All Forum Posts by: Scott C.

Many of the people you speak to in RE are going to be biased on the side of trying to sell to you or be in on a deal with you for their own financial gain, so it really takes a long time of immersing yourself in the community, talking to people, and deciding who you can trust.  For us, when we started we picked markets within 12 hour drive and cities we could see ourselves living in some day - for you I'm sure your criteria will be different.  Once we picked a market, we found a realtor we liked and could trust and who was comfortable working with out of state investors, we made several visits, narrowed areas we liked, until we found a property we liked where the numbers worked.  Might take a year or 2 to find the right first deal, but you'll learn a lot.  That's how we did it as beginners 10-12 years ago, but now with experience our criteria is different and we sometimes look to turnkey to cut corners.

If you are new to real estate investing and considering buying site unseen, you are taking a huge risk.  You need to target a market, locate investor friendly realtor, take a couple of trips to the market to learn about locations and look at a bunch of properties.  I've purchased this way and it takes time and patience.  Or skip the realtor part if you need to, but if you are new to RE, you need to have someone help you navigate the process to locate and purchase.  

Turnkey operators will fast forward the process for you, but creates a whole other set of risks - search BP - plenty of threads on that.  I've bought that way too - it is quick, but NOT as hassle free as they make it sound.

Good luck!

My suspicion with turnkey is that since placing a tenant is a condition of closing (at least the ones I've done), property management has incentive to get a renter in there quickly, which can be counter-productive to getting the most qualified tenant in place. 

Regarding placing tenants, I met with a (large - 850 units) property manager last week who explained that they could get in trouble for discrimination if a tenant meets all the 'criteria' but then the owner turns them down.  I've also heard from multiple property managers that they cannot share any of the confidential information they find in their screen, only summarize it for me, which only adds to the mystery.  Not sure how true these statements are.

I would say that property management should be changed in your case after the eviction. If tenant truly did not pay, then you should have been aware of it within 10-15 days. Eviction for non-payment should not be your first notice that there is a problem.

Also interested.

Passive is definitely a misnomer.  I like to think of turnkey as a "streamlined process to close on a cash-flow property with a tenant in place."

Once you close on a property, the 'turnkey' aspect is almost irrelevant.  The question is whether you have property management or not.  If you went DIY, but put property management in place after close, you essentially have the same 'passive' process going forward than if you did turnkey.  Yes turnkey maybe gives you some advantages, like a few months of free maintenance/repairs, or access to the renovation crew that did the initial renovation work, but in the long term, essentially, you have a house with property management, and all the headaches that go with it.

It is the purchasing process that is vastly different if you go turnkey vs DIY.  I've purchased both ways, and yes, the process is much more streamlined (maybe better word than passive?) with turnkey.  DIY we'd be lucky to purchase 1 property a year, but with turnkey we easily did 3 in a single year, with lots of properties to choose from, and more available if we so wanted.

You're going to get opinions all over the map.  The 'formula' that works for me probably won't work for you.  We don't know how often you fix toilets and how long that takes per incident, what your cash flow is, if you have higher end or lower end rentals, etc.  Unfortunately, those and others are the variables that go in the 'formula'.  It's not as simple as cash flow.

And you have to consider how much your time is worth and what is that time best spent on.  If you spend 5 hours per month of your 'free' time on PM, is that worth more than the $xxx (10%) of your cash flow that goes out the door to PM that month?  Or would you really rather spend your time building your portfolio?  We cannot answer that for you.

Also consider it takes time to find and hire the right PM, and sometimes you have to try a few before you find one you like or one you don't have to constantly stay on top of.  

Personally, I have PM for all my properties because I'm a long distance investor.  

Good luck!

Seems like a mess.  Will seller pay for re-inspection after everything is fixed?  Doesn't seem like house was properly completed and your original inspection was premature.

The MLS/Realtor/bank loan route is definitely slow. I'd say minimum is 3-4 months, but on the short sales we've purchased it was more like 6-9 months.

For my purchases: I used an agent to find properties on the MLS. Bank providing the loan does the appraisal. I've always done an inspection and required critical issues to be fixed before closing. The places I've purchased only have required minor work so contractor cost was minimal. I've invested out-of-state, so I also have a property management company (typically at 10% cost) to handle finding the tenant, all interactions with tenant, as well as manage any repairs needed using their contractors. Also, I've always had my own attorney as part of closing, so I know they have my best interest in mind.

Good luck!

Yes, the company doing the renovation work will take ownership, then make the renovations, and then sell to you.  Completed renovations with inspection is typically required before you can close, as well as tenant in place, so they would need to have ownership to do those activities.  

Sometimes you might be working with a marketer, and in that case they are acting as the realtor - and your contract will be with the actual turnkey operator they are seller for, not the marketer.