How I'm Generating 25% Returns on Turnkey Rentals Without Debt

A Good Strategy for the Busy Professionals 

I'm busy.  You're busy.  Most of us on BP are not full time real estate investors.  We have children, jobs, businesses, problems, and not much free time.   With that small amount of free time I have, I don't have a lot of time to search, analyze deals, rehab a property, let alone any desire to property manage it.   Turnkey real estate rentals have proven to be an incredible strategy for me to exit the stock market ups and downs, and enter the world of REI.

Being able to buy a property that is sourced, vetted, rehabbed, and quality renters are screened and put in place, then the rents are direct deposited in my account on the 20th has been a dream come true.  However, as we all know, NOT all turnkey companies are playing the game the same way.  The vast majority (do not mistake this for ALL of them) are offering 8% to maybe 12% returns, and SOME are even offering 12-15% returns WITH debt leverage.  So basically what that means is if you purchased the property straight cash, your returns would be much lower.   I even just visited a site where a very well known Turnkey did not factor Maintenance into any of the projections.  Seriously - a property that doesn't need repairs?  Baffled on how this is done!

Third Time's a Charm

Two not so great turnkey purchase experiences led me to get it right on the 3rd go around.  It's a good thing I'm very persistent and didn't lump them all together.   

So how am I generating 25% NET returns?  Not gross, where expenses haven't been factored in.  There are 3 things in play:  1)  I'm buying BELOW retail prices.  Most turnkeys price their properties based on the monthly rent commanded, and that often does not equate to an under-valued property, so starting out of the gate your returns aren't strong.    2)  Volume.  We all understand this I'm sure.  If I buy one house, I don't have the leverage with the Turnkey to get an additional discount.  If I buy 5, I'm showing I'm serious, I want a long term partnership, and it's less time and effort for the company per property.   3)  Referrals!   I believe in the concept, the company, the service, and the returns, so I've sent several investor friends to purchase property.  I get a referral credit for each one.  

Setup your Referral Agreement

For example, I just bought a Tri-plex for $30,000 cash.  The Rehab was completely covered by my referrals.  It rents for $1200 on 2 units - the 3rd hasn't been filled and it's still generating 33% NET returns (50% gross!!).  

My Turnkey partner is very aware that marketing and selling for him is extremely valuable.  He can spend less effort on generating sales, and more time on sourcing and vetting properties.  Marketers are one of the, if not the, highest paid professions in the world!  By you marketing for them, you should be rewarded!   So, make sure to create an arrangement with your Turnkey provider to where you are well compensated for bringing them business - you DESERVE it!