All Forum Posts by: Lynn Dickinson

Lynn, first of all, my thoughts and prayers go out to you and your husband. I don't necessarily want to talk you out of turn key properties considering that is my business, but it may not be the best way to go for you given your particular circumstances. I would need to know more about what your monthly cash flow needs are and what kind of reserves you have in order to say one way or the other. Rental properties can be an excellent sources of cash flow but you have to go in to it with your eyes wide open and understand that there are a lot of unpredictable variables. Although it can be an excellent source of income over the long haul, there can be times that you have unexpected expenses that can wipe out a years worth of cash flow. It's not the norm but it's not unheard of to have a bad tenant cause thousands of dollars damage that needs to be dealt with at turn over. Real estate investment works best when you are able to have a portfolio of properties so that if you have one that isn't performing, the others will offset it. It's just like stocks. You wouldn't want to have everything in one stock. Personally, I wouldn't recommend real estate if you are going to have just one property. If everything goes according to plan, you can generate on average of anywhere from $150 to $250 a month in cash flow but as we all know, nothing goes according to plan 100% of the time. You will need reserves for the times that it doesn't. I don't know how much capital you have is being a private lender which can usually bring you a consistent 10% return Having said all that, I'll respond to your questions in the body below.

Originally posted by @Lynn Dickinson:

Hello Bigger Pockets!

This is my first ever post here. As a late-middle-aged woman, brand new to real estate investing, with a sick husband, living (in a rent controlled apartment), in a very expensive real estate market, with a full-time job and not a whole lot of money to invest, I've been considering some out-of-state turnkey possibilities as my initial foray into the world of RE. (I believe I have enough for a down payment on a home in one of the less pricey markets.)

But of course I have questions... (I apologize if they sound silly.) I hope you'll be willing to help me with some of these? Thanks!

1. Is the price listed on a turnkey property, "THE price?" Or do they expect to negotiate? I ask, because when I look at some of these exact properties on Zillow, they are valued at $40k-$50k less than what the turnkey provider is asking. Is that normal? Is it wise to pay that much more for a home than the area/market is estimated to be worth?

Zillow is not a good source of values. It is simply an automated valuation tool that cannot possibly determine values with any accuracy. They even say so in their small type disclosures.

2. What is the usual, general, non-turnkey range of costs for a management company to manage one's distant rental properties? I know what the turnkeys are asking, I just don't know if that's in line with the norm, or if what they are asking is considered a high price. And is this fee ever negotiable?

This varies by market but will be in the 8-10% range. That of course does not include maintenance and repairs that they have to do.

3. I've been reading articles and listening to podcasts, and there seem to be mixed feelings about turnkeys - including some people who feel they have been "scammed" or "ripped off" by a turnkey provider. How does that happen and how can I avoid it happening to me?

There are good and bad turn key companies just like there are in any business so you can't generalize. You just need to do your due diligence and vet the company well. There are many good one right here on BP.

4. Given my situation described above, does it sound like turnkey investing is a good RE starter strategy for me? (I can't really spend a lot of time/energy fixing up a place, and can't afford to buy locally - but I need to start generating some residual income and soon. My husband is not going to get well, and his care is starting to get expensive.) S\

See my comments above

If you have RE investing experience, I would very much appreciate any feedback or suggestions you may have on any or all of the questions above. Thank you SO much for sharing your time and expertise!

Thank you so much for taking the time to write this, Mike!

I do know our financial position is tenuous at the moment, which is why I was hoping to turn a first real estate investment (a duplex or triplex) into a second or third - but I do see your points and I very much appreciate your words of caution.

Is there a way that I can message you privately to tell you a bit more about our situation and ask for your alternative advice?

Thanks again!

Take care,

Lynn

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Thanks Jake. Do real estate agents work with turnkey providers?

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Originally posted by @Ali Boone:

My answers-

It's typically THE price. Turnkey providers don't usually negotiate their prices. For the prices, keep in mind that the turnkeys are fully rehabbed, which can put them in a dramatically different level of quality than nearby homes. Typically the nearby homes are priced assuming distressed conditions or otherwise. When you get an appraisal on the property, you can better see the true value of the property versus what you are paying (to confirm you aren't overpaying).

The PM fees with turnkeys are usually totally standard with normal PM fees, if not lower. When they work with so many properties, they can often lower their fees as compared to companies who are managing more one-off properties. Remember, once you buy a turnkey, it's like owning any other rental property so there's no real different fees than would be with any other property.

The answer is easy- due diligence. There's very little about a property that you can't verify. I'd say one of the biggest mistakes people have made with turnkeys is assuming that everything they are told is true and that they don't need to put any effort in. People have closed on properties that barely even existed. Even just a property inspection would've confirmed that status. As people say on here, 'trust, but verify'. Verify everything you're told through property inspections, potentially visiting the property, etc.

I've always been an advocate of turnkeys for new investors. Here's why-

https://www.biggerpockets.com/blog/turnkeys-for-ne...

Hope those help!

Thanks for your reply, Ali!

Will you please elaborate a bit on the "due diligence" part of your response to #3?

I get that I'd want to hire a local property inspector and maybe appraiser?? But what else? And how much does due diligence cost? If I have enough for a down payment on a property, how much MORE do I need, above and beyond that amount, to do the due diligence and actually buy the property?

I see that you're in Venice Beach. I live not far from you. Have you used any turnkey providers yourself, that you might recommend I either consider or stay far away from? :-)

Take care,

Lynn

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Originally posted by @Kiera Underwood:

1. Depends on who you're working with! Call the provider and ask if the prices are negotiable or set.

2. 8-10% is what I've seen in OKC for property management that does a good job.

3. I've found a lot of turnkey providers are sucking equity. I'm not sure about scamming, but I do think there are strategies where you can avoid them making all the money.

4. I love homes that haven't been fully rehabbed, but that are still in good shape. As long as property management can handle minor repairs and you've got a warranty or enough cash reserves to cover you major repairs (which you can predict based on their age) there isn't too much to worry about.

What markets are you checking out?

Thanks for your response, Kiera.

So far I've looked at Syracuse, Memphis and Kansas City. Still looking and wide open to recommendations.

Please tell me more about your response #3. What kinds of strategies are you referring to? Thanks!

Take care,

Lynn

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Wow! These are wonderfully helpful replies! Thank you SO much, Clayton Mobley and James Wise! I very much appreciate your time and consideration. I will absolutely check out that thread you indicated, Clayton. Thanks for providing the link. That makes it easy - and in my world right now - easy is a very good thing. :-)

Onward and upward!

Take care,

Lynn

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Hello Bigger Pockets!

If you have RE investing experience, I would very much appreciate any feedback or suggestions you may have on any or all of the questions above. Thank you SO much for sharing your time and expertise!

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All Forum Posts by: Lynn Dickinson

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