I originally considered investing into TK a month ago when I realized I was sitting on an inordinate amount of cash, and also beholden to property that I figured wasn't cash flowing as well as other potential investment opportunities. Being from NYC where capital appreciation is the name of the game, I decided to look elsewhere to place my funds, and the turnkey model seemed too good to be true.
After reading over tons of posts and researching and doing the required due diligence - my opinion is that the TK operation is flawed without a doubt, to an extent. I have a background in economics and finance. To me, the TK operation appears to be like a stock that is marketed and pays a consistent dividend each and every quarter - once you buy the stock however, the CEO gets replaced by an interim CEO who adjusts the dividend payout, etc. Basically the dividend stream becomes volatile and unreliable.
Hence the issue with TK investing - they are marketed as consistent dividend streams, but in reality they are anything but. Some excellent posts on BP have attested to that - one by @Michael L who has written about his experience with a TK in Chicago. He is literally sitting at the edge of his seat hoping he will get his rent paid in full each month. It's almost akin to a lotto ticket. Not to mention Laurence's experience, among others.
I have no problem paying a premium for a house that's ready to go with a paying tenant - however, I do have a problem hiring a PM whom I don't know, and receiving maintenance updates across the country all the while pondering how much rental income I will receive in a given month. @Jay Hinrichs whose words on these BP forums I have to say are worth more than gold, really nails it that TK generally works if you know the people who will be taking care of your property very intimately, as well as if you scale your TK properties (i.e. you own 20-100+ properties rather than just 1 or 2). In the end, TK operators are providing a nice service, but it is certainly the investor's responsibility to be aware of the risks involved - and for me, they are definitely too great. I know for a fact after doing the research that I need to be closer where I am more involved and feel comfortable knowing that the rent is going to be coming in consistently, rather than trusting someone I just met. I know out of all the TK operators there are certainly a select few that are well-meaning and have the best intentions, but at the end of the day after the house is sold, the interests are no longer aligned as @Ben Leybovich rightly points out - Unless you know the PM like your own brother/sister.
What's also alarming is the select few people who hover on BP and selectively market TK to amateur investors like myself and others, and yet never disclose the fact that they are duly compensated if you end up purchasing a TK property though their services. In the financial industry, that's called full disclosure and if it isn't done correctly it's not only hugely unethical, it's illegal. There is no problem writing and promoting what has worked best for you, but at the end of your marketing/blog spiels if you are paid to promote TK's you should fully disclose this fact, otherwise you're just leading people astray.
Now I will probably invest closer to home - probably in Brooklyn (Bushwick - an upcoming Williamsburg) where the prices are high and rental income is null, but I'll play the appreciation game and at the very least I can get my hands dirty screening tenants and doing maintenance work and know for a fact what I will be receiving.
All the best to everyone in the new year and I appreciate your time in allowing me to spew my thoughts.
