My Turn Key Company Due Diligence (Reposted)

My Turn Key Company Due Diligence (Reposted)

Investor · Rochester, NY · Member since 2022 · 43 posts · 65 votes

Hey BP Fam! First one was deleted. I'm assuming because I used links. Reposting now without them. Here we go...

After deciding I wanted to explore out of state investing, I spent the last week meeting with several "Turn Key" companies that I located thanks to Bigger Pockets. After multiple meetings/emails with most of them and further Due Diligence, I figured I'd lay out my opinions and some general information on these companies and the services they offer. I know many here want to be in Real Estate but would prefer a little bit more "hand holding." I believe each of these companies offers their own pros and cons to solving that problem for investors who are looking to be as "passive" as possible. Here are the companies I have connected with and done a fair amount of due diligence on:

REI Nation: I'd consider these guys to be a step up from something like Fundrise. You own the actual deed to the house, but outside of that they are really handling everything for you (at a price). They've got over 7,000 doors under management and are truly a one stop shop for an almost 100% turnkey Real Estate investing experience. I really like that they have their own in house management and are not relying on third party companies. Their whole operation seems very well vertically integrated, which I believe would make for a much more universally cohesive operation and investor experience. They sell you turn key, rehabbed and rented properties at (or sometimes a little above) market value with instant cash flow but zero equity at day one. You can expect to see 5-8% cash on cash returns from their deals after all expenses, management fees, debt service etc. The benefit here, unlike investing in a REIT or something like Fundrise is you have the advantage of a tangible asset purchased with leverage that provides cash flow, appreciation, depreciation and debt pay down from tenants. All in all, of the Turn Key options, I personally got an incredible vibe from REI Nation. Their management fee was 10% of rents collected if memory serves.

Rent to Retirement: Essentially the same situation as REI Nation except instead of in house management, they connect you with third party management in various markets. Whereas REI Nation earns most of their money on the management side of things, Rent to Retirement earns their money on the initial sale (when you buy the property from them). They take on all the risk buying distressed properties, rehabbing them, renting them etc. then you as the end buyer purchase a cash flowing property from them at market value. In my opinion, just like REI Nation the asking prices on their active inventory list are a bit steep, but I'm also not an expert in all these markets. For the service they provide and the ability to have a cash flowing property handed to you on a silver platter, the price may be well worth it. Additionally, Rent to Retirement is the only Turn Key company I've found that also offers New Construction opportunities where you have the ability to get in on the ground floor and take advantage of a potential equity capture prior to the property being built and rented. Their management fees were 7-8% of rents collected depending on the property type and they negotiate these fees with the chosen management company in each market. I'm currently doing some very thorough DD on their Cape Coral new construction opportunities and am happy to share what I've learned thus far for anyone interested. I also must say that Zach Lemaster has been very present here on the forums and also willing to pick up the phone and answer any questions I have about R2R, which I believe speaks volume to his desire to meet and exceed his investors' expectations.


The following three companies have a slightly different approach to the "turn key" model and are basically offering the same kind of service, but simply all in different markets. They work with you from acquisition (based on your desired property criteria), through the rehab process, leasing, and finally management or sale. What I like about these companies is they're not selling you a turnkey rental and charging you a premium. They're simply making money as your agent when you buy or sell and as your management company through the day to day operations. All three of these companies have their own in house management, which is always my preference if I have the option.

Evernest (Multiple Markets): I spoke with Hunter at Evernest and we immediately hit it off. We spoke for almost an hour and from start to finish I felt like I had known him for years. Very personable, very knowledgeable and also provided me insight on some Markets in FL since he grew up there prior to moving to Birmingham. Hunter filled me in on some personal deals he's done in Birmingham and why he believes it's a very strong real estate market. What I like about Evernest is that they're in multiple markets around the country and their management fees are tiered and incredibly reasonable. Management fees start at 8% of rents collected, but they also have flat monthly fee options starting as low as $89/month. After our conversation I am doing more DD on Birmingham as I believe it could be an incredible market over the next ten years (and I've now got a connection to an agent). I will also be exploring the other markets Evernest offers services in.

Boise Turnkey (Boise Idaho): I spoke with Corby at Boise Turnkey. He was extremely professional, personable and I felt his understanding of the market in Boise was extremely thorough. Their management fee is 9% of rents collected with no extra leasing fees or project management fees. Per our conversation, Corby did mention that Boise is not the best cash flow market, but an excellent appreciation market. I'd strongly consider them if you're looking to invest in and around Boise. I'm not sure this meets my criteria at this time as I really like to find a sweet spot between cash flow and appreciation.

Turnkey Invest (Memphis, Tennessee): I spoke with James at Turnkey Invest and even though he was 30 minutes late for our call he made up for it with his incredibly down to earth demeanor and friendly attitude. The vibe I got from James and Turnkey Invest was that they're running a wholesome, family oriented operation. He also mailed me a couple T-Shirts, a handwritten letter and a brochure with some additional details on their company and the market in Memphis. I thought this was an incredible gesture considering the postage alone was $10. Does it make me want to immediately invest in Memphis? Not necessarily, but if I decide I want to be in Memphis I know who I'm calling now because I can see James and his team go above and beyond for their investors. Their management fees are escaping me at the moment, but I believe they were between 8-10% of rents collected. James stated that Memphis can be a bit hard to navigate as the "good" areas are a bit all over the place and it really depends on the street. All in all, I personally feel Memphis could be a strong up and coming market and I'm strongly considering it and Turnkey Invest at this point in time.

As an active investor here in Western, NY who is used to self managing 19 units, I personally am leaning more towards companies like Boise Turnkey, Turnkey Invest or Evernest. I'd like to have more of an out of state "team" and not simply buy turn key properties at market value. I feel these companies provide a one stop shop with all the necessary boots on the ground that out of state investors would need to be successful. I am also very much considering the Build to Rent opportunities that Rent to Retirement is offering and have spoken with other investors who have had great success with this model. Granted, we've had an amazing couple years of appreciation (especially in Florida) that could slow down or have a correction, so I'm not breaking out my check book just yet.

That's all the information I have thus far. I hope someone will find value in this. If you have any questions, feel free to comment, message me, connect with me etc. I love meeting new people and encouraging them towards their goals. All the best, BP Fam.

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Zach LemasterBusiness Member
Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
4y

@Tim Mieney

Thanks for the mention Tim!  Great chatting with you earlier about your goals & criteria.  I mentioned this on your last post, but it all comes down to find the right team that is congruent with your investment strategy along with the markets you are looking to invest in.  Sounds like you've done ample research on some of the top recommended operators.  It's not a bad idea to invest with a few different operators as well to have first hand experience to provide perspective on where to scale over time.  After our conversation I think new construction is a great way to go based on what I know about your investment criteria.  Especially focusing on markets like SWFL, TX, AL, TN, etc. where you are in a location that has strong appreciation, quality tenant demographics & potential for immediate equity.  New construction is also an excellent way to minimize maintenance & cap ex for many years.  Feel free to reach out at any point with any questions.

@Jeffery P. Thanks for the kind words sir!  We all get stuck in analysis paralysis from time to time.  That is normal.  Don't that prevent you from taking action working towards your goals.  That first property is essential to get under your belt, not financially, but more mentally & emotionally.  That will allow you to get into the mindset to allow you to scale over time.  Set some fundamental criteria, network & educate yourself, but most importantly take action when you find an opportunity that meets your initial criteria.  I'm here to continue our conversations whenever.

To both of your success! 

See this reply in the discussion

36 Replies

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  • Investor · Rochester, NY · Member since 2022 · 43 posts · 65 votes
    4y
  • Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
    4y

    One thing I don't often like about many of the TK companies is the types/age/location/schools of the homes they pitch.

    Everything of course looks good day 1, but I expect these are often in areas that have the worst appreciation, the worst tenants, the highest capital expenses over the long haul.   That's one thing they don't tell you I expect.

    Do you ever go visit the locations, or google street view the neighborhood for the pitches they are making to you?

    Some people like those areas though.

  • Hunter TerrynPro Member
    Birmingham, AL · Member since 2021 · 79 posts · 68 votes
    4y

    It was great chatting with you @Tim Mieney, and look forward to staying connected with you on your journey!

  • Investor · Rochester, NY · Member since 2022 · 43 posts · 65 votes
    4y
    Quote from @Hunter Terryn:

    It was great chatting with you @Tim Mieney, and look forward to staying connected with you on your journey!


     Yessir! Looking forward to continuing the conversation.

  • Investor · Rochester, NY · Member since 2022 · 43 posts · 65 votes
    4y
    Quote from @Bruce Lynn:

    One thing I don't often like about many of the TK companies is the types/age/location/schools of the homes they pitch.

    Everything of course looks good day 1, but I expect these are often in areas that have the worst appreciation, the worst tenants, the highest capital expenses over the long haul.   That's one thing they don't tell you I expect.

    Do you ever go visit the locations, or google street view the neighborhood for the pitches they are making to you?

    Some people like those areas though.


     That's fair. I am just starting to dive into Turn Key companies. I don't love the idea of purchasing at market value, but it's definitely nice to have cashflow from day one and snag renovated, off market deals that otherwise would likely go for over asking...

  • Member since 2021 · 11 posts · 9 votes
    4y

    Thank you Tim for sharing your DD, I have been doing research as well and am still on the fence as well.  One thing I've learned is that if something looks too good to be true it probably is.  With that being said I also recognize my own fault in analysis/paralysis.  I will emphasize that Zach with R2R has been extremely responsive and that is key for me.

    Jeff

  • Investor · Rochester, NY · Member since 2022 · 43 posts · 65 votes
    4y
    Quote from @Jeffery P.:

    Thank you Tim for sharing your DD, I have been doing research as well and am still on the fence as well.  One thing I've learned is that if something looks too good to be true it probably is.  With that being said I also recognize my own fault in analysis/paralysis.  I will emphasize that Zach with R2R has been extremely responsive and that is key for me.

    Jeff


     Wise words, sir. If you've done enough DD and the only thing holding you back from something is the fear of what could go wrong, that's not the way to be. But if there are true red flags, you most definitely do not want to ignore them. 

  • Zach LemasterBusiness Member
    Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
    4y

    @Tim Mieney

    Thanks for the mention Tim!  Great chatting with you earlier about your goals & criteria.  I mentioned this on your last post, but it all comes down to find the right team that is congruent with your investment strategy along with the markets you are looking to invest in.  Sounds like you've done ample research on some of the top recommended operators.  It's not a bad idea to invest with a few different operators as well to have first hand experience to provide perspective on where to scale over time.  After our conversation I think new construction is a great way to go based on what I know about your investment criteria.  Especially focusing on markets like SWFL, TX, AL, TN, etc. where you are in a location that has strong appreciation, quality tenant demographics & potential for immediate equity.  New construction is also an excellent way to minimize maintenance & cap ex for many years.  Feel free to reach out at any point with any questions.

    @Jeffery P. Thanks for the kind words sir!  We all get stuck in analysis paralysis from time to time.  That is normal.  Don't that prevent you from taking action working towards your goals.  That first property is essential to get under your belt, not financially, but more mentally & emotionally.  That will allow you to get into the mindset to allow you to scale over time.  Set some fundamental criteria, network & educate yourself, but most importantly take action when you find an opportunity that meets your initial criteria.  I'm here to continue our conversations whenever.

    To both of your success! 

  • Member since 2022 · 48 posts · 119 votes
    4y

    Hi @Tim Mieney- 

    This is quite the DD post! I wish I would've seen this prior to my REI Turnkey journey!

    With that being said, I have invested with 2 turnkey providers, R2R (6 properties) and Norada (1).  The Norada property is a new build in the Ocala area so I don't have a lot of background with them.  They've been communicating regularly and have been easy to work with thusfar.

    R2R - I've had the most experience with and the relationship I've developed with @Zach Lemaster is probably why I have 6 properties from their company.  As with any turnkey company, you are paying a premium for your property but on the flip side you avoid all of the "risk" and effort on the front end.  For me this made sense in my situation and I knew it going in.  I have 3 rehab properties from R2R and 2 have outperformed their proforma and easily cash-flowing $250-300 per month.  The other, has been more of a struggle largely due to the tenants put in place and the PM company.  I reached out to Zach early on to get his assistance and he (as mentioned earlier) is very responsive.  We weathered the storm, got new tenants and aa new PM company in place and were able to increase the rent as well.  He was also able to recoup some of the damages done by the tenants as well.  I will say that, even after you've purchased the property, they are always there to support you along the way.  For completeness, I have 3 new builds with them in the Cape Coral area - 1 is nearly complete and the other 2 are waiting permitting.  

    I've had a very positive experience with R2R and would recommend them.  I do think it worthwhile, to have a discussion with them to ensure they meet what you are looking for.  

    Just my 2 cents!  This was a very helpful breakdown!

  • Investor · Rochester, NY · Member since 2022 · 43 posts · 65 votes
    4y

    @Adam Sieg Appreciate your feedback. Do you feel Cape Coral is still a good option at this point in time for someone like me considering a new build?

  • Specialist · Southlake, TX · Member since 2021 · 213 posts · 157 votes
    4y

    @Tim Mieney I enjoyed our conversation the other day. It was inspiring to hear from others that have had success in real estate from such a young age.  

  • Investor · Rochester, NY · Member since 2022 · 43 posts · 65 votes
    4y

    @Seth Young Helps to have a great support system of others that will encourage us!

  • Member since 2022 · 2 posts · 1 vote
    4y

    Hey @Tim Mieney! Thanks for the post - I've new to real estate investing and I'm looking at Turnkey companies. This post was extremely helpful especially since some of these are places that I've reached out to and will be having conversations with.

    I'm curious about how you're doing your DD on properties offered by Turnkey companies. Like I said, I'm very new and I'm not sure what doing DD entails on properties that you can't personally visit, especially in markets that you're unfamiliar with. Where does one even start?

  • Investor · Rochester, NY · Member since 2022 · 43 posts · 65 votes
    4y

    @Humad Syed

    I like using niche.com or city-data to get an idea of income levels, population growth, crime levels etc. Also "walking" the neighborhood of the subject property on Google maps street view is a decent way to get a feel for the area (assuming the pictures are updated). Using the search feature here on BP in the forums and seeing if anyone else is talking about that market is also a good place to start.

    Finally, doing your own deal analysis/underwriting and making sure the deal still works under less than ideal circumstances is a must. If you need a deal analysis spreadsheet feel free to DM me and I can send you a really good one I use.

  • Member since 2022 · 2 posts · 1 vote
    4y

    Thanks so much @Tim Mieney!

  • Investor · Worcester County, MA · Member since 2016 · 122 posts · 72 votes
    4y

    When looking at management companies, I think it is best to focus on metrics like average tenant stay , renewal rates, and lease lengths.  The biggest costs are going to come from turnovers. So, a management company that charges one or two percent more and keeps average tenants in place for more than say 4 years, is way better than a cheaper PM that has average tenant stays of say 2 years.


  • Investor · Rochester, NY · Member since 2022 · 43 posts · 65 votes
    4y

    @David B. 100% with you on this. Appreciate your insight.

  • James WachobBusiness Member
    Real Estate Broker · Memphis, TN · Member since 2015 · 1k+ posts · 893 votes
    4y

    @Tim Mieney thank you for the kind words and NEXT time I will be ON TIME for a call with you. The key to out-of-state investing is building a team who has your best interest in mind. 

    This is tough when: 

    1. Realtors are rewarded by collecting a commission. 

    2. Most general contractors are so busy that they don't need an investors business. 

    3.Many of my clients/friends have been less than satisfied with property managers options when looking out-of-state.

     Finding an alignment with each of these 3 professionals is THE KEY. 1. Acquisitions 2. Renovations 3. Property Management 

    Turnkey Investing is not right for everyone but might be a fit for OOS investors seeking everything under one roof.  

    @Bruce Lynn You have a point. Many in the industry have nearly ruined the work Turnkey by calling EVERYTHING Turnkey. Build to rent may be a good option to explore. BRAND NEW homes built to rent is one of the most popular Turnkey products on the market. 

  • Investor · Rochester, NY · Member since 2022 · 43 posts · 65 votes
    4y

    @James Wachob We'll catch up again soon. I'm still compiling my findings and researching markets. If we like Memphis enough, you'll be my first call.

  • Member since 2022 · 48 posts · 119 votes
    4y
    Quote from @Tim Mieney:

    @Adam Sieg Appreciate your feedback. Do you feel Cape Coral is still a good option at this point in time for someone like me considering a new build?

     Hey @Tim Mieney - I do, especially if you look at the current price of real estate down there.  I feel the market is going to continue to be favorable and it also provides you with multiple exit strategies if it doesn't work for whatever reason.  If you look at the price points for similar models of home on an ongoing basis, you can see they continue to go up.  I'm optimistic that there will continue to be the need moving forward.

  • James WachobBusiness Member
    Real Estate Broker · Memphis, TN · Member since 2015 · 1k+ posts · 893 votes
    4y

    @Tim Mieney you compiled some great findings with your research that many on here will value. Memphis is definitely worth looking into because it has been good to me! #choose901 

  • Investor · Rochester, NY · Member since 2022 · 43 posts · 65 votes
    4y
    Quote from @Adam Sieg:
    Quote from @Tim Mieney:

    @Adam Sieg Appreciate your feedback. Do you feel Cape Coral is still a good option at this point in time for someone like me considering a new build?

     Hey @Tim Mieney - I do, especially if you look at the current price of real estate down there.  I feel the market is going to continue to be favorable and it also provides you with multiple exit strategies if it doesn't work for whatever reason.  If you look at the price points for similar models of home on an ongoing basis, you can see they continue to go up.  I'm optimistic that there will continue to be the need moving forward.

     It is definitely hard to argue with the trend, which has consistently been in our favor, even prior to the last two years. I feel relatively confident in the overall market there at this point. Even in a downturn, renting should still be in high enough demand that we could at the very least break even, and that's assuming some pretty bad circumstances... I'm trying to poke holes in the investment and the biggest cons are basically rising interest rates and market volatility. But the pros vastly outweigh the cons. Not doing something because something bad might happen has never been my MO, but I'm trying to do all I can to make an informed decision. I've been asking everyone I can about Cape Coral overall and so far, the worst opinions are still far better than where I live in Western, NY...

  • Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
    4y

    @James Wachob   Do you see many/any BTR communities with homes for investors where they can just take down 1 home?   Most of what I have seen so far around me....and that is few....are built either by institutional investors, the home builders themselves, and a couple of syndication deals.   I haven't seen any around me that will allow an investor just to take down 1-2-3 homes in a neighborhood.   Otherwise around me most of the big production homebuilders will not knowingly sell to investors.   They only want owner occupants.

  • Investor · Rochester, NY · Member since 2022 · 43 posts · 65 votes
    4y
    Quote from @Bruce Lynn:

    @James Wachob   Do you see many/any BTR communities with homes for investors where they can just take down 1 home?   Most of what I have seen so far around me....and that is few....are built either by institutional investors, the home builders themselves, and a couple of syndication deals.   I haven't seen any around me that will allow an investor just to take down 1-2-3 homes in a neighborhood.   Otherwise around me most of the big production homebuilders will not knowingly sell to investors.   They only want owner occupants.


     Rent to Retirement is offering this in Cape Coral, FL. You can personally build one house yourself and take advantage of all the potential equity. I'm strongly considering pulling the trigger and doing a couple builds at once.

  • Member since 2022 · 48 posts · 119 votes
    4y
    Quote from @Tim Mieney:
    Quote from @Adam Sieg:
    Quote from @Tim Mieney:

    @Adam Sieg Appreciate your feedback. Do you feel Cape Coral is still a good option at this point in time for someone like me considering a new build?

     Hey @Tim Mieney - I do, especially if you look at the current price of real estate down there.  I feel the market is going to continue to be favorable and it also provides you with multiple exit strategies if it doesn't work for whatever reason.  If you look at the price points for similar models of home on an ongoing basis, you can see they continue to go up.  I'm optimistic that there will continue to be the need moving forward.

     It is definitely hard to argue with the trend, which has consistently been in our favor, even prior to the last two years. I feel relatively confident in the overall market there at this point. Even in a downturn, renting should still be in high enough demand that we could at the very least break even, and that's assuming some pretty bad circumstances... I'm trying to poke holes in the investment and the biggest cons are basically rising interest rates and market volatility. But the pros vastly outweigh the cons. Not doing something because something bad might happen has never been my MO, but I'm trying to do all I can to make an informed decision. I've been asking everyone I can about Cape Coral overall and so far, the worst opinions are still far better than where I live in Western, NY...


     Agree completely - its hard to be able to predict that far into the future but I still feel the trend and demand will prevail.  Even with rising interest rates, I think the properties will cash-flow.  They may not cash-flow as well but will still be positive.  Additionally, I always think that the rent you start with will continue to go up so cash-flow will inevitably increase overtime (as will the value of the property).  I think all you can do is get as much information as you can and commit to a decision.  If it works (or doesn't) reflect on it so that you can use that knowledge in the future.  

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