Turnkey properties, what happens after the first year?

[Account Closed]

I'll try to not be generic and over-generalize, but I keep seeing websites and offers for investing into turnkey managed properties who rent out the properties, where during the first year you're promised 10% to 15% ROI's. When I see this "first year" nonsense, it sounds to me like a ponzi scheme, but I want to know what happens after the first year..because no one in the right mind cares about how this starts, we care about how it finishes. So I'm looking for someone nice enough to tell me what happens after the first year, after the "everything is peaches" period, and preferably someone who invested with companies like this before and remained invested for more than a year.

[Jon Holdman]

Well, we've seen a few posts from folks in this situation.  Things that can happen after the first year include:

• Finding out the rent is significantly less than the turnkey seller claimed.  The seller was actually subsidizing the rent.
• Finding out out the house is worth significantly less than you were led to believe.  So, after you discover the rent is not what you expected and decide to sell, you discover you're deep under water.
• Finding out there are ongoing maintenance issues.  That can start before the first year ends.
• Finding out the PM doesn't want to deal with the property anymore and that other PM's won't manage properties in that area.
• Discovering the expenses are more than claimed.  Sellers (not just turnkey) often claim taxes and insurance are the only expenses.  That is "this cash flows - rent is $1000 and your payment will be only $600."  Apply the 50% rule to the TRUE MARKET RENT to estimate your expenses.

Now, maybe none of these will happen.  If you do your own due diligence and find out the reality and not just trust what you're told, you shouldn't have these surprises.