Rental Property Investor · Escondido, CA · Member since 2017 · 684 posts · 550 votes
I have decided to focus on SFR turnkey investments as I will not be able to afford anything in my backyard. After reading David Greene's book, I decided that creating the core four teams he suggests is only possible when dedicating lots of time which I don't have. That leaves turnkey. I know its more expensive but I am sure people can be successful with it and hope podcasts describe trends, best places to look into, what to analyze and what to avoid. I suspect there are a few episodes on BP podcasts. In addition I would love to spread out and learn from other people. I hope you can help me find the best in that niche
Dr. Axel Meierhoefer
Passive Real Estate Investing is good.
I also like Get Rich Education podcast.
Lane Kawaoka is saying don’t buy if the rent is less than $900. He’s using (I’m assuming) it to draw the line between nicer properties (A and B)and not so nice properties (C and D class).
The A and B class properties will sell much easier to a primary homeowner years down the road if/when you want to sell. You might say that you don’t plan on selling for a long time or plan to hold forever now...but it is always nice to have the option to sell as your situation might change in the future.
I have two turnkeys right now and if I had an offer at full value for either of them I would strongly consider selling...just because I think I’ve found better uses for that equity now.
I recommend you check out Jason Hartman's organization. He does a great job in turn key rentals and isn't wed to any particular city or state. He has several podcasts, but he Creating Wealth Show is largely dedicated to SFR.
Hi Dr. Axel,
I’m in the same boat as you and am going forward with the turnkey route. Some podcasts I’ve been listening is Passive Real Estate Investing and The Real Wealth Show. Good information to get started.
All the best,
Johnson
Dr. Axel Meierhoefer Johnson Lo as someone who bought ten of those turnkey rentals a few years ago and trying to get rid of them I urge you to not buy under 900 rent properties and duplex tri quadplex because there is not exit strategy to sell to a retail buyer.
Sfhs are not scaleable.
I am not sure what you mean by "I urge you to not buy under 900 rent properties"? I am not really investing with the aim to sell to retail buyers, but maybe I do not understand what you are getting at. Can you please explain for a novice?
Welcome to BP!!
I suggest you take a look at the following website: http://turnkey-reviews.com/ It's a website created by @Brie Schmidt and @Jay Hinrichs . It's basically the Yelp for TK providers with investors giving real feedback on TK providers nationwide. Brie also does a podcast interviewing investors who use TK operators. Some good lessons learned. It's a good place to start.
Wishing you the best! Metra
Dr. Axel Meierhoefer
Passive Real Estate Investing is good.
I also like Get Rich Education podcast.
Lane Kawaoka is saying don’t buy if the rent is less than $900. He’s using (I’m assuming) it to draw the line between nicer properties (A and B)and not so nice properties (C and D class).
The A and B class properties will sell much easier to a primary homeowner years down the road if/when you want to sell. You might say that you don’t plan on selling for a long time or plan to hold forever now...but it is always nice to have the option to sell as your situation might change in the future.
I have two turnkeys right now and if I had an offer at full value for either of them I would strongly consider selling...just because I think I’ve found better uses for that equity now.
Thank you Metra. That's awesome. I will jump on that.
Ahh Kyle, I get it now. I suspected he meant something about neighborhood quality but wasn't sure. I definitely look at quality and cashflow together. The goal is not to go from our crazy price level to the bottom of the barrel. I have heard lots of warnings in that context.
I understand what you are saying about your turnkeys although I wonder if you would be willing to elaborate where you see much more ROI/cash flow at this point?
Thank you Metra. That's awesome. I will jump on that.
Ahh Kyle, I get it now. I suspected he meant something about neighborhood quality but wasn't sure. I definitely look at quality and cashflow together. The goal is not to go from our crazy price level to the bottom of the barrel. I have heard lots of warnings in that context.
I understand what you are saying about your turnkeys although I wonder if you would be willing to elaborate where you see much more ROI/cash flow at this point?
I think Lane's points are going to be valid especially at this point in the cycle as if you can't exit with profits you are kind of stuck into giving any cash flow back when you exit. Sort of a buy high and sell low scenario if there are no retail buyers down the road. When you buy turnkey normally you pay retail, if the hood is not good enough you will see all the locals investing there paying less and usually not a little less.
Someone too busy might also consider a solid reit in senior facilities or other growing niche. The returns will rival best turnkeys and have one click exits part or all. Plenty of retail reit buyers any day of the week.
How this easier and more profitable exit might help you...let's say the cycle now has bargains close to home...and now you can buy them however if you are in some random tk location you miss the opp because your funds are stuck or you have to lose all profits to exit. Essentially killing the better opportunity you might have had.
Any ways just food for thought. One good tool you can use for your search is rentfaxpro and there you can compare rentability, vacancies, pm ratings, tenant quality etc to national averages. They say lenders use rentfaxpro. I have found many TKs fall below national averages and substantially below even CAs non city metro type areas. You really have to do your homework and don't take what is presented on paper as reality.
Got it. I know nothing is forever but my main interest is to develop cash flow for retirement, so my focus is not as much on getting out quickly. I totally see your point about the ability to take advantage of opportnities
The podcast I couldn't think of the other day was Clayton Morris. He and his wife have a turnkey business. I've listened to a few of their podcasts, but haven't worked with them directly, so I can't give any recommendations either way.
@Axel Meierhoefer You've discovered what a lot of people find and that's that it is not easy to put together a team that you can trust and depend on and try to manager a project across the country while you are buy with a family and career. It's something that is very difficult to do part time. Turn key does not always have to be more expensive however as long as you are not paying over market value. New investors often feel that they'll have built in equity by doing it themselves but that's not always the case for the following reasons.
You make your money going in and turn key companies are usually buying at much better prices than the individual due to the fact that they are usually buying further upstream such as at auctions, tax sales and direct to distressed homeowners. They are not usually buying on the MLS where there are no deals today.
Their rehab costs are far lower than the individual because they have better sources for big ticket items like HVAC and other materials. A typical turn key company can replace an AC, furnace or roof for 1/2 of what someone can do on their own.
Turn key companies have far better control over their labor costs. Their crews usually work for them exclusively giving them more control of work quality, schedules and costs.
You are not paying a mortgage, taxes, insurance and utilities while the property is being rehabbed and marketed for a tenant.
A true turn key will already have the first tenant in place. If you do it yourself you typically have to pay 1 months rent in a lease up fee.
Something that is often overlooked is the fact that your rehab costs are paid out of pocket lowering your cash on cash returns when you do it yourself.
When you factor all of these things in, you'll generally find that you're not really paying more for a turn key. Just make sure the turn key company is not putting big mark ups on the property.
I read a bunch of things about Morris. Listening and investing are still two different things. My current favorite to invest with is Memphis invest. I know they are not the cheapest but everything I read and hear is great and I spoke to them in person.
@Mike D'Arrigo You are correct sir. I have not read many of the BP posts on Clayton Morris as I’m not focused on investing with TK providers. It’s been 12-15 months since I 1st came across them and was only passing on information that I couldn’t recall last week.
@Account Closed Your first few years your return on deployable equity is in the 20-35% range. But as time passes and you get more equity (good thing) your ROE decreases to a point where you might as well be in bonds for that amount of headache.
And I'll tell you after having 10 turnkey rentals that there is a CAPEX tidal wave that kills you in year 5-10.