DATA POINTS - Multi Year Turnkey Performance - Your Experience!

[Josh Stack]

Hey Everyone,

My wife and I are having a very lively debate about turnkey vs. non-turnkey.  Hearing all the turnkey success stories really fuels the debate but then I go in and read an inordinate number of thread where turnkey and turnkey providers are basically being pooh poohed.  The debate about whether or not going with Morris Invest or Jason Hartman is well documented so this is not an attempt to re-litigate those discussions not is it an attempt to get into which city is better, Birmingham, Indianapolis, Memphis, Kansas City, Oklahoma City, Chicago, Atlanta, Charlotte, Jackson, Jacksonville or Little Rock.

What we would like is some real world year over year performance data on how your turnkeys are actually performing.  Over time do they hold up or is the worst that's said about them on these forums really true?

Can you kindly share your experience with real world multi year numbers?  Most importantly, would you invest again in the same properties, knowing what you know now?

Looking forward to your data!

[Brandon H.]

I opted for turnkey (new construction) in Jacksonville, FL because (i) I was looking for diversification outside of the stock market, (ii) I do not have the time right now to manage a renovation long distance, (iii) I can't afford local properties, and (iv) I liked that new construction would tend to have minimal CapEx until the mortgage is paid down.

I have less than a year of data so perhaps my example isn't all that helpful but my cashflow numbers came in much higher than I originally forecasted in my pro forma (although, this is largely due to property taxes coming in way lower than I anticipated, in year two it will likely be corrected). Currently, I'm cash flowing ~$505/month on a property I purchased for $165,320 ($1420 in rent, ~$780 in PITI, $250/year HOA, 8% property mgmt). Cash return, not accounting for equity gains from appreciation or principal payback, is almost 13% in years when there is no turnover and closer to 8% in years where there is turnover. I expect these rates to decrease a bit once the property taxes get reassessed (new construction tends to lag a bit since the govt takes time to reassess the value after the building is constructed). I estimate that my property taxes will go up ~$100/month so my numbers will adjust accordingly.

For the most part, I'm happy with my decision and I would do a new construction deal again.  I ended up getting lucky with how the numbers turned out.  I've since evaluated a number of other new construction SFHs and many didn't perform as well the above example.  The key is being patient and critical of each opportunity.  There is no rush so take your time finding the right first investment.  If your first experience is bad, you'll be unlikely to do a second.