Turnkey Companies

[Ravi Chaudhari]

Hey all, I've just started looking into out-of-state investing and have been reading about turnkey property companies.  I would like to hear about your experiences working with turnkey companies.  I can see the advantages, but I would like to hear more about the pitfalls and things to consider before choosing to work with one.

Also, if you've had success working with a turnkey, please provide your experience of what has made them a good partner for you.

Thank you.

[Mike H.]

Based on the ones that I've looked into in the past, you're going to essentially be paying retail for properties which limits your upside and actually creates some risk should you want to sell them since - with all the fees/closing costs - you'll have to come out of pocket to sell.

But the key is in their property management service. Thats what would really determine whether they're a good deal or not. And thats probably the toughest part of out of state investing in my eyes - finding good property management.

If it were me, I think I'd skip the turnkey places and find another investor or possibly a realtor and tell them what you're looking for. Maybe even a wholesaler. Buy the house from them as they know they typically need to sell a house to an investor at around 70 to 75% of the ARV.

So if the house is worth 160k, you should be able to get it for an all in price (i.e. purchase plus rehab costs) of about 120k. Thats much better than the 160k you're going to pay to one of these turnkey companies.

Then get your PM to lease it up and manage it.  Its a lot easier to make money on houses that you're all in at 75% or even 80% than the ones you're all in at 100%.

Not to mention the fact that many of them tend to over estimate the actual rental amounts too.