My trip to Kansas City to meet with Turn Key Operators

[Julie Macd]

Last week I was in Kansas City, MO to meet with turnkey providers and get a better feeling for the city and what is available. Due to personal constraints I was only in town for 3 days which, while enough for initial meetings, was really not enough time to get to know neighborhoods, see more than a few houses and arrange follow up meetings. I wish I had planned for a week, but I was able to accomplish a lot in just a few days. I have received a lot of requests for information on my trip so here it goes.

I wanted to meet with companies with different kinds of TK models. Each company has a slightly different approach to their clients, tenants, and remodeling.This is important to consider when reviewing your own investment objectives and who you want to partner with. I live overseas, so communication especially through email and skype are important. I am looking for a partnership with the company that will be looking after my assets, so I need to know we have similar business objectives and approaches. This can range from the quality and quantity of the remodel (some focus on redoing almost everything versus doing just what is necessary), approach to tenant issues and on- going maintenance. Some management companies focus only on their own turnkey customers, and generally have a more proactive maintenance programme. Others are commercial property managers, some have in house maintenance, others all contracted maintenance etc.  On the property side, there are different approaches to your involvement in the remodel or upgrading of the property.

First, I decided to focus on turnkey companies which are based in the Kansas City area. There are companies which represent one or more companies that work in the area. They generally are paid a placement fee if an investor buys from their person on the ground.  While the initial customer service for the sale, and ongoing investment may be through the third party, the day to day management, upgrades, etc, are provided by the company on the ground. Therefore, it is important that you are comfortable with both. While the main contact was very responsive, I found the contact in KC was not as much so. As I said above, relationships and communication are important for me, so this implies a potential issue for me so I decided not to meet with the team on the ground.

@Nathan Brooks and Bridge Equity provide full service turnkey services. They perform high quality remodels and do a thorough review of all the work needed to update mechanicals, bathrooms, cosmetics, etc. They use the same materials throughout their property so are able to have volume discounts while using quality materials. On paper, some of their returns may seem lower than other companies. However, for their proformas, they use reasonable (complete) numbers from the beginning whereas, proformas from other companies maybe missing expense items or use unreasonably low numbers. With Bridge Equity, you can commit to the house purchase in advance, the purchase will only be complete once the work is done, all inspection items cleared, and a tenant is in place. They are a great team, very professional and customer service orientated.

On the other end of the development spectrum, I met with JK at Storybook Realty.They offer a hybrid turnkey business model whereby the investor purchases the property up front and they will manage the required upgrades and subsequent property management. The investor can then decide how much (or how little) of the upgrades should be done and when. While I did not see a finished house, from the walk throughs, JK is extremely knowledgeable about construction and the work that needs to be done. They focus on northern KC, and specifically areas with good school districts.

I also met with Steadfast Capital / Alpine Property Management. They also provide full turnkey services, but also provide the opportunity to invest through deeds of trust for the purchase. I met with their property management team who were very professional and knowledgeable. While I was unable to see inside the houses they presented as they were all rented, they met my criteria and at least one is a potential option for me.

No matter who you decide to work with, this is your money, your investment, and your decision. Decide beforehand what your criteria really are for investing, both in terms of the numbers, and what you expect from your partners. Know where and what kind of area you want to be in. Lower priced properties bringer higher risk but more potential cashflow on paper depending on tenant turnover. More expensive areas are ‘safer’, lower cashflow and more appreciation potential.

Do your own due diligence, research, and run your own numbers. While I believe most of the turnkey operators will try to provide an honest deal and numbers, at the end of the day, they are in business to make money and you so are you. However, their gain may not always be yours.If you are not comfortable with a deal, be straight forward and honest, but do not be afraid to walk away if it does not seem right or does not fit your investment criteria.

Thanks to everyone that I met and spoke with over the last month or two as I move forward on my investment journey. I will keep you posted as I pursue my investment journey.