Is investing in turn-key worth while in the current market

[Felipe Ocampo]

With property prices rising in the recent years, it seems like most turnkey companies cannot provide worthwhile returns. Most of the available properties I have seen recently quote an 8% cash on cash return, but after including vacancy, repairs and cap ex the returns are closer to 3-4% even in the best markets. I know the repairs and cap ex costs will be low in the first few years, but they should be included especially when the cash flow is below $200 a month since any repair/turn over could eat up a year's worth of cash flow. 

I guess my question is: Should I keep saving until the market conditions get better and I can get some better deals or buy right now? I know this is a tough question since no one can predict the future and no one knows when prices will drop again, but I just want to get people's thoughts on this. 

Note: I live in an expensive market and have little time with family and work to find deals in my area. I also do not have the expertise or the connections to do so here, which is why I am looking at other markets that have better returns. 

[Andrew Johnson]

@Felipe Ocampo I think your question boils down to timing the market (you might get lucky but not likely possible) rather than the merits or challenges around turn-key vendors.  There are more than a few good points already in the thread but I'll just add...

1.) When "deals are good" will interest rates still be 4.5%-5%?  Or will they be higher?  Not that you can predict interest rates any better than you can predict the housing market.  However, if interest rates rising causes the market to cool a little, the two may become interrelated.  And at the moment it seems like (who knows what will happen) the fed is debating 2-4 quarter point hikes this year.  So I'd guess towards the end of the year you'll be at 5.5%+ on rates.  Just a guess, I'm no economist, and home loan rates don't always move in lock-step with what the fed does.

2.) Can you catch a falling knife?  It's super simple to say "I'll wait until the market gets better" but a.) you don't know when that will happen, b.) it might not happen in a market you want to buy in, and c.) if you think the market is going to drop...and it drops 10%...I'd bet a box of donuts you want to wait until it drops *another* 5%...or *another*10%...

3.) Related to point #2 it's pretty unlikely you'll see housing prices drop and it won't be related to something like a.) interest rate rising or b.) a hiccup in the economy.  If it's an economic hiccup you'll end up less certain about maintaining (let alone raising) rents.  And you might not be so eager to part with your $40K nest-egg in a period of economic strife.

So, anyway, those are my thoughts for a random Wednesday...