Is turnkey for a newbie the right way to go for rental property?

[Kevin Charles]

Hello all, I am interested in buy and hold strategies however I have zero experience in buying any type property. I am interested in getting my feet wet and I am trying to decided which course of action would make the most sense. I live in the NYC area and the prices are too high for me to get good cash flow. So I have been thinking of pursuing options out of state. As a person with no experience, how much sense does it make to pursue out of state turnkey properties? I'm hoping the process would help me to learn the ropes to go about it myself at some point. Is this a feasible plan?

[Clayton Mobley]

@Kevin Charles I think you'll find that you are not alone in your current position. I feel like about 30% of the active posters on BP are folks in bloated markets like NY who need to invest OOS to make the most of their capital. Do a search for some of those keywords (new york, new investor, turnkey, feet wet, etc) and I'm sure you'll find a ton of folks in your same shoes. Not to suggest the blind leading the blind, but you'll all be at different stages in your research and investment journey so it might be nice to connect with some other folks in your same situation so you can swap experiences and research.

As for real advice, I obviously am biased, generally, toward the turnkey model. But, that being said, the choice between turnkey and a more DIY option like the BRRRR method comes down to how you feel about some key tradeoffs, and everyone's answer is a bit different.

All investing is a tradeoff of some kind - risk for reward, time for money, etc. In this case, there are a couple to consider. Time for money is definitely a big one. If you have a full-time job, a family, or just don't really want to spend a ton of time (ie basically have another job) on your REI, then turnkey is a better choice. You sacrifice the potential return you could make by buying a distressed property and forcing equity through rehab, but you get your time back. I would never call turnkey a fully passive investment, since you should be doing a lot of legwork before you ever cut a check in terms of research and vetting, but once the investment is made it should be pretty hands-off.

The other trade you're looking at is passivity for control. You can have a full-service turnkey company take care of everything, but you won't get to call the shots on things like rehab and tenant selection. Or you can scout your own deal, hire a contractor and oversee the rehab, and self-manage your tenants for maximum control but also maximum time investment.