What is a fair margin for a turnkey provider to make?

[Nathan J.]

Hi all,

Seems like there are a few turnkey providers that look to sell to out-of-state investors. What is a fair margin you can expect to pay for this service?

These providers use local knowledge and networks to find bargain properties, then renovate & find a tenant before selling. That is a service that folks out-of-state should be expected to pay for. The question is how much is fair versus getting fleeced?

Thanks in advance

[Jay Hinrichs]

@Nathan J. that is a great question and as HML who specialized in funding turn key companies in the day... I have seen well over 2000 huds.. and in the day the TK company made their profit the day the investor bought the property pre rehab with the HML I provided so I saw exactly how much they made per deal... The answer is 5 to 10k back in the day... Now a days depending on market the guys I fund will make that and or much better.. Its the same thing as if your buying a rehab to sell to a home owner.. You can watch BP here and when someone hits a home run they post HEY I JUST MADE 150k on a FLIP then the BP followers start in with post after post of congratulating the rehabber for hitting home run.. YOu do not have Turn Key operators or any of the people that sit on the west coast marketing the product coming on BP and disclosing what they make... They make as much as they can like any other investor.. YOu need to work it backwards in a market to figure out profit margins for TK flippers... You can get much of this information on MLS.... take a market look at the cheapest properties in a neighborhood your interested in in my 20 plus years of funding SFR TK homes average rehabs are 5k for fluff and buff to 25k for replacing most major items and roof etc.. So add in that in.. you come to say all in in many markets is 50 to 60k and if the Tk operator has the same home for 79k or less probably pretty standard if its above that then there is a pretty big hit being made. Its Caveat Emptor ... ONe thing you should get is a scope of work on any turn key home and you can price that out.. Then get a third party inspection when the home is done to confirm that the work on the scope was actually done... And if you buying for long term rentals make sure the mechanicals and major components are either new or less than 10 years old . A 25 year old Hvac system that is serviced and working when you buy could crap out any day and cost you 3 to 5k to replace there by taking 2 to 3 years of your so called positive cash flow.

I wrote a book on the do's and don'ts of Tk for Australians. if your new to TK you may want to give it a read its basic but there are some pearls in there to get you thinking of what questions to ask.

As like with anything there are great TK companies and there are one's that are not good at all..