All Forum Posts by: Anton Ivanov

@Spencer Hsu

Unfortunately all of your questions are extremely difficult to answer without intimately knowing the city, neighborhood and the specific details about a house. So the following are just my best guesses, nothing more:

Maintenance: You didn't ask, but I would use 10% because it's a multi-family. Could be more, depending on the quality of tenants you will get.

Cap Ex: Relatively new building, although don't know the condition or the structure and systems. I would use around 8%.

Vacancy: Depends on the area, how fast you can rent it and whether tenants will be Section 8 or not. Best thing you can do is ask your prospective property manager for advice. I would use 10% since this is a multi-family.

Fixed Landlord Expenses: Not sure which ones you have in mind. If tenants pay for all utilities, the only ones you will be responsible for are usually landscaping, insurance and property taxes. Also don't forget property management.

Insurance/Property Tax: These are typically paid yearly. You can go on the county's tax assessor website (just google it) to find the exact taxes due on the property. Note that they may go up if the house will be re-assessed during this sale. For insurance, you can get a quote from a local agent. Hard to say how much it will be, probably upward of $600/year.

Annual Growth: Again, entirely depends on the area, but I'm usually very conservative with this and would not use anything more than 2%. Maybe even 1%.

@Jeff B.

1) You are correct. Turnkeys are priced at market value (some cases even above), you will not get any discount. Also their listed price is what you'll have to pay, they are usually not negotiable.

2) Yes, after you buy a rental property, it doesn't matter how you bought it.

To expand on my answer to Jeff, I think managing a rental property yourself IS doable. I personally wouldn't do it, but many people on BP do this. Before making the decision, I would familiarize yourself with what it all involves, so you know what you're getting yourself into.

Alternatively, you can do what you suggested - use a property manager for a while, then if you feel like you can do it yourself, fire them and take over.

Property management fees will be between 8-10% of gross rent in most cases. They are fully tax deductible, along with all other expenses incurred on a rental property, including maintenance, repairs, taxes, other fees and mortgage interest.

@Jeff B.

I'm not aware of any TK company that forces you into using their in-house or "preferred" property management services. Their main business model is flipping homes. If you want to self-manage or pick a different property manager, you can. I could be wrong and there may be some out there that do this, but that would surprise me.

I don't agree with you about not using a property manager as a buy & hold investor. In fact, I think that unless you own only 1-2 properties in A-class neighborhoods near where you live or want to be a property manager full time, self-managing is a waste of time. I pay more in taxes than I do my PM's and for the amount of time/effort the save me it's well worth it, especially once you get 5+ rental properties.

Even with a PM, though, it will never be 100% passive. No investment is and if you think that, you're lying to yourself.

@Jay Thacker

I think you misunderstand the turnkey process a little bit. There will be no difference as far as management goes - turnkey or not, you still have to find tenants, handle maintenance issues and deal with tenant problems.

Even though when you purchase turnkeys, you will often get a tenant with the property, they will eventually move out and you will have a new one. Even though the turnkey is recently rehabbed, you will have maintenance issues, stuff will break and you will eventually have to replace the roof, HVAC and other high-cost systems.

So regardless how you purchase the property, it is crucial to have a good property manager, as they will be key to your long-term success as a landlord.

What turnkey does for you is eliminate the need to find and rehab properties yourself, saving you time and eliminating some risk, at the cost of a higher up-front investment price.

The ARV/Market Value you put is $150. Your initial loan amount is $80. Your initial equity in the property is $150 - $80 = $70.

If the purchase price is equal to the ARV/Market Value, your equity will equal your down payment. Otherwise, it will be the down payment, plus the difference between ARV/Market Value and the purchase price.

Let me know if this makes sense.

@Bert Adams

Turnkeys can be good, but you I would strongly advice you start by educating yourself about real estate in general. Go through the Ultimate Beginner's Guide, read some intro articles on the blog and get a solid foundation of knowledge about how to evaluate markets, what to look for in neighborhoods, how to finance your properties, how to run cash flow projections, how to manage your rentals and how you can exit.

Whether you go turnkey or not, you will need all of this basic knowledge and understanding. If you buy without it, turnkey or not, there is a very good chance it will be a bad purchase.

@Francis M.

You can find posts and many blog posts here on BP about market analysis if you search. There is not single best strategy and I've written several posts about it myself. 

The main point is that which market and neighborhood you chose will have more impact on your long-term performance as a landlord than which property you buy. I would say it's something like 75% market/neighborhood and only 25% the house itself.

Most people don't realize this until much later in the game

@Francis M.

Finding mult-family turnkeys will be a lot more difficult than SFRs. I've seen some companies do it on occasion, but I haven't met anyone who specializes in turnkey multi-family exclusively.

Before you start looking at properties through, I strongly suggest you learn how to evaluate different real estate markets, neighborhoods and cash flow projections. Without that, you may end up purchases a property that will perform poorly.

@Kevin Marques

This is probably not what you want to hear, but I would first make sure you have a solid foundation of knowledge about how to analyze real estate markets on a more macro level, how financing works and how to run cash flow projections on each house. The beginner's guides here on BP are very good for this, so if you haven't already went through them, it's probably a very good idea.

I just see to many people jump right into looking at properties and buy carelessly. The city and neighborhood where your home is located will have more impact on your long-term success as a buy & hold investor than anything else. Plus most of the numbers you see advertised for turnkey properties are inflated and you NEED to do your own analysis. 

@Lisa Renee

It could definitely work and can potentially reduce some of the risk and time associated with finding and rehabbing properties, at the cost of you paying a higher price for the investment up-front.

There are tons of great blog and forum posts about turnkeys here on BP, so I suggest you give them a read to learn more about how they work.