Are Turnkey Investments Worth It?

Question

Dear BP Community,I am a new investor looking to start my real estate investing career. I am currently an Active Duty Army SM and don't have the time or team to find deals. Nor do I have a specific state that I call home, as I move every couple of years. I'm currently living in the DC market which doesn't seem realistic for me to invest in. Given my situation, turnkey investments have interested me and I was curious to see what the BP thoughts are on turnkey investments. I've seen posts regarding the topic from 2015-2017, just wondering if that was still relevant.Thanks!

Ali Boone · Answer

You're going to get answers all over the board, and likely more of them will be negative than positive. For some reason people tend to trash on turnkeys, primarily because you don't have the forced appreciation option on the front-end, but turnkeys are perfect for multiple scenarios when someone doesn't have the time, skill, or interest in doing all the hands-on work. I started buying turnkeys in 2011 and they are all I still care to buy. They may not offer the highest returns, but I also do next to no work on them and I have made plenty of money on them. Reach out anytime if you have questions I can help with. I have a turnkeys Facebook group and work with turnkey investors all the time.

Marcus Long · Answer

@Maikeli Niu As you can see there are obvious pros and cons. I second @David Pere's recommendation to talk with @Stuart Grazier from Storehouse 3:10 Ventures. As he mentioned, they are both active duty and work with a lot of active duty and veterans (who also would be happy to share their experiences with you). Even if turnkey isn't your planned long term strategy, it might be a great way to take action now and start investing while you research other markets or strategies.

Stuart Grazier · Answer

Thanks for plug @David Pere and @Marcus Long! @Maikeli Niu Happy to help in any way I can.

Maikeli Niu · Answer

Hey thanks guys for your advice and insight. I'm sure you are all very busy, so the fact that you took the time to respond to my post means a lot. Thanks Again!

Mike D'Arrigo · Answer

@Maikeli Niu it depends on what you mean by "are they worth it?" Just like with any strategy, turn key is good for one person and not another. In your case where you don't have a lot of time to find a team or to source deals, turn key is probably the only realistic option. For someone with little experience, little time and doing it out of state, it's a good way to go. Some people would say that you are sacrificing equity which isn't always the case. Even if you try to do everything yourself, there is no guarantee that you are going to have equity left in the deal and it is risky. The advantage to turn key is the ease of entry. It's relatively passive and you'll have cash flow from the start. If you're goal is cash flow, then it's a great way to go.

Michael Ferrell · Answer

Maikeli, welcome to BP and thank you for your service! I agree that any good investment is better than no investment. If you do a little research on the front end and educate yourself on how to analyze a deal then you should be able to find a turn key that works for you. If I was still on active duty I would probably be using turn keys or a partner that will do most all of the work. Yes it is true that you could make less money but I would rather have 30% of a thousand a year rather than 100% of zero. Best of luck on your Real Estate endeavors.

David Pere · Answer

@Maikeli Niu Itis true that you are able to get a bigger return on your own sometimes, but ultimately investing in turnkey is better than not investing. I love the idea of either turnkey investing, or becoming a limitary partner (passive investor) on syndication deals for service members who are investing from overseas. You should talk to @Stuart Grazier with Storehouse 310 ventures. He and his partner David are both active duty Naval officers, and their turnkey operation is the best one I've ever worked with! They are straight shooters, and could give you a lot of information about turnkey too!

Thomas Greer · Answer

There is no "free lunch" as they say and arbitrage opportunities are rare. Typically, any reduction in work comes at the cost of potential return. And conversely, any extra potential return usually costs more risk or more work (or both). I guess the goal for most is (given your unique abilities, knowledge, capital, risk aversions, etc) what is the most return you can squeeze out with the least amount of work and risk. I think there are a million ways to make money and not everyone needs to be a ground up developer or "flipper" that goes BK (bankrupt) four times before they become millionaires. If the returns and strategy makes sense to you and your situation...go for it. But don't forget that if $$ is your only concern, then always benchmark your time and effort with something as simple as ETFs, REITs, syndications, etc. There are all kinds of ways to make money. All the best!

Daniel Kim · Answer

Thank you for your service. I personally did not choose to use any turnkey provider. Their properties may require less stress/maintenance since they are turnkey but you would be getting little equity in most cases. I would much rather choose a market, study it and then build a team of your own. Yes, it would be time consuming since you are on active duty but I feel like real estate is never truly passive - when you do let it become too passive you will be at the mercy of a property management company that may not care about your interests. If you have any idea of where you would want to settle down once you are out of the military (hopefully an affordable area) and any family or friends in those areas, I would cut out the turnkey provider a.k.a. middleman and try to invest on your own.