Is there still a Stigma behind Turnkey Real Estate Investing?

Question

Greetings BiggerPockets community!

As a turnkey real estate investor and owner of a property management company, I witness a persistent misunderstanding around turnkey investments. Many investors attempt to handle everything on their own, underestimating the importance of having a reliable on-the-ground team.

I receive daily calls from out-of-state investors who've experienced losses trying to learn a new market, find good deals, manage contractors, and oversee properties from thousands of miles away. I've heard numerous horror stories just this week that prompted my post here... This approach seems to be leading many investors to financial setbacks and unnecessary stress, and an overall pretty traumatic experience.

The truth is, while turnkey real estate provides a streamlined investment process, success depends on assembling a capable local team. A reputable turnkey provider, with a strong on-the-ground presence, can guide you through the intricacies of the local market, ensuring smoother operations and better returns.

So this has made me wonder, why the recent influx of calls from out of state investors-- seeking to do it all on there own? I recall back when we started Ohio Cashflow in 2013-- as a turnkey provider-- @Engelo Rumora and I had a brutal time building up our reputation as there was such a bad rep around turnkey operators. So i'm curious, are investors still being burnt by turnkey operators and that is why they are seeking to do it themselves, without an established team on ground? Does the risk of finding one reputable turnkey operator out-way that of; self learning a market, sourcing a good agent, title company, contractors, and management company?

What has been your experience with managing remote real estate investments? Have you found success with managing your own curated local team?

Travis Biziorek · Answer

More investors are wanting to do more themselves simply because the numbers aren't working like they used to.

It was easy to pluck something from the MLS, or a turnkey provider, have someone do all the work and still cash flow.

It's far harder to do that today, so people need to get creative or start putting the work in themselves.

Beyond that, turnkey gets a bad rap because it's basically buying at or above market. You're paying for convenience.

That makes sense for those that have a long time horizon and genuinely enjoy their W2. But I don't think that's most investors.

Ned J. · Answer

I constantly see posts about building a competent team...... sounds great, but is pretty hard from out of state.

You are basically trying to find someone that you have never worked with before, that you can trust to not screw you and help make you $$.....with a lot of your $$ on the line. And there are LOTS of people out there that don't meet that criteria, and ultimately don't have your best interest in mind. . So from out of state how do you find people you can trust? Not easy....

Unless you know other people in that market, reputation is hard to really truly assess accurately. Lots of people out there that have fancy marketing, Podcasts, You Tube channels, that can sell a melting chocolate ice cream cone to a person in white gloves.... but until you truly work with them, its hard to be sure who to trust.

I think the "stigma" around TK is that there are a lot of companies out there that slap lipstick on a pig, market it with BS numbers and unrealistic expectations and leave the customer in the dust after the sale. And trying to distinguish the good vs bad TK providers is not that easy IMO

Account Closed · Answer

Appreciation wind at the back, buying below market value, and having a great team, made it possible over the last 4 years for me. Needed all three. Hard to say if I was starting now if I’d be successful. Or at least building the portfolio would take much much longer.

Travis Biziorek · Answer

Oh, I 100% agree.

So many "gurus" out there that are incentivized to make this all sound easy doesn't help things either.

I truly hope we see these "higher" (historically normal) interest rates for a good while. Maybe folks will realize REI is actually work and all this garbage marketing will wash itself out.

Wishful thinking on that last part but, hey... a guy can dream.

Chris Clothier · Answer

@Dominique Osborn a little late to your post, but I think the key to your entire question is the phrase - turnkey provider.

As you know, providing the actual product as well as the services is what differentiates turnkey providers from the many companies that use the word today. Turnkey is nothing more than a marketing term and it can mean anything the person using it wants it to mean. Same with buyers. Too often an investor has an idea of what Turnkey means to them and unfortunately figure out after they purchase that their definition and the product and service provided are different.

Same goes for when they engage a turnkey promoter. It is often not until after they are down the line that they realize a promoter may have a great reputation based on a great provider that they work with. They may also work with some lousy providers that pump out a lot of volume. The buyer thinks that because the word Turnkey attached to the brand of the promoter that any and every home purchased is the same with the same standards. This is the biggest reason we've stayed with our own marketing team and plan. We don't want our reputation for quality and service being used to sell other properties and hurting our brand.

I think in some ways the word turnkey has a bad reputation due to a belief that everyone is the same and every company or person using the word is providing the same quality and services. Sadly, that is just not the case and it is really, really hard for investors to cut through the noise and figure that out.

Cade Edwards · Answer

@Dominique Osborn Most investors want to increase the cash flow so they are willing to try and do the heavy lifting themselves. Forgetting that it can take a well established team with a lot of experience to actually make a great investment property strive in this environment.

Engelo Rumora · Answer

Hey Dom,

Folks have and always will be scammed by turnkey providers.

Folks have and always will fail when trying to do it all themselves.

A few succeed and my fedora is off to them.

Many other fail and then it's up to us to make a cake out of crap.

I'm bias and think folks should buy turnkey.

Then again, I personally wouldn't buy turnkey because I had no issues moving from Australia to Ohio and doing it all "myself."

Makes me wonder though as it took us 10+ years of hammering the pavement and setting up systems, processes, manuals, procedures, personnel, tech, etc... before we could open the doors to "out of house" investors and before we could claim "We are a reputable and organized property management company".

How the F@#$ do investors succeed in making the whole process work from afar is mind boggling to me.

Again, big hat's off to those that succeed as I couldn't and thus why I moved to the best country in the world.

God Bless America and here is to another 10+ years and standing the test of time (Before AI and the terminator take over lol)

Brandon Goldsmith · Answer

Building a team typically works out for those who started in their home state and know the processes and then venture out of state to buy turnkey or even value add properties. I see investors struggle more when they start off out of state and try to do it all themselves @Dominique Osborn

Becca F. · Answer

@Dominique Osborn

I talked to a turnkey provider with properties in Cleveland, Detroit and a few in Memphis. I didn't go with them because it would have taken months of researching those cities and areas. The property management company they work with place the tenant by the time the property closes. Maybe some people see that could be conflict of interest - what qualifications are they using for tenant screening? Are they just trying to get it rented quickly to close the deal?

I wound up buying a mostly turnkey SFH (need a few minor repairs after inspection) in Indianapolis with an agent off the MLS. I used to live in the Indy area so I was much more familiar with neighborhoods, even down to certain streets, which I now have gotten to know on a more granular level. I think it's really difficult to BRRRR out of state (tried several times with different offers) even after I've done a local renovation. I would buy another turnkey although I know putting 20% down isn't the best way to scale - to me the reduced stress level is worth it of not having to do a renovation from 2000 miles away.

Is there still a Stigma behind Turnkey Real Estate Investing?

Is there still a Stigma behind Turnkey Real Estate Investing?

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