Reputable Turn Key Investment Companies?

[Jennifer Krupp]

Hi,  

My  husband and I are looking to start building a real estate rental portfolio to provide additional income for retirement.  Our plan is to purchase either single family homes and/or multifamily properties, hold them for the long term and have them paid off by the time we retire.  We are interested in the turn key investment model, especially since we both have careers, kids and a ton of stuff that keeps us busy.  We've been in touch with Memphis Invest but don't feel like the cash flow we could achieve with them would be worth while.  We could invest in our local market and have the same monthly cash flow, and probably do better on appreciation.  

We are open to investing locally, but just want to explore all our options.  Could anyone recommend reputable turn key investment companies?  Are they still a thing?  I searched the forums and the newest post I could find was over a year old.  If any one has any personal experience with them I'd love to hear about it.  

Thanks all! 

[Chris Clothier]

HI @Jennifer Krupp!  I would have responded earlier, but was out of pocket for a few days.  

First, if you are able to invest in your own market and make a respectable return AND have the possibility to own appreciating assets, my advice would always be to follow that path.  There is no need to invest halfway across the country just because the story being told sounds better than investing close to home.

Passively investing is just that.  It is boring and you will have little control.  The story is not exciting.  For many investors, that is exactly what they want.  A boring, passive investment that simply delivers consistently.  Without knowing all of the details, my initial suggestion would be to invest there close to home and here is why.

You ask two things.  One - you want recommendations about reputable Turnkey companies.  Two - you are looking for more cash flow.

Reputations are earned over time and have to be constantly fought for.  Too often, recommendations are made after relatively short periods of time.  Short being less than owning for 3 years and often less than 5.  It is precisely after this time when an investment really starts to show you how it is going to perform and a Turnkey company has to earn its' reputation.  Almost any investment can look good or a couple of years, but what happens later is what matters most.  

Unfortunately, investors purchase based on the glitz of an investment and are often attracted to good sales pitches, high returns, guarantees and the sales pitch, the returns and the guarantee are all too often gone when they are needed most.  Unexpected cash calls, short occupancy periods, higher and higher turnover costs are very common when investing out of state - especially when the buyer is looking for higher cash flow.

Cash flow is a calculation. It comes from a group of numbers. How much are you putting down? What is your interest rate? What is the monthly rent? What is the yearly cost of insurance? Is there an HOA? Before you get into anything else, these number effect your cash flow most. Simply moving these numbers around a bit can seriously effect what your cash flow looks like. Then the hidden numbers that crush an investment after year 3 are the deferred maintenance costs and the repercussions of that deferment.

A common practice is to defer maintenance on a property to hold down entry costs for the buyer.  The property is priced below market, but has hidden costs that will have to be paid.  By deferring maintenance, an investor gets a property that has not been maintained and therefore residents leave quickly.  This leads to frequent move-outs and escalating costs of ownership.  5% for maintenance and 5% for vacancy do not even come close to covering these costs.

When companies are competing to see who can race to the bottom first (lowering prices and selling property cheaper and cheaper) they have to cut somewhere in order to make a profit.  The first thing to be cut will be renovations.  

I recently commented on another forum that everything is more expensive today.  The cost of housing is up.  The cost of labor is up.  The cost of goods from lumber, to paint, to nails, to singles...all are up.  If the steel tariffs actually go into effect, expect the costs of aluminum windows, siding, appliances, water heaters, AC units...everything in a house to go up further.  On the other side of the ledger, what are showing strains and an inability to keep escalating at the same pace, are rents.

So, in order to find more cash flow, something has to give.  You can take more risks by buying cheaper properties or in some cases, put an emphasis on buying close to home.  Something has to give though if you want a higher return.  A safe, consistent return does exist, but it is simply not as strong as it was 3-5 years ago.

I hate that this post is so long, but lastly, be aware what you are buying right now.  The property you are paying $80,000 for today in the midwest, was a $50,000 property a few years ago and sometimes located in areas you wouldn't have wanted to buy.  Remember, everything costs more today.  There are fewer properties available so many properties on the market are carrying higher risks for less reward.

If you decide to invest out of state, make sure you spend a lot of time discussing renovations, management philosophy and housing location.  You can still do very well in the housing market today and far from home passively.  If you choose to buy Turnkey, there a few quality companies that are trying to do business the right way, but there are few with long histories to build reputations.  You are going to have to really dig in and pay attention to the answers you get.  

Add to all of that the confusion of BP'ers writing recommendations for companies they work for or commentators who are actually getting paid referrals and it can be confusing.

Feel free to message me - I would be happy to share with you companies we have masterminded with for best practices in this space and whom you may want to check out.

I would however recommend buying in NV based on what you've shared, but if you go out of state, just be patient.  There is no need to rush right now.  Depending on exactly how much risk you are willing to take and what you are willing to be happy with as a return expectation, you can find what you are looking for.   Just be patient.  Best of luck ~