Investing in Turn-key properties

[Kumar R.]

Hi,
My name is Kumar from Northern California, employed full time. Have spent several months trying to educate myself by reading most of the articles on this website.

I am a regular visitor to this website, this forum provides ..
# Great wealth of information on real-estate, concise but still well described for newbies.
# Information is shared by members who are actually doing this business, this makes it realistic.

Having spent some time researching on Turnkey projects, I am planning to start investing in out-of-state rental properties. Local properties are very expensive to invest in decent area, which would have been my preferred area to invest.

I have come across several companies that has turnkey offerings for investors.

Memphis ==> memphisinvestmentproperties.net, memphisinvest.com, Memphiscashflow.com, investornation.com

Ohio ==> Realestatedone4u.com

Illinois ==> Mackcompanies.net

midwest ==> Equityteam.com, Rpmmidwest.com

Cincinnati ==> Cincinnatireia.com, Cincyareaproperties.com, Meadowsteam.com

Alabama ==> Turnkeyventures.com

NJ ==> Trentonsrentalmgmt.com

Arizona ==> Arizonaturnkeyrentals.com, Pruvenrealestate.com, Homelovers.com

Georgia ==> keypropertysolutions.com, Gainvesting.com

North Carolina ==> retireonrentals.com

Florida ==> howtobuyusarealestate.com

Kentucky ==> peakkc.com

Are there are any members in this forum who are working with any of the above listed companies ?. All your suggestions are appreciated.

Thanks for reading.
Kumar

[Jon Holdman]

Kumar,
I have not looked in detail at your list, so cannot comment on the deals offered by any of these specific companies. I have, however, reviewed a number of deals offered by turnkey companies. The majority (though not all) of the deals I have reviewed have been, at best, mediocre. They're priced above other properties in the same area and the claimed rents are higher than the market. These companies are, all too often, aimed at people exactly like you. Someone from NY or CA or some other very high priced market. You will look at these deals with your CA eyes. You will think I can't believe these houses are so cheap and will jump in with both feet.

Before you engage in a deal like this, you need to 1) learn about the landlord business, and 2) learn the market where you're buying.

I get beat up for advocating the "50% rule". That is, expenses, vacancy, and capital will eat 50% of your gross schedules rents. Really, that's market rent. Any particular property in any particular year will do better or worse than this rule of thumb. But for a portfolio over the long term, this rule seems pretty good.

You can do quite a bit better by contributing your own labor for management and minor maintenance. But it you're living in the bay area and have properties far away that's very difficult to do. You will have to pay a PM and you will have to pay someone to deal with the most minor of problems. So, this rule of thumb is what you should consider.

Second, learn the area. That can be as simple as spending some time doing research. Look on realtor.com and local web sites and see what's for sale in the same area. Look on craigslist and other sites and see what's for rent. Watch for six months or a year and see what disappears and what's still there month after month. Then, once you've found something where the deals being offered are comparable to the market (you're not going to get screaming good deals going this route), the claimed rents seem about right, and properties come and go for both for-sale and for-rent properties, buy a plane ticket. Go there. Drive the area. Drive up and down every street in the area of the properties. Day and night. Meet the sellers. Look over their operation. Meet the PM. Buy a soda at the 7-11 and see what the area is really like.

Real estate is not like stocks. If you buy a stinker stock, you can sell at a loss at any time. Thirty seconds online and its gone. Real estate isn't like that. You get stuck with a stinker and it can suck more and more cash out of your pocket. Even if you pay cash. If you're leveraged, and you overpay, you can end up with a "deferred down payment" and have to pay to get rid of a bad property.

Real estate can be a good investment. But for many people who got caught up in the hype of the bubble years, it can be absolutely devastating. Learn the business first. Learn what's a good deal for you and what's not. Then jump in.