Old people do the silliest things.
Yes, maybe it once made sense to wear a suit everyday, but that’s not how it works anymore.
No, you don’t have to wait for the Sears catalog to get Christmas present ideas. That’s what top 10 lists on the internet are for.
The things oldies do are funny because they don’t match the times. Years of change happens, but at some point they quit adjusting their approach.
When it comes to purchasing a turnkey rental property in 2017, you are going to need to adjust your approach as well.
How it Worked for My First Two Properties
I purchased turnkey rental properties in both 2011 and 2014.
Turnkey means I go through a company who flips properties specifically to be rentals for investors.
In 2011 no investors were buying. It was an excellent time to learn how everything worked because people were more willing to work with a newb like me. They actually took the time to talk to me, in an effort to generate some sales.
Even in 2014 it was typical for the turnkey companies to finish the rehab before lining up the investor to sell it to. This let you see the final product. I could browse properties on Jason Hartman’s investor network website to see great options from multiple turnkey providers in the city.
But that’s not how it works in 2017!
My New Process
Properties are moving fast.
I have noticed that the turnkey providers are less willing to jump on the phone to discuss their operation. Yes, it is still possible, but you have to be the one following up – they aren’t struggling for sales.
Some of the deals still make it to the point of getting emailed out to multiple investors or posted to an investor network like Jason Hartman or Norada.
But you’ll really have to act fast if you want the deal. It might be scooped up within an hour, so you have to decide quickly if you are in:
It’s best to not compete with the masses. How can you avoid it?
Move up in the process.
The turnkey providers are flippers. It might take 2 months for them to purchase a property, fix it up, and sell it to someone else – or even less time in a highly desirable area – I hear that puerto rico turnkey properties are becoming increasingly popular. I want to know about the properties before everyone else.
This requires establishing a relationship with the provider and frequently checking in to see what is in the pipeline.
It’s a little more work and you have to call dibs before the rehab is finished. This requires putting up earnest money, but you still have the opportunity to back out if your research uncovers anything unexpected.
But that’s what it takes in 2017. Even though it is competitive, the numbers still work. You can still hit the 1% ratio on a quality rehabbed rental.
How Have You Adjusted?
Has your strategy adjusted in 2017?
How about how you operate your strategy?
Any tricks or tips you can share on how to move up in the process?
Hi Brian,
Your article is very accurate and reflects our experience in KC. It’s important to build a relationship with the turnkey provider, be honest and don’t waste their time, show you are a serious buyer. I believe it’s important to visit the provider, check out their operation and rehab standards plus this gives them an opportunity to meet you and more importantly remember you when you’re ready to purchase. Ultimately you are correct… you need to be in the position to buy what’s in their pipeline pre rehab and in order to do this you need to be comfortable with their level of rehab by seeing it with your own eyes. Good luck with your next purchase 🙂
PS – Are you planning on attending the next Bay Area Real Estate Summit in October?
That’s a great tip on going out to meet the turnkey provider. I haven’t done that, as some of my vetting is by going through Jason Hartman’s company.
No, I won’t be at the Real Estate Summit. I guess I’m just not THAT into it. Also with the amount of money I’m investing now, I don’t really need all the next level type of info. Focus for now, worry about that other stuff later.
This is good stuff. I was just looking at Jason Hartman’s website and the deals in Jacksonville. I’m partial to the location as it could be a future retirement location for us. The combination of weather, taxes, and military bases could be a good draw.
There was so much information on one particular property I was looking at. I felt like I had a lot to learn to even understand 20% of it. We don’t have a lot of liquid cash to invest at this time, so it’s no big deal.
I’d love to read a blog post dissecting a random property on the site and what you look for when it comes to an investing opportunity.
That is a great idea! Those numbers can be pretty intimidating at first, but in reality most of them aren’t even that important. There are just a few key ones to look at.
I’ll do that post soon!
I’ve noticed this too. The provider I worked with in KC used to have a spreadsheet of prospective properties. I asked him about an updated list and he said it’s too competitive now and that I’ll have to tell him my criteria and he’ll keep an eye out for it. I was also looking at a house hack/partnership with a family member in upstate NY and it’s crazy hot there as well. All the multifamily houses go on the market, have an open house, and set a deadline for bids the following day.
That’s great he told you that at least! I am under the impression most people aren’t saying it to investors, but the ones who figure it out get the deals first.
One day deadline for bids is crazy! What could it hurt extending it to 3 days? It’s not like people aren’t going to bid because it is too long…
I just got rid of my final, so-called “turnkey” rental, in Memphis. Total nightmare. I bought a total of three in 2009. Middle class and upper middle class black neighborhoods. In almost 10 years I had a 50% eviction rate. Used four different property managers.
In retrospect, I overpaid, like most out of state investors. That was my first mistake.
Second mistake was to invest in minority neighborhoods where you either settle for marginal (or worse) tenants who don’t pay, or you end up with properties that sit vacant as you try to find a halfway qualified tenant. In the meantime, the property is vandalized. This last rental had it’s AC condenser stolen which is very common in Memphis.
Oh no, that is sad to hear! Do you have any insight into where / price? I’d love to check it out if you are comfortable sharing the address. Would definitely like to learn from your situation, thanks for sharing.
My other Memphis property’s AC unit actually has a cage around it, which is pretty common for these neighborhoods.
Are your other rentals working out better?