Turnkey property discussion

[OSman]

It seems okay to renew a discussion on the merit (or lack thereof) of buying turnkey properties as part of real estate portfolio.

Yes I am maxing out 401k, back door roth, fast track to student loan payoff...

I have always been interested in real estate investing however and am inclined to take the PIMD mindset. I am on the waitlist to purchase a property in Memphis through MidSouth Home Buyers likely to occur early next year. I am wondering if anyone has experience with this company or others like it? It is very highly touted on the real estate guys podcast. 10% management fees are high but I am hoping to be as hands off as possible with management while still owning the properties outright so seems worth it.

Aside from my specific situation I am interested in getting updates from others as its been a while since I have seen turnkey discussions pop up.

OSman

[Radonlake]

No experience with MidSouth Home Buyers but curious whether you live in Memphis and know Memphis?

Out of interest, I looked through their listings and lots of properties are in difficult parts of town seems to me and some of their numbers seems very optimistic. We have been selling all but one of our Memphis rental properties (all self bought) so take this with a grain of salt. If you are not local or have local knowledge, I would try to get some insight before buying.

[wonka31]

Good properties are typically had when you buy well. These properties are already renovated and are typically overpriced. I looked at multiple turnkey companies in the past and decided against it due to the high cost of the houses, lack of diversification and high expenses (including the management fee).

I chose to go into syndications instead, haven’t regretted it for a second.

[EntrepreneurMD]

Maybe consider paying off your debts first, including your student loans.

Of course it is very highly touted on the real estate guys podcasts - in a current strong real estate low interest rate environment no doubt. That means, especially with a wait list, they are trying to build up an oversupply of willing buyers to sell to you as high as possible. "Turnkey" means they are selling at a premium for that benefit to you - how much of a premium? Who knows?

10% management fee is a large percentage of revenues, and doesn't include realtor fees if a tenant moves out and you need a new one. You said you want to be as hands off as possible. There can be some conflict of interest to contend with. The management company can be buddy buddy with more expensive repair contractors (or charge you a high rate for in house contractors), or not bother to take the time for multiple quotes on large jobs, or is not at loan risk if dissatisfied tenants move out, etc. They won't care as much as you. It's your money.

Rather, what I did for my commercial real estate (which I had built but also had signed leases for all spaces)  is I have an employee (with prior property management experience) that manages the properties (3-4 hr/week) at far below 10% and works directly with me on pricing to ensure financial viability, so not usually so hands off if you want to do it successfully.

I'm very big on real estate. This could be a good investment if you decide to go for it. Just do your homework and perhaps be ready for potentially more involvement than you think.

[Dont_know_mind]

Turnkey=Turkey ?

[Ghetto]

wonka31 wrote:

Good properties are typically had when you buy well. These properties are already renovated and are typically overpriced. I looked at multiple turnkey companies in the past and decided against it due to the high cost of the houses, lack of diversification and high expenses (including the management fee).

I chose to go into syndications instead, haven’t regretted it for a second.

Click to expand...

This is correct. When you hear the word “turnkey”, hold on to your wallet. You’re buying at a premium.

[Panscan]

Waitlist?

So you're waiting to buy any random property in the area that they have available? Wow sounds sweet for them. A line of people waiting to buy their stuff.

[CordMcNally]

If it were me, I would wait until things shake out from your other thread before I bought additional properties.

[Molar Mechanic]

I looked into it a while back.  The only thing I was sure of is that there were a lot of people making money and I was far from convinced I’d be one of them.

 

im pretty convinced that everything is priced so the buyer is on the knife edge of profitability, whit everybody else is cashing checks.

 

strong pass!