From contract to close, what is SFH Turnkey timeline?

Question

Hi everyone,

I'm under contract with my first SFH Turnkey property and it feels like the process is taking forever. I put it under contract on July 14th, and it took a month to get an inspection and the punch list created for a few items that need to be fixed. Now it's been another month and the repairs still haven't been made. I have to follow up constantly and have expressed frustration about the lack of communication from the company.

1) What is an appropriate timeline that I should expect for this process? Given it's my first one, I want to be reasonable, but I feel like it's definitely going to be 3 months from start to close and I'm getting impatient.

2) At what point does it make sense to walk away, and is this a difficult process? I still like the property, the neighborhood, etc. so I'm trying to power through but am losing confidence in this process and company, so don't know if I just want to cut it loose and look elsewhere.

Thank you for your advice!

Ali Boone · Answer

Well when I read the subject line I was thinking about all the different scenarios with turnkeys-- some aren't finished being rehab at the time of contract, different in financing timelines, etc. But it sounds like the rehab has been done and they just aren't finishing it? And why did the inspection take a month?

It actually doesn't make a lot of sense because as long as they are delaying all of that and not getting it sold, the more of their funds are tied up with it and expenses are building for them.

What market is this in? I'd be curious what company it is if you wanted to share (could be direct message so it's private). If I know the company (I know a lot of them) and I know they are a good company, I'd say I'd take different steps towards remedying it. But if the company isn't that up to snuff, walking away might be easier and that process is very simple. They wouldn't really be able to contest it given what you have said.

What do they say in response to the delays when you ask them?

Ian Walsh · Answer

The TK company should have given an estimate on time.  3 months is long in the investment world but not unheard of.

Natalia Avalos · Answer

Hi everyone,

Thanks for your feedback and it's helpful to have a sounding board with this decision. A few comments/responses to questions:

@Tom Ott and @Chris Clothier The property  management company is separate and I've actually  had great conversations with that manager and also talked to someone who has been using him for a few of her properties and she is very pleased. So part of me thinks that if I can power through  the sale I'll be in a better position and will just never buy from these guys again.

@Joseph M. I did vet them through a few folks on Bigger Pockets and they had a positive experience a year ago; I think since Alabama has gotten much more popular they are overwhelmed and not handling it well...and that's giving them a pretty solid benefit of doubt

@Caleb Heimsoth and @Rob Hakes The rehab was done before the place was under contract and this was supposed to be a few minor fixes like caulking... I also have no money down at this point besides paying for the inspection... which makes it even more tempting to walk away.

I think I'm just frustrated that I've spent all this time pushing them and then to walk away  when it feels like I'm getting closer. That being said, at this rate it could be 2 months until closing whereas I could start over and be fully closed on a different property by then. I'd appreciate any more advice you have with that context and will also look at my contract to look into my options.

Darrell Bratton · Answer

@Natalia Avalos Thank you for keeping us updated. I am debating doing Turnkey in the future.

Darrell

Chris Clothier · Answer

Natalia,

Without knowing the company or the scenario it is hard to say.

I would however be MUCH more concerned about he lack of communication.  You said yourself that you are losing confidence.  It is not about when the right time is to walk away.  Your instincts probably tell you that this is how your entire experience is going to be.  When it goes vacant, you will be the last to know.  When you have an issue, you will get a bill without any communication or ability to ask questions.

I think you already know how this is going to end and it very well may not be very good.  The neighborhood is immaterial to you at this point.  A bad management company without good communication with you will take an emotional toll on you and could easily lead a great property in a great neighborhood to become a horrible investment.

Again, you may not be telling us the whole story and I don't mean that disrespectful.  But, I take you at your word that you have not set unreasonable expectations.  If you are frustrated with time and communication before you own the property, then that is a really good indication of what it will be like after you own the property.

Best of luck as you move forward.

Rob Hakes · Answer

@Natalia Avalos

I started doing some turnkey properties last year.  On one, I signed the purchase contract July 2017 and we closed December 2017.  Definately longer than i had anticipated, but the rehab was very extensive and contractors were slow (typical).  They did not require earnest money and all rehab was on there dime so I did not have cash tied up in the deal for that duration.  Just the downpayment at closing.

Tom Ott · Answer

Are they going to be the same company managing it? If so, I would think this is an accurate show of their speed. If the property is completed and ready to go, it should only take 30-45 days after the contract is signed.