All Forum Posts by: Jay Y.

@Jag Sekhon A turnkey company is simply a company that specializes in selling "investor ready" properties. Basically, they market to investors who want to buy a property that has been rehabbed, and rented out to a tenant (usually a condition to closing). Typically, they also run the property management as well. They try to make it as hands off as possible for the investor, which is part of the attraction, especially for busy professionals.

@Account Closed Appreciation will vary depending on location. Generally, I think people focus on out of state for the cash flow. I'm a fan of leverage since the cash on cash is so much higher... and I want to take advantage of the low interest rates.

@Kevin Dolan Welcome! I'm also a buy and hold investor from the Bay. You are going to love it here. ;)

@Arthur Garcia , @Matt Mason are right, you can't outsource everything. Turnkey investing (and real estate in general) will never be 100% passive. Semi-passive income is the best you can hope to achieve.

I also agree with the lack of discount when going turnkey. That's something you'll likely be forfeiting. It's kind of a trade off between time and money... Again, using stocks as an example, you can purchase an index fund that tracks the entire S&P 500 for a small fee... or you could hand pick your own stocks and build your own dividend growth index fund for income. If you want total control and higher yield, do it yourself. If you want to be more hands off, go with the index fund.

Building a local team is definitely possible if that's what you want to do. But also ask yourself, which markets do you want to invest in? Does it make sense to invest a lot of time and effort into building a local team if you only plan on buying one property there? Just something to think about...

For myself, sure, I'd love to own 10 properties in the Bay Area (an area that's always in high demand for rentals b/c of all the jobs here)... and I have built a local team here. I could go further out to Modesto or Stockton and grab a few properties over there and establish a local team... but how many would I really buy? Is that a growth area I want to invest heavily into? Would it be worth all the work? However, if I decided to go turnkey instead, I could buy a few in Houston, Dallas, Indy, etc... and diversify that way. Remember, it's extremely important to buy in areas where the jobs are and where the people want to be. You have to be certain of the area you are investing in before you start planting down any roots.

@Arthur Garcia You bring up a very good point about the first property. Like buying your first stock, it's initially very nerve racking if you haven't done it before. Over time, I've found that this fear starts to wane a bit... kind of like having a basket of 20-30 stocks... if one goes bad, you're still well diversified.

Obviously, when first starting out this isn't the case as all your eggs will be in one basket, so to speak. So, yes, you definitely have to assess your own risk tolerance and comfort level before deciding to go out of state. If you are in any way doubtful and feel uncomfortable, don't do it. It's better to stay in state and accept a smaller return than to not invest at all.

With all that said, and I know not everyone is a fan of turnkeys (you obviously pay a premium for their services), the one thing they do provide for an out of state investor is a complete solution. Most turnkey providers will sell you the property directly (you don't need to find a realtor), rehab it, place the tenant, and then run the PM. Thanks to BP, it's easy to ask around and get referrals to reputable companies.

Of course you could do all this work yourself locally... However, if you're going to be investing in an area that's a few hours drive away, do you really want to spend all your free time on the weekends trying to put a team in place? Time is money after all. And how do you even know that your local PM will take good care of your property? It's still going to be a risk/gamble, in state or not. Also, if all they're doing is running your PM, that's the only way they're going to make any money off of you... With turnkeys, the companies do have incentive to excel from the PM side b/c they'll want you to buy more properties (this is where they make their real money) in the future and help with word of mouth referral...

@Account Closed Incredible cash flow in the Bay Area? Sounds awesome, would you mind sharing some numbers? There are so many investors interested in investing in the Bay, I'm sure they would jump all over that...

This thread is focused on the new investor making their first buy and hold purchase. Does the model still work?

Rock on @Tom Bujnowski , tell it like it is!!!

@Travis Nance Welcome from a fellow Californian! How's the market up in your neck of the woods? My friend's dad just recently retired up there after selling his SFH in the South Bay. He made out like a bandit (insane appreciation), so I'm hoping he's now enjoying the good life up in Wine Country ;)

I'm pretty new with out of state investing, but so far that property has been a lot easier to deal with than my local properties. I don't use a PM locally, and probably get a text/call once every 3-4 months. I'm not complaining at all and actually have some great tenants locally, but the out of state property has been 100% hands off. I log on to the web portal and see any maintenance requests, etc. but I let the PM handle that.

I hear what Dawn is saying about good deals that can be had in any market... However, this would only hold true for those seasoned investors who know what they are doing. For newbies just starting out without any experience (and not much capital), I really doubt they're going to be able to find these bargains.

Realistically, if you're going to invest in the Bay Area, and you're not going in with all cash, all you're really banking on is future price appreciation. You can look at condos, townhouses, SFH, etc. and you won't find anything that cash flows with a typical 25% downpayment... not today. And it would be a real shame to not cash flow when you have to drop $70k+ on a downpayment. Why not take your money somewhere else and get a much better return?

A lot of folks recommend finding a multi-family, so you can live in one unit and rent out the rest... This sounds great in theory, but again, you have to consider your local market. I've been to the bad neighborhoods in San Jose, and even there, quads start at $800k+. For someone just starting out, that's a sizable downpayment, even if you go FHA...

I love the Bay Area... just not as an investment opportunity right now.

yes, I definitely understand where you are coming from. 2012 was the last year to get in on deals and still get cash flow. In the Bay Area, the numbers simply dont work anymore.

I got lucky and was able to land some deals last year. Even so, my focus has completely shifted to investing out of state. If I was starting today, I would look out of state. Sure, you could try Sac and areas farther out, but the returns in those areas have started to dry up as well. To me, investing in Sac vs out of state is no different. I can't manage from afar anyway, so I might as well find a market that offers better returns.

@Ralph E.

Yeah, if you want to reference someone, you can start by typing the @ symbol, and the first few letters of their name. On my PC, I need to put a space after the @ before the first letter.

For instance.... @ Ja

Once you do that, a dropdown menu should pop up and you'll be able to select the person you want to reference.

Let us know if that works for you.