented properties for myself and others. 

So, after going through the motions with open mind, I decided to call it a day as far as my search for TK properties is concerned. This might be a good investment decision for you based on your abilities, goals, strengths and weaknesses. It ain't for me.. 

There is a happy ending to this story as I have a Duplex in Richmond under contract (woo-hooo) and the appraisal came back great !  4K over contract price.. I will update the details of that on another thread..

Good luck to everyone who is considering TK properties, and thanks to everyone who has contributed to this thread. 

[John Bucknum]

@Chinmay J.

Thanks for the update, i had researched this style of investing, but like you i dont think it fits my personality or comfort level. I prefer to have more input in the decision making process. 

Good luck in your endeavors!

[Caleb Heimsoth]

Chinmay J. I appreciate your posts but I’ll just add a couple things to it. Not all turnkey companies sell you properties at or above appraisal value. The last one I got was entirely rehabbed and purchased below appraisal value. You’re right that the vacancy amount would be hard to hit, but I don’t think the maintenance numbers are hard to hit. The company I’ve used says they average 700-800 per year in routine maintenance. The turnkey I’ve bought has all new systems from hvac to roof. Those systems could easily last 20 plus years. The non turnkey property I’ve bought has systems that have lasted much longer than that.

Lastly I think if you’re doing single family homes you can estimate on average (over 6-8) homes minimum that your tenants will stay on average of 2 years, maybe 3. Average turnover cost I’ve been told are 1500 or so to make it rent ready.

I respect your opinion I’m just not sure I could do this business model better myself. Of course the biggest downside (in my opinion) in going this route is you have to keep getting new DP money and you can’t sell in the near future if you needed to

[Chinmay J.]

Originally posted by @Caleb Heimsoth:

Chinmay J. I appreciate your posts but I’ll just add a couple things to it. Not all turnkey companies sell you properties at or above appraisal value. The last one I got was entirely rehabbed and purchased below appraisal value. You’re right that the vacancy amount would be hard to hit, but I don’t think the maintenance numbers are hard to hit. The company I’ve used says they average 700-800 per year in routine maintenance. The turnkey I’ve bought has all new systems from hvac to roof. Those systems could easily last 20 plus years. The non turnkey property I’ve bought has systems that have lasted much longer than that.

Lastly I think if you’re doing single family homes you can estimate on average (over 6-8) homes minimum that your tenants will stay on average of 2 years, maybe 3. Average turnover cost I’ve been told are 1500 or so to make it rent ready.

I respect your opinion I’m just not sure I could do this business model better myself. Of course the biggest downside (in my opinion) in going this route is you have to keep getting new DP money and you can’t sell in the near future if you needed to

Not all at all.. Happens from time to time though. TK companies are essentially flippers who retain you as a client and manage your property and tenants. When it does happen though, either you should be willing to shell the difference or walk away. You can walk away, but think about it. You just waited 3-4 months for rehab to complete. You could be hunting for deals during this time. 

You are right on turnover costs. That's what I have noticed w/ my properties. 

You can't really do this business model any better than what is already laid out for you. You are really not an active participant in the investment. As a passive investor, there is nothing much for you to do. 

[Naveen A.]

@Jay Hinrichs, I am quite familiar with a few TK providers and marketers as a result of browsing these forums for a few months now but I was not aware of "turn key light" category of firms. Would you mind sharing some of these rehab-for-hire companies ?

Originally posted by @Jay Hinrichs:

@Chinmay J.  some states are non disclosure states .. all deeds that are recorded will say 10 dollars..

Texas  MS and a few others.. Just FYI...

if your financing appraisers have to pull comps from somewhere and come up with a value.. now in some markets that can be hard because not much gets sold on MLS other than old houses that need lots of work.. and because in some markets were the turn key folks work there simply is not many if any sales happening to homeowners..

although things are firming up in that regard.. IE turnkey companies are putting things on MLS so they can establish good comps.

As for what is a deal.. its all across the board but as someone how has literally financed a few thousand of these turn key homes.. its nothing different than any flipper would do.. they want to make a profit

so you have the wholesale price what they pay for the asset in as is condition.. this is a cash sale since these are not financeable.. then you have the SOW which ranges from 7k to 40k.. depending on the home.. then you have carrying costs.. REMBER YOUR Not carrying the home during the construction and very few of these companies do this with cash they all have their money source's like myself.

Then you have marketing fee's many times .. the marketing folks are well represented on BP you know who they are.. then you have the profit for the flipper.. or turn key operator.. profits are usually 10 to 20% of gross and sometimes a little more if they get a good one..

So if you do it yourself.. you stand to buy wholesale and hire contractor you pay cash you eliminate the carrying cost although you will have tax's and insurance while your under construction.. and you eliminate a brokerage fee be it a local MLS broker or a turnkey marketing company.. and you eliminate the profit the turnkey operator is wanting to make.

now the key is can you get those wholesale deals and what happens when that nice rehabber walks off with your rehab money LOL or does a crappy job.. this is what turn key will insure against.. it takes a ton of work to put a team together some folks like to gloss over that or the new BP book building a team.. but I can tell you from 2 decades of doing this.. that is SO much harder than it appears.. UNLESS yoru doing volume if your buying 1 or 2 houses in a year its going to be a challenge.

Now I know when I build new construction I do maybe 35 homes a year personally.. we look at lot cost vertical cost of money to build  sales cost and what our profit we can make.. we factor that in before we bid on the lots you have to back into it based on end sales price.. you can't just build it and they will come and or it will appraise.. with the goal to make 10 to 15% on gross and if we do better than 15% that is a huge win for us.. but of course these are 400k and up.. so numbers are bigger but so is the risk. and we can't be like a high volume turn key company that does our yearly production in a month or two.

I fund a few VEndors that do a turn key light ( is what I call it) they will let you pay cash for the house and they will charge you a fee to use their rehab crews and coordinate it all. then hand you off to PM.

the reason PM is critical in turn key is you have a tenant base that is some what of a challenge to manage.. other wise none of these turn key guys would be in the business of PM unless they were going nuclear and growing it so big that it becomes a profit center in its own right.

I hope some of this makes sense. its simply not a big mystery you have certain components that go into bringing a product to market and make it financeable.

[Jay Hinrichs]

Originally posted by @Naveen A.:

@Jay Hinrichs, I am quite familiar with a few TK providers and marketers as a result of browsing these forums for a few months now but I was not aware of "turn key light" category of firms. Would you mind sharing some of these rehab-for-hire companies ?

Originally posted by @Jay Hinrichs:

@Chinmay J.  some states are non disclosure states .. all deeds that are recorded will say 10 dollars..

Texas  MS and a few others.. Just FYI...

if your financing appraisers have to pull comps from somewhere and come up with a value.. now in some markets that can be hard because not much gets sold on MLS other than old houses that need lots of work.. and because in some markets were the turn key folks work there simply is not many if any sales happening to homeowners..

although things are firming up in that regard.. IE turnkey companies are putting things on MLS so they can establish good comps.

As for what is a deal.. its all across the board but as someone how has literally financed a few thousand of these turn key homes.. its nothing different than any flipper would do.. they want to make a profit

so you have the wholesale price what they pay for the asset in as is condition.. this is a cash sale since these are not financeable.. then you have the SOW which ranges from 7k to 40k.. depending on the home.. then you have carrying costs.. REMBER YOUR Not carrying the home during the construction and very few of these companies do this with cash they all have their money source's like myself.

Then you have marketing fee's many times .. the marketing folks are well represented on BP you know who they are.. then you have the profit for the flipper.. or turn key operator.. profits are usually 10 to 20% of gross and sometimes a little more if they get a good one..

So if you do it yourself.. you stand to buy wholesale and hire contractor you pay cash you eliminate the carrying cost although you will have tax's and insurance while your under construction.. and you eliminate a brokerage fee be it a local MLS broker or a turnkey marketing company.. and you eliminate the profit the turnkey operator is wanting to make.

now the key is can you get those wholesale deals and what happens when that nice rehabber walks off with your rehab money LOL or does a crappy job.. this is what turn key will insure against.. it takes a ton of work to put a team together some folks like to gloss over that or the new BP book building a team.. but I can tell you from 2 decades of doing this.. that is SO much harder than it appears.. UNLESS yoru doing volume if your buying 1 or 2 houses in a year its going to be a challenge.

Now I know when I build new construction I do maybe 35 homes a year personally.. we look at lot cost vertical cost of money to build  sales cost and what our profit we can make.. we factor that in before we bid on the lots you have to back into it based on end sales price.. you can't just build it and they will come and or it will appraise.. with the goal to make 10 to 15% on gross and if we do better than 15% that is a huge win for us.. but of course these are 400k and up.. so numbers are bigger but so is the risk. and we can't be like a high volume turn key company that does our yearly production in a month or two.

I fund a few VEndors that do a turn key light ( is what I call it) they will let you pay cash for the house and they will charge you a fee to use their rehab crews and coordinate it all. then hand you off to PM.

the reason PM is critical in turn key is you have a tenant base that is some what of a challenge to manage.. other wise none of these turn key guys would be in the business of PM unless they were going nuclear and growing it so big that it becomes a profit center in its own right.

I hope some of this makes sense. its simply not a big mystery you have certain components that go into bringing a product to market and make it financeable.

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[Yong Park]

I found this thread to be incredibly useful on many fronts.  Thanks all.

[Chinmay J.]

I have updated the details on my new Duplex that I alluded to, in the earlier post, here.. Click here !