What is a turnkey rental provider?

[Ben McMahon]

I see a fair bit of "Turnkey Rental providers". I haven't really looked into it that much, but I was wondering what that involves? My core book of business is in the shenandoah valley in VA. Servicing Winchester, Warrenton, Harrisonburg, Front Royal, etc.

I currently have a PM company, a construction crew, and a brokerage.  Sometimes we flip houses for me, and sometimes we partner with other investors. Sometimes we sell, and sometimes we turn them into rentals.  I think I am actually a turnkey provider at times even though I never really thought about it.  Can someone enlighten me?

Do the rentals I provide need to be currently owned by my company?  

Normally what happens is that someone comes to me and says they want to invest in real estate.  Than I ask them what they want to do.  Some say "flip a house"  some say, "buy rental properties".  So I help them buy a property ( or sell them mine), and walk them through the whole process of looking at the property as an investment, etc etc etc.....  I usually handle the rehab, although not always and we generally either sell it for them again, or manage it.  So what am I ?

[Patti Robertson]

Turnkey generally means you are selling an investor a property that is already rented and you will manage it.  The investors are generally passive and wouldn't want to be involved with the "process".  I'd say what you are doing is closer to mentoring.  

[Todd Krzeminski]

@Ben McMahon

I have 3 turnkey rentals I own in the midwest. From what I've seen, there's a lot of variation in how different turnkeys operate. But from what you describe, you're not far off.

Typically, when an investor wants to buy a turnkey property, he/she starts by finding a market and a provider they want to work with. They may never see the property they're buying because they might live states or countries away. There's really a lot of trust that has to be built with the provider because they might not get eyes on it.

In most cases, the investor is completely hands off. The acquisition and rehab is done before it's advertised to the investors. So in that case -- yes the property is owned by the provider for that time period. The turnkey provider usually has a list of inventory available for the investors to choose from, and it's always the buy and hold model, not flips.

After purchase, Property Management may or may not be handled in house by the provider. The properties I have were not managed by the provider, but they gave me recommendations. But you might continue the relationship with the provider acting as a sort of counselor -- someone to turn to for advice when you run into issues with the house, tenants, PM, etc., and also who you return to when you're ready to buy your next.

I probably wouldn't characterize what you're doing as turnkey. It sounds like you are really tailoring your process to the needs of the investor, which certainly isn't a bad thing. Some people might call it turnkey, but it sounds like it might still be less hands-off than would qualify. In fact, what you provide might be something I'd be interested in, because it sounds like it might be a good way to transition from turnkey to doing it all myself, which is where I want to get to. When buying turnkeys, you're pretty blinded to the process.

There's a lot of demand for turnkey rentals, because there are a lot of investors (like me) that work a full time job and don't have the time to go through the process themselves. 

[Ben McMahon]

Ok, that makes sense. What kind of returns are turnkey providers providing these days?obviously it's going to be different all over the place, but there should be an estimate for appreciation in some areas that would account for a chunk of the difference in the cash flow. Assuming it's being done in places that make sense to invest.

For instance, in my area there is less cash flow than say Memphis tn. But an hour west of D.C., we are in a great appreciation area. In fact over 50% of the population commutes. How is that sort of thing being presented by these providers? Todd Krzeminski thanks for the insites

[Tom Ott]

Originally posted by @Ben McMahon:

I see a fair bit of "Turnkey Rental providers". I haven't really looked into it that much, but I was wondering what that involves? My core book of business is in the shenandoah valley in VA. Servicing Winchester, Warrenton, Harrisonburg, Front Royal, etc.

I currently have a PM company, a construction crew, and a brokerage.  Sometimes we flip houses for me, and sometimes we partner with other investors. Sometimes we sell, and sometimes we turn them into rentals.  I think I am actually a turnkey provider at times even though I never really thought about it.  Can someone enlighten me?

Do the rentals I provide need to be currently owned by my company?  

Normally what happens is that someone comes to me and says they want to invest in real estate.  Than I ask them what they want to do.  Some say "flip a house"  some say, "buy rental properties".  So I help them buy a property ( or sell them mine), and walk them through the whole process of looking at the property as an investment, etc etc etc.....  I usually handle the rehab, although not always and we generally either sell it for them again, or manage it.  So what am I ?

 A TRUE Turnkey provider is a company that owns a property and completely renovating it 100% and then rents it out. They sell the property to an investor and manages it as well. Many other people throw the word around to define a property that doesn't need work, but that is not the real investment meaning. 

I would look into:

How to Find the Right Turnkey Real Estate Investment Company for You

and

The Best Types of Markets for Profitable Turnkey Properties

[Todd Krzeminski]

@Ben McMahon I'm looking for and getting Cash on Cash returns of between 10-12%. That's not to say it's easy to come by. I just have to be patient and pick my spots. 

Cash flows between $150-200 after expenses, vacancy, maint/capex.

[Timothy Murphy III]

@Ben McMahon

The term turnkey gets used by a lot of people to mean a lot of different things. A true turnkey system is really more of a process first and the asset is secondary. A true turnkey investment should include a fully renovated property with a vetted and placed tenant already in place and should come packaged with property management and maintenance. The idea is that it's a truly hands off and passive investment that cash flows from day one with little to no input from the investor. Not all properties that are advertised as turnkey meet these criteria, so if that's what you're looking for be sure that's what you're getting.

[Account Closed]

True turnkey, meaning the properties are owned by that company, rehabbed by that company, and managed by that company. It is a hands off process for investors!

[Ben McMahon]

I guess it wasn't really that silly of a question.  Given that it does seem to mean different things for different people.