Turn key or local investing

[Tim Murray]

Hii. I'm wanting to purchase my first rental property but I'm stuck on choosing what to do I live in Hawaii where prices are high. I want to try invest locally. But I also been looking at the turnkey method. Like the rent to retirement or similar. Looking for any advice? Thanks

[Nathan Gesner]

Markets are crazy right now. Read the newspaper experts or even local REALTORS and you'll hear them talk about housing prices being unhinged from reality. There are a lot of indications that something is going to change. This may be a good time to continue saving your money and educating yourself to see what shakes out. Waiting one year isn't going to derail your life and may turn out to be the wisest decision you've made.

[Mio Chee]

Aloha Tim,

Welcome to BP! I am also from Hawaii so I can totally relate. After spending almost a year trying to look for a rental that makes sense and cash flow, I decided to use a turn key company and invest out of state. I still want to buy rentals here one day, but for someone like me who was just starting, it was really difficult to enter this market even when home prices were much lower 8 yrs ago. I love being a long distance hands off landlady. I can enjoy my life while my rentals appreciate, its loans are payed down by my tenants, etc.   

[Lane Kawaoka]

@Tim Murray

Hawaii is a primary markets which are NOT ideal for cashflow investing.

It could appreciate but I consider that gambling. Sophisticated investors invest on cashflow where the rents exceed the mortgage plus expenses (and enough money to pay for professional property manage to do our dirty work). A lot of this concept is explained in the Keynesian Beauty Contest theory where only the top competitors get the most notoriety but the best picks are hidden in the field. So part of the game is staying away from the "dumb" amateur money.

Sophisticated investors look at the Rent-to-Value Ratio and look for at least 1% or more to be able to cashflow after expenses. You find the Rent-to-Value Ratio by taking the monthly rent dividing by the purchase price. For example a $100,000 home that rents for 1,000 a month would have a Rent-to-Value Ratio of 1%. Most people I work with live in primary markets (as opposed to Birmingham, Atlanta, Indianapolis, Kansas City, Memphis, Little Rock, Jacksonville, Ohio, or other secondary or tertiary markets) where the Rent-to-Value Ratios are under 1%. Plus we invest in red states so we have good landlord laws on our side too.

I started with turnkey remote rentals in 2009-2015 while working my engineering W2 job. Then went into syndications once my net worth went over 500k.

Let me know if I can help. 🤙

[Mike D'Arrigo]

@Tim Murray first you need to clearly define your objectives and criteria. If your goal is cash flow, Hawaii probably isn't going to work and you you'll probably have to go out of state. Personally, I like the Midwest for cash flow, however, not just any market. There are several affordable markets that will cash flow but for long term asset stability and value, you should look for markets that have growing populations, growing jobs, modern/diverse economies that are landlord friendly with low to moderate property taxes. If you choose to go out of state, I would recommend having Indianapolis, Kansas City and the Quad Cities high on your radar. We're active in all 3. I'd be happy to share my insights with you.

[Zach Lemaster]

@Tim Murray

Thanks for the interest in RTR! The best advice I have for you is to come up with a detailed criteria. What amount of capital do you have set aside to deploy, which markets appeal to you, neighborhood class, expected ROI/cash flow, SFR vs MF, how passive or active you want to be involved, what is your short and long term goals, appreciation potential, new construction vs older homes, etc. It's all balancing act, but having a defined criteria & networking with the right people that can help provide you with some guidance are always an important starting point. It's a crazy market out there right now with many variables, but the fundamentals of REI never change. Personally we are actively still buying quite a bit, but a lot of that is because it fits our tax strategy. 2022 is still a good year for certain tax benefits that are changing in the future. Best of luck to you in your journey, and feel free to reach out at any point with any specific questions.

[Jordan Wight]

I’ve purchased two turnkeys through R2R in Florida and I’m happy with how it’s going. Turnkey are easier because there are no bidding wars. And they are in good markets with cash flow and appreciation. Feel free to reach out if you want more information. 

[Melinda McDonald]

@Tim Murray Good morning - When looking to invest, many of the responses have clear on making sure your market can support your investment objectives.  As @Mike D'Arrigo mentioned, the Midwest still has shown to be strong in terms of returns and good values.  Putting together a strong team is vitally important when residing in another state from your investment.  Please feel free to reach out if I can assist in putting your team together.  

Best,

Melinda

[James Wise]

Quote from @Tim Murray:

Hii. I'm wanting to purchase my first rental property but I'm stuck on choosing what to do I live in Hawaii where prices are high. I want to try invest locally. But I also been looking at the turnkey method. Like the rent to retirement or similar. Looking for any advice? Thanks

 If you do go out of state via the turnkey route make sure you do your due diligence on the properties. Lots of investors from high cost markets like yours get themselves into a ton of trouble thinking that they can't lose because they aren't used to the pricing being so low in the turnkey markets. I like to give all the new out of state turnkey investors the punch list below. If you do this on any out of state property you buy you will go a long way to reduce your risks.

• Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
• Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
• Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
• Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
• Make sure your property manager is a licensed real estate brokerage.
• Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estate
• Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.

[Patrick Drury]

@Tim Murray
If the market you live in currently doesn't fit what you are looking to get out of investing you should look to invest out of state where you can get those returns. The midwest is a great place to start the search. I live and invest in Columbus which has lots of population growth and job opportunities. The Columbus market itself is a nice hybrid of cash flow and appreciation. 

[Alex Evans]

The turnkey model is one that works for a lot of people who are looking to invest in other places where their money can obtain more value in a place that is not where they are currently residing. 

One of the best places to look at is the Memphis Metropolitan area. This market is providing a great rent to the value currently that is not as obtainable in a lot of other markets around the world like where you are from in Hawaii. The Memphis metropolitan area is a market that has seen great cashflow, but also pretty stable appreciation over history as well. 

Feel free to reach out if you have any questions about what turnkey is, or different markets to invest in I would be more than happy to help. 

Have a great day!

[Brandon Goldsmith]

If it is not feasible to buy locally, then I would suggest looking out of state. There is a lot of opportunity in the midwest for cheaper MF properties, depending on your goals. I would suggest taking a look at Ohio. @Tim Murray

[Adam Sieg]

Hi @Tim Murray!

When we started our real estate journey, turnkey was the only option that really made sense to us.  We found this model provided us the best way to get into real estate due to our time and geographic restrictions.  It looks like @Zach Lemaster commented on this thread, so I would recommend looking into them.  We've been very successful working with him and his team at R2R.  We purchased 3 rehab turnkey properties about 1.5 years ago and all have been cash-flowing quite nicely without significant issues.  We had some tenant and PM issues with one but Zach has been beyond helpful during the process to get tenants to pay as well as transition to a new PM company.  We are currently waiting on 3 new builds in Cape Coral and are excited to see how those play out.  I would recommend having a call with them to see if they meet what you are looking for and in the potential markets you are considering.  Would be happy to provide more details!  Happy Investing!

[Milton Chamberlain]

Hawaii? Nice! I lived in Honolulu for a year in 2016 while my wife went to school there, and my bro-in-law moved to Oahu last November. Cant beat the hikes and the beach (and the food!)

I actually have 'purchasing a home' there as a goal of mine as well. My wife and I love it so much.

I don't know the specific real estate rules for Hawaii, but I keep meaning to reach out to a realtor there to see what kind of techniques there are for getting a property with as little money down as possible. We were thinking of using my brother-in-law to purchase an owner occupied, hoping we could get 3.5% down.

I know the problem there is space, so are there a lot of duplexes there? That would be my suggestion for getting your foot in the 'investing world' door. You gotta live somewhere, so why not buy a duplex? Will provide you with a lot of room to grow with appreciation and a greater potential to pull out equity down the road, plus you will have someone else there to cover a big chunk of the mortgage. (Here in the KC metro you can usually get about 3/5 of the mortgage covered by the other side tenant. 

But easier said then done. Maybe that's not possible in HI.

[Tim Murray]

Thanks to everybody's response I appreciate it 

[Tim Murray]

Quote from @Jordan Wight:

I’ve purchased two turnkeys through R2R in Florida and I’m happy with how it’s going. Turnkey are easier because there are no bidding wars. And they are in good markets with cash flow and appreciation. Feel free to reach out if you want more information. 

[Tim Murray]

Quote from @Jordan Wight:

I’ve purchased two turnkeys through R2R in Florida and I’m happy with how it’s going. Turnkey are easier because there are no bidding wars. And they are in good markets with cash flow and appreciation. Feel free to reach out if you want more information. 

 Hi Jordan how was your experience with RTR