Turnkey worth it for investing in multiple states?

Question

I’m seeing a lot of controversy with turnkey companies and I get why. My question is, provided you find a good company (where all the moving parts do a good job and in the end you get a good enough ROI), is it better to go with them if you want to have options to invest all over the country? Obviously you have to find one that does have teams all over. Or is it still better to build your own teams in each area? Which takes a lot of time and some trial and error and seems like would end up costing you money in the beginning for each new place. Or once you’ve build one team does it get easier and easier to build others and not become a big struggle?

Thoughts?

Chris Clothier · Answer

Hi @Rachel Mellies,

The key part of your question is "...if you find a good team...". This is a bit more difficult than you would think. Unfortunately, the word Turnkey has. certainly lost it's meaning here on the BP site especially over the years. That is why there is this perceived controversy. It is almost impossible for an investor to compare two companies or two opportunities simply because they both include the word Turnkey. It can mean completely different things to different people. That is not necessarily a bad thing, it just means you have to have your ducks in a row on the front end and know how to discern and separate or categorize the opportunities. Sometimes companies market as turnkey and the service they provide is buying, renovating and managing investments. Sometimes that can be in one market or multiple markets. I only know of two or three companies that offer multiple cities on any type of scale and one of them is my families' company. Other companies can market with the word turnkey and what they mean is they find a property and fix it, but you need to find a management company. Others can mean that they find the property, but you have to pay for it and pay for the renovation, but they can manage that process for you and then you can find a management company. that option is much more risky. Then other companies market as turnkey, but they actually have relationships with the turnkey companies and they help you get qualified and answer your questions, then they hand you off or show you properties from a turnkey provider. They are simply there to hold you hand and they actually get paid by the turnkey providers.

That should be about as clear as mud!

Which is why I said that the key is fixing someone or a company that you trust and like and that does a good job. The good news is that in each of those descriptions there are companies that do their particular definition well. The bad news, there are probably more that don't do their definition very well.

I wrote a book called The Turnkey Revolution that McGraw-Hill published and while there are not a lot of other books you can get on Turnkey investing, I know of a few that I trust including one by Ali Boone. They are both available on Amazon and both are good for just gaining an understanding and mine in particular gives a few high-level suggestions on finding markets, providers and ultimately an investment. But, in no way is my book the only resource you should look at. There are also blogs and FB groups you can follow to get advice directly from investors who have the good and the bad. It is tough sometimes to get that direct response from investors because as you notes, there is plenty of controversy around the word. One other thing you can do is directly message with investors who have posted stories here on BP about their experiences. Many are happy to share outside of the spotlight and I am sure that is true for both the good and the bad stories. I have a number of clients on here who are no longer super active, but do respond to chat requests.

If I were in your shoes again, I would look to surround myself with a few investors or voices from the industry who are interested in answering your questions an helping you figure out if it is a strategy for investing that works for you. Be patient. There is no need to hurry. Interest rates are what they are and the same goes for today's home prices and rental rates. In my opinion, investing in real estate - especially passively - is a long-term investment play. Done right and with the right amount of due diligence and caution, you can build a solid portfolio that meets your expectations. Best of luck as you move forward!

Malorie Moore · Answer

Hi Rachel,

I am not saying building your own teams in each market isnt doable, but you were right, it may cost you a bit more. If you are wanting to invest in multiple markets I feel that a turnkey provider can be a great start since they are already established in the markets that they offer. Depending on your goals, there are defiantly markets where you can get more ROI. Best of luck to you! I would love to connect.

Taylor L. · Answer

It totally depends on you, your time available, and your goals. Not everyone has the time or patience to build teams, but they still want to invest and maintain control over their properties. Turnkeys are one aspect that addresses that segment.

Jeremy Horton · Answer

I agree that it 100% depends on the person and their goals.

IF you want to invest in a SFH and pay market price for a house that's essentially been bought, rehabbed and sold to you, by the turnkey company, then managed by the turnkey company - then turnkey may be right for you. They have the support systems in place already. They make profit every step of the way for making it "easy" for you. I get it, it's right for some people, but it's not my style. I find that the ROIs are overestimated because vacancy/repairs/maintenance/cap ex are often underestimated. Good luck getting anywhere close to the "1% rule" with a turnkey company.

Alternatively you would have to build your own team from the ground up. This can be time consuming and difficult but done. Lots of people do it sucessfully, and lots more probably not so much. It's important to learn EXACTLY what you're getting into and maintain awesome contact with everyone.

I personally want higher returns and I'm willing to have the early headache in order to learn and get better and better until they become easier.

Steve Donovan · Answer

Hello @Rachel Mellies As others point out; you will build more equity in the do it yourself route vs turnkey, but that assumes that things go well. Many things can and do go wrong in a rehab: the $7000 bathroom upgrade that turns into $25,000 because of a bad subfloor, because of the leaky pipe, because of...; the lost rental income due to extended rehab time because the contractors don't show up as promised etc. I'd be comfortable if I were you if you were working on a project in your geography where you could watch over it or if you had an established team you could trust in a distant city who could be your eyes on and boots on the ground. Turnkey is a trade off between certainty and risk and the potential upside is the reward if it works out. All the best in your investing future!

Logan McKay Zylstra · Answer

I like the hustle and believe that I can beat the returns of turnkey operations. However as Taylor stated, if you don't have the time, knowledge, or desire to buy deals yourself turnkey operations are perfect.

Turnkey worth it for investing in multiple states?

Turnkey worth it for investing in multiple states?

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