How to screen for legit turnkey companies?

Question

As someone new to real estate investing, there are some people who advised that an easy way to get started is buying a property from a legit turnkey company.

1. For all you experienced investors, have you purchased from a turnkey provider? If so, what was your experience?

2. How did you obtain peace of mind that the turnkey provider was legit and was actually providing a quality, cash flowing property and not stiffing you?

Thanks everyone!

Ali Boone · Answer

I started buying turnkeys in 2011 and they've been my primary focus over the years. My experience has been a learning one, but overall I'd still choose the turnkey route over other routes (as I'm on my way out to deal with a property I'm currently landlording....GROSS). The peace of mind shouldn't come from the turnkey provider or guessing that everything is legit. There's very little you can't verify about a property, and turnkeys are no exception. Working with a good, legit turnkey provider will just make your experience nicer and smoother (hopefully) and is safer for new folks who don't know what to look for. But technically all of the verification of the property and the cash flow should come from your own volition-- verifying rents and lease agreements, property inspection, deed/title insurance, comps, etc.

Stuart Grazier · Answer

@Ali Boone you mentioned that you made a few mistakes with turnkey companies. Would you mind giving some insight into what those mistakes were? I'd love to learn how to better serve our investors and not make similar mistakes.

Ali Boone · Answer

1. Most of my properties have been through turnkey. First one was in 2011. I've learned a lot from them (happy to help you with that if you want), and made a few mistakes with them, but ultimately I still prefer them as my method of investing.2. You absolutely don't have to trust the turnkey provider (and shouldn't) because you should be doing full due diligence on the property during the buying process. Things like property inspection, etc. All of that should confirm you're getting what was advertised. Life will be a lot easier if you work with a trustworthy turnkey provider, but you shouldn't trust any of them to tell you the condition of the property and the situation when you should be checking up on all of that yourself. There's very little about a property that you can't verify.

Stuart Grazier · Answer

@Christopher Townsend one recommendation is to ask for referrals and talk to some of the clients that have done deals with the turnkey provider you are considering. If the company isn't willing to do that, it may be a sign they are hiding some skeletons in the closet. I also agree with @Jeff Schechter - get on a plane and go see the operation, meet the team, see the neighborhood, and the typical property type they are selling. Also talk to the property management company they are using because property management can make or break your investment.

James Wise · Answer

Looking at what the reviews actually say is big too. Don't just brush over negative reviews without looking into them. Sometimes a negative review is actually good for you the investor.If you see a property management firm with a ton of tenant complaints along the lines of They increased my rentThey slapped me with a late feeThey evicted me immediately without giving me time to catch upthis shows that the management company is working in your interests & you can trust the operation. Other types of negative comments are a big red flag. For instance the multiple threads about Ocean Point Property Management & Morris Invest have much different negative comments. Those comments tend to focus on the company selling investors properties that were supposed to be rehabbed & never were etc...Much different.

Jeff Schechter · Answer

Disclosure: I am a partner in a successful TK operation in Indy. It's amazing to me how few people will actually take the time to get on an airplane and come see what we're really up to.... Look at properties, drive the neighborhoods, understand the processes. For an initial purchase, this should be mandatory due diligence.

Eddie Werner · Answer

I think any strong due diligence with a service company entails speaking with their current clients, multiple clients that have owned multiple properties for a number of years from the provider.

Jason Pabon · Answer

That's the beauty of the internet! Look at reviews online and talk to other investors. Learning from others is key. I also recommend attending meetups in your local area (if you haven't already) and start connecting with local investors.

Larry Fried · Answer

Yes, started investing with turnkey back in 2012, and I have also helped a number of other investors do the same. Given my circumstances at the time, it was a great way to get started in OOS REI.

Tom Ott · Answer

Google! It can be great to find out reviews or other information about a company. Also, if you know their name, ask here on the forums. Chances are, if they are legit, you will find some investors who have worked with them before. You could always search their name in the forums as well and see what people are saying about. Find former or current investors and reach out to them!For now, try looking at:What to Ask When Working With a Turnkey ProviderandThe Best Types of Markets for Profitable Turnkey Properties