@Rico See I am absolutely stunned and surprised by the amount of useless information being peddled when the same question like yours gets asked in the forums. As an example, the gentleman who has responded to you has provided no details that fully demonstrate that he has understood your unique challenges. I live in NJ and am frustrated and tired of looking at properties in the local investing model. When I run my cash flow numbers, the price I can offer on a property as an investor is far lesser than what seller wants to see at. I have had 7 - 8 offers being turned down most recently where even a Fannie Mae Homepath property which is a foreclosure accepted offers higher than mine although mine was $3k higher than the closest comparable sold over the last 6 months in a regular sale in the same condo complex. Beats me!!! I started looking at some of these bank owned properties because I was not getting much success going the retail route. I recently won a bid on Hubzu for a foreclosed home. However, the house had its pipes cut out in the basement and no water and my lender wouldn't lend with no water unless it was a rehab homestyle renovation loan which takes on an average 60 days to close and Hubzu had a 30 day limit beyond which it was a flat $300 fee plus $100 per day for each incremental day. So, I had to get out of that deal as well. On the retail side, the challenges I have seen in NJ are high property taxes. As a result of a combination of factors above added to the fact that I do not have contractor crews in place (as I have a full time demanding job) I am unable to proceed on my investment goals in real estate locally. When I posted my dilemma on these forums, I got useless responses mostly about do it yourself or focus on in-state etc. which were short on details and went nowhere to yield a tangible suggestion.
As a result of all of the above, I have started looking at turnkey investments. I have spoken to a number of firms padeals, memphis invest and norada. I have been looking at the investment properties on their website and have been using my own adjustments to the numbers provided to see what the monthly cash flow would look like. As examples, for memphis invest, I had to add the vacancy rate, repairs and CAPEX to the proformas sent. To Norada's I had to adjust a number of percentages around vacancy, closing cost, rent appreciation etc. to more conservative estimates. When I do all this, there still seems to be some level of positive cash flow but lesser than what I would like to get. So, there are two lessons here when looking at turnkeys a) keep looking at deals until you find what meets your goals and b) there is positive cash flow even after hiring a property management company. The latter is unimaginable in NJ where the offer price would need to come down even lower to be able to afford property management.
So, based on all this, I have looked at what my primary motivations are for getting into real estate. I already have a well diversified managed stock portfolio and I am looking some passive investment options which will yield a steady cash flow 10 years down the line when everything is paid off. My intent is to use all extra cash from these turnkey investments into paying off the mortgage faster so that in 10 - 12 years time I own about $1MM portfolio fully paid off which can yield a sizeable monthly chunk. I have also asked myself what I want to be - an investor or a landlord. The turnkey option offers you to do the former and focus on building your portfolio which my local in-state investing does not allow to do.
I have still not purchased a turnkey property yet nor am I affiliated with anyone; so all of the above is just my personal rant. What I have found is that turnkey is a viable option for out of state investors like us who cannot get meaningful returns in the local market. You need to use your due diligence in running your own financial checks on proformas provided by turnkey providers, do your own research on property areas they are selling in, crime stats, property values etc. But, if everything works out, I do not see any harm in investing in turnkey.
Many people in this forum talk about built in equity where you make money going in. I have read all the relevant real estate books, forums, blog posts, pod casts etc. where this is being said. But, it is easier said than done to find deals where you can do this without putting in a lot of work. If you are like me and have a primary job and are just looking for passive investments you should consider turnkey. Of course this in just my personal point of view and you are free to choose your own path and this is also just my personal point of view at this time when I don't have turnkey properties. So, the experience may change once I acquire a few. However, looking at things from where I am I think turnkey seems like a pretty good alternative to consider at this time.
