Help me figure out if I am crazy or...

Real Estate Deal Analysis & Advice
2yFollow

Help me figure out if I am crazy or...

Ivana Ivanovic
Member since 2021 · 19 posts · 22 votes

Folks, I was talking to a turnkey company to buy an investment property, and looking at a few properties. Their pro forma sheet doesn't take into account ANY vacancy or repairs when calculating cash flow, and the rent comps are...ambitious. 

1. The way their cash flow calculations are presented is IMO sketchy: while the form is not a spreadsheet, it is made to look like vacancy/repairs are included in cash flow calcs (stacked together with other numbers impacting cash flow, and right above the final cash flow amount) 

2. When asked about vacancy/repairs, their answer is: that's why why they separately have $5,000-10,000 as "account reserves" in their pro forma. Or "simply cost of doing business", they keep repeating - (an unprofitable business, it seems to me, but maybe I am just inexperienced?). Furthermore, they add something along the lines of "this property is working for you, cash flow is here to cover this type of stuff while the property is appreciating -- so what if you have that 5K HVAC unit replacement " (FYI, even when optimistically calculated, cash flow does NOT cover a 5K HVAC unit within the first few years) 

3. When asked why their properties don't cash flow in any rental calculator, the answer is: "people who use these rental calculators don't get the kind of deals we give you" 

4, Re rent comps...I looked at Zillow, and another tool, and if I simply rely on Zillow, rents are typically lower and there are properties in the same few blocks on the market for 40+ days. THe turnkey company's answer: our property mgmt company is doing daily complex algorithms and they have the best information here. My reply: "but these properties realistically are for rent, so your comps should not be that much off, correct?" No reply, just that their PM knows best. P,S. PM has bad reviews for the most part 


Am I crazy here? Should I at least see NEUTRAL cash flow if I account for vacancy and repairs (and am optimistically counting on this to appreciate)?...Not to mention that all their ROI calcs depend on cash flow of course so long term return calculations also fall apart.

I do want to give them benefit of the doubt but I also want your smart opinions. Thank you very much! 

8Reply
65 views

Most Popular Reply

Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
2y

There are TONS of turnkey rental companies out there.  If you have concerns, don't buy.  Go look at some others.

7Reply
See this reply in the discussion

35 Replies

Jump to latestLatest
  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    2y

    There are TONS of turnkey rental companies out there.  If you have concerns, don't buy.  Go look at some others.

    7Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    2y

    I agree with Greg. There are also many different ways to invest in real estate.  Not all properties will cash flow (either initially or some ever), but at the end of the day when you sell them, you should come out ahead.  I have rentals that initially didn't cash flow, but as rents increased they do.  Plus house prices have increased (speaking for where my rentals are) and tenants have helped pay down the mortgage...so in the end that is a win for me.

    1Reply
  • Bradley BuxtonBusiness Member
    Real Estate Agent · NV · Member since 2023 · 1k+ posts · 713 votes
    2y

    @Ivana Ivanovic

    You're not crazy they are trying to sell you something. That is okay they are selling a product... except you're not comfortable with the deal so walk away and find something else. There will be another deal. Check with local builders they might have new inventory they want to move or turnkey rentals. Here in the Reno, NV area there are new construction homes that have tenants already in place, paying above market rent, and the builders are offer 5.5% interest if you use their lender. They are they best investments in the area. Not a turn key company but it's turnkey as an investment.  If the deal doesn't feel right then look for the next deal. 

    2Reply
  • Ivana Ivanovic
    OP
    Member since 2021 · 19 posts · 22 votes
    2y

    Thanks all for the responses. @Theresa Harris I know the balance re cash flow and appreciation, but they should not claim there'll be cash flow if there won't be any. The idea here is that you are paying them to find you the right kind of deal, in this case one with at least a minimum cash flow... 

    0Reply
  • Brian Kloft
    Investor · Arizona & Oregon Coast · Member since 2023 · 128 posts · 113 votes
    2y

    From your answers that you say they are giving you I would say run away. It is fine if a property doesn't cash flow but if it doesn't they should say why that is fine and not give you some magical answer. If they are getting higher than comps then they should be able to tell you why, not just some hypothetical that their pm does some daily complex algorithm. I get higher rent than many others but I can tell you why I do. It sounds like they are telling you to trust them, but not willing to show you the details on why you should trust them but that it is their 'magical sauce' that makes things work. When people tell you that they are smarter than you and that you can't understand it and they won't take the time to walk you thru it line by line; you should not trust them. There are others that will be able to show you the numbers and explain why something works the way it does.

    0Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    2y

    You've answered your own question. Your gut is telling you that there is something wrong with what they are selling. From what you've posted here, I'd guess that your gut instinct is right. 

    Podcast Guest on Show #243
    Skyline Properties
    View Page
    3Reply
  • Ivana Ivanovic
    OP
    Member since 2021 · 19 posts · 22 votes
    2y

    @Brian Kloft I appreciate your reasoning here massively. I do believe in trusting your gut too - and my gut was screaming "no" to the salesy pressures from day one (texts and emails that we need to look at properties urgently, that two are already sold, etc.). Their style a massive turnoff in addition to everything else. 

    And yeah, no good answers other than "magical sauce'. 

    I do however to some extent want to double check my gut, and this is super helpful to make sure I am not paranoid.Thank you!

    0Reply
  • Ivana Ivanovic
    OP
    Member since 2021 · 19 posts · 22 votes
    2y

    @JD Martin, brief and says it all. Gonna go listen to Show #243 now (the marketer in me loves that you put it in your signature!) 

    1Reply
  • Stuart UdisPro Member
    Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
    2y

    I've always felt the objectives of the turn key service providers are at conflict with the objectives of the end buyer.  You will constantly hear of  shortcuts during construction and the conscientious decision to use lower quality materials during the renovation. I personally never hear stories of the turn key provider spending extra sound proofing between units or investing in better quality fixtures or other high touch building materials so that the end buyer can enjoy reduced maintenance costs and better tenant engagement. The turn key providers have moved on by the time these issues manifest themselves.  Most also rely on  beefed up rents and unrealistic operated expenses in their pro-formas to justify higher sale figures which appears to be the case here.

    @Ivana Ivanovic you appear to have a good grasp on your own diligence process which will serve you well. It seems this turn key provider is quite the peddler with an excuse for every concern you raise which would give me additional pause. Your own diligence is telling you this is not a deal to pursue. Remember as the old adage goes the best deals are generally the deals you walk away from. 

    [email protected]
    1Reply
  • Luke Bricca
    Investor · Austin, TX · Member since 2020 · 20 posts · 13 votes
    2y

    I agree with the above posts - it's in the turnkey company's best interests to jack up rents to increase their projected ROI.

    As a general rule, I do not trust a single projection value any seller offers as they're nearly always weighted in favor of the seller.

    Zillow is a great way to check rent comps. Make sure it's within 0.25mi, part of the same neighborhood/subdivision, roughly same sqft, and within the last few months. In some markets, seasonality increases rents in the summer vs. winter, but this typically runs ~5-10%.

    0Reply
  • Ivana Ivanovic
    OP
    Member since 2021 · 19 posts · 22 votes
    2y

    @Luke Bricca good point that they are a seller in the end (and the beginning, heh). I think the idea behind turnkey should be that they are a proxy of me - the buyer - for a set amount of money - but alas that's clearly not the case.

    Thanks for the Zillow endorsement - helps a lot! 

    Cheers, 
    Ivana

    1Reply
  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    2y

    Its hard to cashflow buying normal deals in 2024, theres almost 0 chance you will cashflow from a turnkey company after real expenses using a manager. 

    2Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    2y
    Quote from @Ivana Ivanovic:

    @JD Martin, brief and says it all. Gonna go listen to Show #243 now (the marketer in me loves that you put it in your signature!) 

    Actually, BP puts it in there automatically - it's not editable 🙂. But even if they didn't I'd probably put it in there anyway because, as Carly Simon said, I'm so vain 😄
    Podcast Guest on Show #243
    Skyline Properties
    View Page
    0Reply
  • Luke Bricca
    Investor · Austin, TX · Member since 2020 · 20 posts · 13 votes
    2y
    Quote from @Ivana Ivanovic:

    @Luke Bricca good point that they are a seller in the end (and the beginning, heh). I think the idea behind turnkey should be that they are a proxy of me - the buyer - for a set amount of money - but alas that's clearly not the case.

    Thanks for the Zillow endorsement - helps a lot! 

    Cheers, 
    Ivana

     @Ivana Ivanovic Of course! I've worked in institutional single family acquisitions for a few years and have rarely had good experiences with turnkey investors. Typically most of the money (especially in this market) comes though purchasing a property in need of reno from a buyer not willing to put in the work/cash to reno, and then doing the work to reno it to capture that latent value.

    By buying a house that's already reno'd and ready to rent, you're missing out on a big portion of the potential equity-building potential of that investment, since the two big ways you build equity are through either reno or the housing market just moving up. Of the two options, renovation will net you significantly more equity in a short time period.

    0Reply
  • Travis Biziorek
    Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
    2y

    Ivana, there's a TON to unpack here and I'm happy to carry on the convo via DM or a call.

    You're not crazy. Turnkey providers often exclude a lot of the "soft costs" that always come with owning rental property.

    I work with a company and all we do are BRRRR type deals in Detroit for cash investors. We've considered rehabbing in-house and selling turnkey. But, when you do the numbers correctly, they are always atrocious.

    Which brings me to why these turnkey providers are running the numbers the way they are.

    They "don't work" when they do it correctly. So they have to fudge it to make the investments look appealing.

    Luckily, many folks figure this out. But unfortunately many do not. They either don't have the experience to understand there are other costs than simply PITI or they are making a decision too quick to stop and think about it.

    The reality is turnkey rarely works if you want to make sure the property is generating cash flow. I think a lot of these providers skated by in the past when rates were extremely low. 

    Cash flow was higher and the numbers were strong enough where people may not have had a great outcome but the investments didn't end up losing money on a monthly basis either.

    But rates are higher now, and so are prices. The model simply doesn't work for cash flow focused investors. 

    It's a scummy thing to be doing and I personally couldn't do it and sleep well at night. I'd go another route.

    2Reply
  • Ivana Ivanovic
    OP
    Member since 2021 · 19 posts · 22 votes
    2y
    Quote from @Luke Bricca:
    Quote from @Ivana Ivanovic:

    @Luke Bricca good point that they are a seller in the end (and the beginning, heh). I think the idea behind turnkey should be that they are a proxy of me - the buyer - for a set amount of money - but alas that's clearly not the case.

    Thanks for the Zillow endorsement - helps a lot! 

    Cheers, 
    Ivana

     @Ivana Ivanovic Of course! I've worked in institutional single family acquisitions for a few years and have rarely had good experiences with turnkey investors. Typically most of the money (especially in this market) comes though purchasing a property in need of reno from a buyer not willing to put in the work/cash to reno, and then doing the work to reno it to capture that latent value.

    By buying a house that's already reno'd and ready to rent, you're missing out on a big portion of the potential equity-building potential of that investment, since the two big ways you build equity are through either reno or the housing market just moving up. Of the two options, renovation will net you significantly more equity in a short time period.

     @Luke Bricca Yesss...my heart is really in renovating and giving houses a new life (did that with my own house pretty much) but alas I live in the Bay Area so there is nothing I can afford here....or anywhere nearby really... plus a small kid (so travel is hard), so hard to travel frequently and supervise a contractor, etc. 

    Feels like I ought to find something in between in the right market - by that I mean a gem that doesn't need major structural repairs, and luck out on a contractor etc. 

    0Reply
  • Ivana Ivanovic
    OP
    Member since 2021 · 19 posts · 22 votes
    2y
    Quote from @Travis Biziorek:

    Ivana, there's a TON to unpack here and I'm happy to carry on the convo via DM or a call.

    You're not crazy. Turnkey providers often exclude a lot of the "soft costs" that always come with owning rental property.

    I work with a company and all we do are BRRRR type deals in Detroit for cash investors. We've considered rehabbing in-house and selling turnkey. But, when you do the numbers correctly, they are always atrocious.

    Which brings me to why these turnkey providers are running the numbers the way they are.

    They "don't work" when they do it correctly. So they have to fudge it to make the investments look appealing.

    Luckily, many folks figure this out. But unfortunately many do not. They either don't have the experience to understand there are other costs than simply PITI or they are making a decision too quick to stop and think about it.

    The reality is turnkey rarely works if you want to make sure the property is generating cash flow. I think a lot of these providers skated by in the past when rates were extremely low. 

    Cash flow was higher and the numbers were strong enough where people may not have had a great outcome but the investments didn't end up losing money on a monthly basis either.

    But rates are higher now, and so are prices. The model simply doesn't work for cash flow focused investors. 

    It's a scummy thing to be doing and I personally couldn't do it and sleep well at night. I'd go another route.

    Thank you so much. I can't help but wonder how these people sleep at night. 
    0Reply
  • Travis Biziorek
    Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
    2y
    Quote from @Ivana Ivanovic:
    Quote from @Travis Biziorek:

    Ivana, there's a TON to unpack here and I'm happy to carry on the convo via DM or a call.

    You're not crazy. Turnkey providers often exclude a lot of the "soft costs" that always come with owning rental property.

    I work with a company and all we do are BRRRR type deals in Detroit for cash investors. We've considered rehabbing in-house and selling turnkey. But, when you do the numbers correctly, they are always atrocious.

    Which brings me to why these turnkey providers are running the numbers the way they are.

    They "don't work" when they do it correctly. So they have to fudge it to make the investments look appealing.

    Luckily, many folks figure this out. But unfortunately many do not. They either don't have the experience to understand there are other costs than simply PITI or they are making a decision too quick to stop and think about it.

    The reality is turnkey rarely works if you want to make sure the property is generating cash flow. I think a lot of these providers skated by in the past when rates were extremely low. 

    Cash flow was higher and the numbers were strong enough where people may not have had a great outcome but the investments didn't end up losing money on a monthly basis either.

    But rates are higher now, and so are prices. The model simply doesn't work for cash flow focused investors. 

    It's a scummy thing to be doing and I personally couldn't do it and sleep well at night. I'd go another route.

    Thank you so much. I can't help but wonder how these people sleep at night. 

    I don't either. 

    Karma will do its thing though.

    1Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    2y

    We are currently selling a few duplexes for an OOS investor who bought them from a turn-key company 6 years ago. They did a very nice job with the rehab. He was sold on an promised "8 CAP" - and not on comps. This is a huge red flag. Residential 1-4 does not get cap-rated.

    So he way overpaid and now 6 years later the properties are barely worth what he paid for - we have seen about 50% appreciation here in Milwaukee in the last 6 years.

    In fairness, turn-key providers have to make a profit, so they have to cut a slice out of the deal. Given the current market, where it is hard enough to find a deal without a third party making money, I don't see how that would work.

    0Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2y
    Quote from @Ivana Ivanovic:

    Folks, I was talking to a turnkey company to buy an investment property, and looking at a few properties. Their pro forma sheet doesn't take into account ANY vacancy or repairs when calculating cash flow, and the rent comps are...ambitious. 

    1. The way their cash flow calculations are presented is IMO sketchy: while the form is not a spreadsheet, it is made to look like vacancy/repairs are included in cash flow calcs (stacked together with other numbers impacting cash flow, and right above the final cash flow amount) 

    2. When asked about vacancy/repairs, their answer is: that's why why they separately have $5,000-10,000 as "account reserves" in their pro forma. Or "simply cost of doing business", they keep repeating - (an unprofitable business, it seems to me, but maybe I am just inexperienced?). Furthermore, they add something along the lines of "this property is working for you, cash flow is here to cover this type of stuff while the property is appreciating -- so what if you have that 5K HVAC unit replacement " (FYI, even when optimistically calculated, cash flow does NOT cover a 5K HVAC unit within the first few years) 

    3. When asked why their properties don't cash flow in any rental calculator, the answer is: "people who use these rental calculators don't get the kind of deals we give you" 

    4, Re rent comps...I looked at Zillow, and another tool, and if I simply rely on Zillow, rents are typically lower and there are properties in the same few blocks on the market for 40+ days. THe turnkey company's answer: our property mgmt company is doing daily complex algorithms and they have the best information here. My reply: "but these properties realistically are for rent, so your comps should not be that much off, correct?" No reply, just that their PM knows best. P,S. PM has bad reviews for the most part 


    Am I crazy here? Should I at least see NEUTRAL cash flow if I account for vacancy and repairs (and am optimistically counting on this to appreciate)?...Not to mention that all their ROI calcs depend on cash flow of course so long term return calculations also fall apart.

    I do want to give them benefit of the doubt but I also want your smart opinions. Thank you very much! 


     The better question is which turnkey shops do not do this?

    They pretty much all do it, some with predatory lending type practices on this board. 

    1Reply
  • Ivana Ivanovic
    OP
    Member since 2021 · 19 posts · 22 votes
    2y
    Quote from @V.G Jason:
    Quote from @Ivana Ivanovic:

    Folks, I was talking to a turnkey company to buy an investment property, and looking at a few properties. Their pro forma sheet doesn't take into account ANY vacancy or repairs when calculating cash flow, and the rent comps are...ambitious. 

    1. The way their cash flow calculations are presented is IMO sketchy: while the form is not a spreadsheet, it is made to look like vacancy/repairs are included in cash flow calcs (stacked together with other numbers impacting cash flow, and right above the final cash flow amount) 

    2. When asked about vacancy/repairs, their answer is: that's why why they separately have $5,000-10,000 as "account reserves" in their pro forma. Or "simply cost of doing business", they keep repeating - (an unprofitable business, it seems to me, but maybe I am just inexperienced?). Furthermore, they add something along the lines of "this property is working for you, cash flow is here to cover this type of stuff while the property is appreciating -- so what if you have that 5K HVAC unit replacement " (FYI, even when optimistically calculated, cash flow does NOT cover a 5K HVAC unit within the first few years) 

    3. When asked why their properties don't cash flow in any rental calculator, the answer is: "people who use these rental calculators don't get the kind of deals we give you" 

    4, Re rent comps...I looked at Zillow, and another tool, and if I simply rely on Zillow, rents are typically lower and there are properties in the same few blocks on the market for 40+ days. THe turnkey company's answer: our property mgmt company is doing daily complex algorithms and they have the best information here. My reply: "but these properties realistically are for rent, so your comps should not be that much off, correct?" No reply, just that their PM knows best. P,S. PM has bad reviews for the most part 


    Am I crazy here? Should I at least see NEUTRAL cash flow if I account for vacancy and repairs (and am optimistically counting on this to appreciate)?...Not to mention that all their ROI calcs depend on cash flow of course so long term return calculations also fall apart.

    I do want to give them benefit of the doubt but I also want your smart opinions. Thank you very much! 


     The better question is which turnkey shops do not do this?

    They pretty much all do it, some with predatory lending type practices on this board. 


     Well, in addition to a couple of other comments, that helps. I was already set to start on a solo path (with the help of an investor-focused RE agent), but now won't even be tempted to check out another turnkey company. 

    0Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2y
    Quote from @Ivana Ivanovic:
    Quote from @V.G Jason:
    Quote from @Ivana Ivanovic:

    Folks, I was talking to a turnkey company to buy an investment property, and looking at a few properties. Their pro forma sheet doesn't take into account ANY vacancy or repairs when calculating cash flow, and the rent comps are...ambitious. 

    1. The way their cash flow calculations are presented is IMO sketchy: while the form is not a spreadsheet, it is made to look like vacancy/repairs are included in cash flow calcs (stacked together with other numbers impacting cash flow, and right above the final cash flow amount) 

    2. When asked about vacancy/repairs, their answer is: that's why why they separately have $5,000-10,000 as "account reserves" in their pro forma. Or "simply cost of doing business", they keep repeating - (an unprofitable business, it seems to me, but maybe I am just inexperienced?). Furthermore, they add something along the lines of "this property is working for you, cash flow is here to cover this type of stuff while the property is appreciating -- so what if you have that 5K HVAC unit replacement " (FYI, even when optimistically calculated, cash flow does NOT cover a 5K HVAC unit within the first few years) 

    3. When asked why their properties don't cash flow in any rental calculator, the answer is: "people who use these rental calculators don't get the kind of deals we give you" 

    4, Re rent comps...I looked at Zillow, and another tool, and if I simply rely on Zillow, rents are typically lower and there are properties in the same few blocks on the market for 40+ days. THe turnkey company's answer: our property mgmt company is doing daily complex algorithms and they have the best information here. My reply: "but these properties realistically are for rent, so your comps should not be that much off, correct?" No reply, just that their PM knows best. P,S. PM has bad reviews for the most part 


    Am I crazy here? Should I at least see NEUTRAL cash flow if I account for vacancy and repairs (and am optimistically counting on this to appreciate)?...Not to mention that all their ROI calcs depend on cash flow of course so long term return calculations also fall apart.

    I do want to give them benefit of the doubt but I also want your smart opinions. Thank you very much! 


     The better question is which turnkey shops do not do this?

    They pretty much all do it, some with predatory lending type practices on this board. 


     Well, in addition to a couple of other comments, that helps. I was already set to start on a solo path (with the help of an investor-focused RE agent), but now won't even be tempted to check out another turnkey company. 

     What's an investor-focused RE agent? 

    That's also almost mythical. There's maybe in 1 in every 100,000, that are truly "investor" focused. Most are sales focused, and you're the one they are selling to. Quit reading the nonsense, and judge based on behavior. Don't tell me you're getting a "core 4" next.

    1Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    @Ivana Ivanovic

    one thing you're hitting on is that right now, there is competition for deals at every tier.  you mentioned you might want "a gem that doesn't need major structural repairs, and luck out on a contractor."

    what's tough about that is that deal - something that just needs light cosmetics, but is priced below market - doesn't really exist right now.  or it does, but there is tons of competition for it, which drives the price up.  it's very difficult for investors in HCOL areas to buy a random property in a random market that they haven't visited and don't know anyone in and make money.  if you bought something in 2014 and it wasn't great, the market might bail you out in 5-10 years.  i don't think that's the case right now.

    I think turnkey is a good option if you have significant liquid capital, want to buy in a solid market in a solid area, couldn't care less about cash flow for 10+ years and are even willing to be negative, and are willing to pay for repairs and capex without batting an eye.  just like your retirement account - you buy 5 houses in a great area and don't look at them for years.  that's not most of us, and so i give you kudos for figuring it out.

    0Reply
  • Ivana Ivanovic
    OP
    Member since 2021 · 19 posts · 22 votes
    2y
    Quote from @V.G Jason:
    Quote from @Ivana Ivanovic:
    Quote from @V.G Jason:
    Quote from @Ivana Ivanovic:

    Folks, I was talking to a turnkey company to buy an investment property, and looking at a few properties. Their pro forma sheet doesn't take into account ANY vacancy or repairs when calculating cash flow, and the rent comps are...ambitious. 

    1. The way their cash flow calculations are presented is IMO sketchy: while the form is not a spreadsheet, it is made to look like vacancy/repairs are included in cash flow calcs (stacked together with other numbers impacting cash flow, and right above the final cash flow amount) 

    2. When asked about vacancy/repairs, their answer is: that's why why they separately have $5,000-10,000 as "account reserves" in their pro forma. Or "simply cost of doing business", they keep repeating - (an unprofitable business, it seems to me, but maybe I am just inexperienced?). Furthermore, they add something along the lines of "this property is working for you, cash flow is here to cover this type of stuff while the property is appreciating -- so what if you have that 5K HVAC unit replacement " (FYI, even when optimistically calculated, cash flow does NOT cover a 5K HVAC unit within the first few years) 

    3. When asked why their properties don't cash flow in any rental calculator, the answer is: "people who use these rental calculators don't get the kind of deals we give you" 

    4, Re rent comps...I looked at Zillow, and another tool, and if I simply rely on Zillow, rents are typically lower and there are properties in the same few blocks on the market for 40+ days. THe turnkey company's answer: our property mgmt company is doing daily complex algorithms and they have the best information here. My reply: "but these properties realistically are for rent, so your comps should not be that much off, correct?" No reply, just that their PM knows best. P,S. PM has bad reviews for the most part 


    Am I crazy here? Should I at least see NEUTRAL cash flow if I account for vacancy and repairs (and am optimistically counting on this to appreciate)?...Not to mention that all their ROI calcs depend on cash flow of course so long term return calculations also fall apart.

    I do want to give them benefit of the doubt but I also want your smart opinions. Thank you very much! 


     The better question is which turnkey shops do not do this?

    They pretty much all do it, some with predatory lending type practices on this board. 


     Well, in addition to a couple of other comments, that helps. I was already set to start on a solo path (with the help of an investor-focused RE agent), but now won't even be tempted to check out another turnkey company. 

     What's an investor-focused RE agent? 

    That's also almost mythical. There's maybe in 1 in every 100,000, that are truly "investor" focused. Most are sales focused, and you're the one they are selling to. Quit reading the nonsense, and judge based on behavior. Don't tell me you're getting a "core 4" next.


     LOL! What's "core 4"? Ha ha ha. I think the investor-focused agent is one that understands investor needs vs. buying a primary home- very different ball games I think. They help the investor also connect with a PM on the ground and potentially contractors, which can be useful. 

    0Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2y
    Quote from @Ivana Ivanovic:
    Quote from @V.G Jason:
    Quote from @Ivana Ivanovic:
    Quote from @V.G Jason:
    Quote from @Ivana Ivanovic:

    Folks, I was talking to a turnkey company to buy an investment property, and looking at a few properties. Their pro forma sheet doesn't take into account ANY vacancy or repairs when calculating cash flow, and the rent comps are...ambitious. 

    1. The way their cash flow calculations are presented is IMO sketchy: while the form is not a spreadsheet, it is made to look like vacancy/repairs are included in cash flow calcs (stacked together with other numbers impacting cash flow, and right above the final cash flow amount) 

    2. When asked about vacancy/repairs, their answer is: that's why why they separately have $5,000-10,000 as "account reserves" in their pro forma. Or "simply cost of doing business", they keep repeating - (an unprofitable business, it seems to me, but maybe I am just inexperienced?). Furthermore, they add something along the lines of "this property is working for you, cash flow is here to cover this type of stuff while the property is appreciating -- so what if you have that 5K HVAC unit replacement " (FYI, even when optimistically calculated, cash flow does NOT cover a 5K HVAC unit within the first few years) 

    3. When asked why their properties don't cash flow in any rental calculator, the answer is: "people who use these rental calculators don't get the kind of deals we give you" 

    4, Re rent comps...I looked at Zillow, and another tool, and if I simply rely on Zillow, rents are typically lower and there are properties in the same few blocks on the market for 40+ days. THe turnkey company's answer: our property mgmt company is doing daily complex algorithms and they have the best information here. My reply: "but these properties realistically are for rent, so your comps should not be that much off, correct?" No reply, just that their PM knows best. P,S. PM has bad reviews for the most part 


    Am I crazy here? Should I at least see NEUTRAL cash flow if I account for vacancy and repairs (and am optimistically counting on this to appreciate)?...Not to mention that all their ROI calcs depend on cash flow of course so long term return calculations also fall apart.

    I do want to give them benefit of the doubt but I also want your smart opinions. Thank you very much! 


     The better question is which turnkey shops do not do this?

    They pretty much all do it, some with predatory lending type practices on this board. 


     Well, in addition to a couple of other comments, that helps. I was already set to start on a solo path (with the help of an investor-focused RE agent), but now won't even be tempted to check out another turnkey company. 

     What's an investor-focused RE agent? 

    That's also almost mythical. There's maybe in 1 in every 100,000, that are truly "investor" focused. Most are sales focused, and you're the one they are selling to. Quit reading the nonsense, and judge based on behavior. Don't tell me you're getting a "core 4" next.


     LOL! What's "core 4"? Ha ha ha. I think the investor-focused agent is one that understands investor needs vs. buying a primary home- very different ball games I think. They help the investor also connect with a PM on the ground and potentially contractors, which can be useful. 


     I know what an investor friendly agent is. I'm saying do you believe those exist, yet alone in abundance? Those are unicorns. 

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free