Turn Key Real Estate Investing Anyone?


#1

I’d like to know if anyone has had any dealings - good or bad - with turn-key rental home companies, where they find / rehab / rent / manage the property for you? The most obvious company that I’ve seen doing this on a big scale is called Memphis Invest, in the Memphis, Dallas and Houston markets.

Anyone have any direct experience with this company or others like it?

Your input is greatly appreciated - thank you.


#2

I don’t but here are two bloggers that do in case you haven’t been following them:



#3

Interesting topic. I had never even heard of this. So the only thing you do yourself in this model is put down the money, and get your name on the deed?


#4

Yeah, it’s definitely a thing. The margins are so good in some locations (St. Louis, Kansas City, Memphis) that there’s enough margin to pay all the management fees, remodeling fees, etc. and still turn a nice profit. If you read the above articles, you’ll see that often people never even visit the property. Obviously there’s some big risks associated following that path.


#5

Thank you, I will follow-up with these two, and see what I can find. Appreciate the lead.


#6

If you’re interested in turn key rentals, you may want to check out Hipster Investments. It’s a good resource for information on the subject. Hope that helps! :slight_smile:


#7

So how did this work out for you?


#8

I pursued the Memphis Invest informational, phone chat, etc.

A bit of high pressure…“How much do you want to invest?”…“How many houses do you want to buy?”…kind-of-thing. All of it was to be done in-house, and with their folks. Closing was estimated to be $10K-$15K on top of a 25% or more down payment (if financing traditionally).

I spoke to a number of folks, some had good experiences, some had less-than-stellar experiences.

At the end of the day, I decided against, as I don’t think my dollars would go as far, and my returns may not be as rosy as they predicted.

Still looking / considering other options.

The fact is that we’ve done rental houses in the past, and they’ve been fairly seamless. Of course, there are issues that occur and will always do so - that’s the nature of the beast. However, I still think there is better value to be founbd somewhere between doing it yourself and completely farming it all out.

I haven’t figured out where that is ‘exactly’.

My income is good - so I don’t want to get bogged-down in spending a lot of time managing a handful of houses, versus making money doing what I do best (and get paid for, as such).

Apartment buying? Maybe. But again, I need to connect with the right folks / service provider, etc, wherein I don’t feel that the costs are so steep / they have me by the short-curly-hairs coming and going.

You have any insight, Edgar?


#9

I own 9 houses with Memphis Invest. I’d be happy to go over the details concerning each purchase and discuss real numbers if you want to see the actual ROI (thus far).

I agree with @SlyFoxTodd that they are a bit high pressure. Even when you are a customer and have decided to buy, it’s very much “this house won’t last, I need a commitment from you as soon as possible or you may lose it.” Although, I started to get the impression that they were not intentionally being high pressure, but rather had low inventory. Most houses really did seem to be gone within a few hours of MI making them available to their buyer’s list. Because of that, not only did it feel a little high pressure, but there’s no way you can possibly do your due diligence and you pay a premium because there’s such high demand. I may buy a house for $110k when comps in the area are going for $105k. I had at least two houses where I had to make a higher down payment because the appraisal came in, well not low, but based on the comps for the area.

I do recommend MI, but it’s because I trust the renovation work they do and the property management. In four years, I have not had even one month of vacancy, and no significant repairs or issues with tenants. That said, if I had it to do over, I certainly would. Rather than getting mortgages on houses with MI as the rehab middle-man, it would be far more profitably for me to do the rehab, rent, refi cycle. I can see the public records and know that MI paid $45k for that same house they sold me two months later for $110k (after doing a $20k rehab with in-house contractors). Where I’m making 10-14%, I could be making significantly more.


#10

I did this in St. Louis. It was a duplex in a lower income part of town. I’m in Texas. I never set foot in the place. It was a bit of an experiment and it was a bit of a failure.
The property managers never got very good tenants in there and there was a lot of turnover. Could have to do with the property managers. Could have to do with the class of tenant but I spent a good deal of money on the turnover process, cleaning, fixing broken things, etc. I sold it earlier this year about break even but I lost on transaction costs.
The two rental homes I’ve done myself are great here in my hometown but I’ve had a little more input on those and if I really need to they are only 20 minutes away to check on things. Plus my market is hotter than St. Louis.
I couldn’t fly to St. Louis to really check on things myself so you are totally at the mercy of the property managers.
There seem to be a lot of people doing turnkey though and I am only one data point but I would concentrate in my own town first. Also the property manager takes a significant amount of profit.


#11

I looked into Memphis Invest as it seemed like a very trustworthy and highly recommended company. Ultimately, I went a different route because the return on the properties just didn’t seem as great as others I looked into. Plus, I wasn’t too sure of some of the neighborhoods they were investing in.
Just in case you’re interested, I used Kansas City Investment Real Estate, run by William Robison. I wrote a few blog posts about my experience if you’re interested.


#12

Has anyone used RealtyShares?


#14

I’ve not used RealtyShares, but my understanding is that they do more real estate syndication. Which not only involves acquiring, fixing up and managing the property, it also allows investors to pool funds to buy properties. This lowers risk for each investor.


#15

Hi, I’ve bought 2 houses from MI. I’m very pleased with the renovations and their customer service. Overall the returns are not out of this world but the properties I bought have met my criteria. In the end you have to do your due diligence as they will send you properties that have really low numbers. They also provide your with an aggressive pro forma; however, I use my own spreadsheet to estimate more conservative/realistic numbers before I commit to the house they are proposing. The one thing I will say is that appraisal is always the wild card. The first property came $2000 below purchase price and the second one almost $5000. This was not an ideal situation but still my numbers were decent. Tenants were placed prior to closing with 2 year leases with rent increase in year 2 which was good. As for the future, not sure If I will go for a 3rd property just yet as I’m looking at other markets and partnering with a friend of mine to see if we can implement more of a DIY approach. We will see.


#16

@NatPhorU how are your MI investments going? Did you purchase anymore? I’ve been in contact with them, and have had questions about their ROI. Glad I saw your post and hope we can chat about it.


#17

We recently put up a blog about this:

Turnkey investing can be profitable, but you have to do a lot of due diligence to make sure you are getting a good deal. The incentives aren’t really in the investor’s favor because the turnkey company makes money from selling the property to you, whether it cashflows or not. I would spend 90% weeding out bad companies. Once I found one I trusted, I would run a lot of comps on their properties


#18

Thanks! I appreciate you taking the time to send this to me. Memphis Invest is suppose to be one of the industry leaders, but I hesitate to purchase something from them when they paid $90k, then rehabbed for 50k and are selling for $170k. The markup in price seems a bit too crazy for me. I also plan to have a broker/ real estate agent and CFP take a look and give me their thoughts since they have no skin in the game, as mentioned in this article. It just seems like people are getting screwed and don’t realize it…I hope to be proven wrong by a Memphis Invest. Will know soon.