All Forum Posts by: Jeff Schechter

@Jasraj Singh that's my point.  There isn't a "better."  That depends on YOU, and what your end game is.  If you have a good career that makes you money, and your talents are best used there, and you just want good cash-flowing properties, then TK is likely for you.  If you don't have a good career, want to take a lot of risks, want to learn, and eventually want to be a full-time RE investor, then TK is likely not for you.  

I'm loving all the comments here.  We run a pretty successful Turnkey operation, so indulge me for a moment...

Yes, if you want to do all the work yourself, you will likely get SOME savings.  Here's what you need to consider though...

1.  Do you have the buying relationships that the TK company has?  ie - do they know that you have the ability to buy 6-7 properties at a time and pay cash?  Will you be able to get the same deal on the acquisition just buying one property?

2.  Do you have relationships with contractors that you've done a lot of business with already?  Where there is an understanding of what needs to be done, and pre-structured pricing in place?  Again, would you get the same deal, just hiring a contractor for a one-off project?  Would that contractor be motivated to do a great job for you in lieu of a LOT of future business?

3.  Will your contractor go back and cure any remaining inspection items?  Will they guarantee their work for a period of time?

4.  Once all these 3 items are taken care of, you still have to get the property tenanted.  Do you have experience with this?  Do you have a PM team that you can trust?  Will they keep maintenance and tenant turns cost low so that you can cash flow?  Most of them charge a fortune for these things (even within TK companies).

So, most of your cost "savings" would get eaten up with the above economies of scale.  And the rest can get eaten up with poor management after the sale.  That's not to say that you wouldn't maybe do $5-7K better (up front) if you did it yourself, but you need to ask what your end game is... Do you want immediate cash flow, or do you want to be a general contractor, and take all the risk just to get the same result?

TK's provide a lot of value for the investors who just want solid, cash-flowing properties.  These investors understand that they CAN do it themselves, they just choose not to, as the risk/reward formula does not work in their favor.  For the professional who would rather put their efforts into their careers and doing what they do best, this is a great solution.  For the investor who is willing to get their hands dirty, and take a lot more risks, TK is not the way to go.

Call me biased, but we've been in Indy going on 4 years, and it's still going strong.

Depends. What market do they want to be in? What price point? Do they want SFH's or multi's?

@Craig Oram The main problem is not Turnkey.  It's that the PM model itself is flawed.  Think about it...  If your rent is $1700, then at 10%, they are making a whopping $170 to manage the property.  Unless a PM company has THOUSANDS of doors, this is not profitable.  So they have to look for ways to be profitable.  

We are TK company in Indianapolis (this is not a pitch), and have a strategic partnership with a unique company that does NOT mark up any maintenance or tenant turns... AT ALL. They use a fixed pricing model for all contractors.  When we changed our model, we got criticized by a lot of investors that bought into the mantra that the TK company HAS to be in the PM business too.  But it made sense for us, as when we gave up our PM, we gave up having to have that division be profitable.  The arrangement works out fantastically, as all parties can now do what they're best at, and while we are separate entities, our services are integrated.  Our partners manage thousands of doors across many markets, and make it up on volume.  The important thing to consider about this model is that Property Management is now monetarily motivated to do one thing - keep your property rented.  That's the way it should be.

Not sure if they operate in your area, but happy to make an introduction.

Best,

J

I'd recommend speaking with @Clayton Mobley at Spartan.  They run a tight ship, and can certainly get you into a solid, performing property.

@Babu Ramadoss We operate a turnkey company in Indianapolis.  While our formulas are ONLY designed to maximize cash flow for our investors, we've been fortunate to be in a hot market the last 12-18 months, and are seeing much more appreciation than what we would have expected.  We also are in a state with low taxes, and very landlord-friendly laws.  This obviously cannot go on forever...as the market continues to appreciate, the price-to-rent ratios will be less favorable.  But right now, there is still a window of opportunity here.  

I am a partner and co-founder of a successful Turnkey operation in Indianapolis, so you'd think that my answer would be biased, but it's not...

The answer to your question:

IT DEPENDS.  

The right turnkey (there are good and bad ones) provide a lot of value in terms of acquisition, rehab quality, tenant quality, management quality, etc.  The reason they are successful is because they are set up to do all the heavy lifting...offering WAY more value to the investor than what they can do on their own...especially from a distance.

If you have the time, money, freedom to fly back and forth, and inclination to do all of this yourself, then Turnkey is NOT for you.  If you are a busy professional, and feel your time and efforts are better spent doing what you do best, then Turnkey IS for you.

Great news @James Wise.  We're doing the happy dance down here in Indy!

Yeah, I 2nd what @Ali Boone said.  We run a very tight TK ship in Indy, and the few bad players give the entire industry a bad name.  THANK YOU for posting your results!