Simple Passive Investor from California

[Mabel L.]

Hello! I'm so happy to have stumbled upon BP through the Madfientist podcast and now, I'm addicted to listening to all of the BP podcast!  

My husband and I are in our late 30's and are about 4-5 years away from reaching financial independence and of lately, I've been thinking about how to speed up that process and create additional streams of income.

I have bought and sold a couple of properties (including land-lording) so I have a little experience here and there.  The podcasts however, have opened up so many different ways of approaching real estate that I had never thought of and has actually helped solidify the kind of investor I definitely do NOT want to be.

At this point, I am really interested in turnkey properties. I think it may be a good fit for all of the following reasons:

#1) I can't seem to find properties with good cash flow around here (in SoCal).

#2) I don't know anyone out-of-state that can help me acquire, rehab, manage properties.

#3) The idea of putting a team together to do #2 is not attractive.  I like simple.  Sounds like a lot of work (at least I can admit it!)

#4) Time is precious.  I have a full time job (Middle School teacher).  I do not want to spend my nights and weekends looking at ugly houses much less flying to places to investigate. (Instead, I grade papers and plan lessons...much more exciting!)

#5) I HATE landlording.  

#6) I know finding good tenants is actually quite easy if the location is prime (I own in SF and just sold in Pasadena - plenty of high-quality renters, never a vacancy).

#7) I am happy with decent returns, I do not need to squeeze every possible penny out of a transaction.  I believe everyone can win.  

I am really interested in hearing from those that have experiences with turnkey companies, especially how to go about evaluating property managers/managements. 

I'd also love it if anyone can offer how they compared the TK companies and what were the determining factors that helped them choose a particular TK.  

 The TK company I've read over and over again is Memphis Invest (which I'm at this point quite convinced they are a sound and reputable company) so I would love to hear from anyone with experiences with a different company. 

Thanks BP for providing this forum and to all who have generously contributed to BP!

~ Mabel

[David Faulkner]

I agree with Jay. Stay local in CA and your returns will likely smoke what you could do with an out of state turnkey over the long haul. It will NOT likely be 100% passive, though. You could put your money to work locally in a pool or individually placed through a mortgage broker issuing Hard Money Loans. That would be totally passive. Lots of good groups like the Norris Group in SoCal doing this.

If you insist on 100% passive and out of state REI, then I think there are better investment models than turnkey. For one, if you qualify as an accredited investor (if you are near financial independence then you likely will), then you could look into private placements whereby you could be a passive investment in an apartment syndication. In other words, you would invest in a large apartment complex, get a preferred return of 8-12%, and the syndicator who puts together and manages the deal takes or splits profits above the preferred return. Larger scale and better aligned incentive structure than with a turnkey operator IMO.

So, a few options for you, but out of state turnkey would be just about the last option on the list I would advise you to choose. I'm sure there are plenty of turnkey operators and those that are marketing for them that would disagree, but the difference is I'm not trying to sell you anything.