Turn-key rentals in hot rental markets?

[apax999]

Has anyone here ever bought a "turn key" rental property from a turn key company? There are a few big ones like memphisinvest.com and noradarealestate.com that sell rehabbed homes with a 2 year tenant rental in place. They claim to promise anywhere from 10-20% cash on cash returns and appear to have decent followings in the REI community about them.

The caveat with turn key properties is that they are generally regarded as overpriced, and the investor is "paying for convenience" up-front. Turn key's are targeted to people like me, who live in NY, where property taxes make single family home investing very difficult.

I've personally been speaking with Memphis Invest a bit over the past few months, just haven't had a chance to to do all my proper due diligence. They supposedly rehab and rent out 20-40 properties per month and currently manage close to 2000 properties under their property management umbrella.

I attached the file sheet for one of their properties to show you how they advertise the numbers. Was just wondering what some of you REI guys think about turn key rentals.



-apax

 

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[Steve37]

If the returns they provide fit within your investment criteria then you might as well give it a shot. Memphis Invest has a pretty good reputation for being transparent and not grossly overstating potential returns.

I've never purchased from a turnkey operation, but a few years back a partner and I bought a few houses from a builder who was going under and immediately turned them over to a property management company. Neither of us has ever seen these houses but they continue to pay off each month with some healthy appreciation included as well. The key is to have a solid property manager and it appears Memphis Invest does a pretty good job of that.

 

[CashFlowDepot]

be careful about investing in Memphis. The crime rate is high

http://www.neighborhoodscout.com/tn/memphis/crime/

and they are losing population.
cannot show you that site because obama took it down for the Gov. shut down ( which was totally not necessary)

you do not want to invest in a place that is losing population.

Dallas Texas would be a much better choice for rentals
population is growing by 100 people a day. big need for rentals and rents are going up up up

 

[hatterasguy]

Sounds like a mess. Your not going to make money with turn key properties the money is in the crappy ones. Also companies like that come and go. They raise a bunch of money, spin a bunch of property around to sound impressive and go bankrupt.

Let me put it this way, if they were getting a 20% return on those rentals they would not be selling them, or at the very least not to joe public. Their are a lot of institutional investors with bottomless pockets who would buy everything they had.

Looking at the numbers I would be a buyer for that house as it sits rented for $900 a month for about $50k-$60k. You want to make money when you by, as well as when you rent.

 

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[JimPellerin]

A real turnkey solution needs to provide ongoing property mannagement with guaranteed rents. I offer my investors a hassle free real estate investment experience. I cover all the monthly costs and guarantee the rents. We split the profit when we sell in 3 years. This usually yields the investor 15% per year.

 

[CashFlowDepot]

Hey Jim

Let's say you got in to the deal in 2005 - at the top of the market. In 3 years, you'd be right in the middle of a terrible housing crash. The house is worth 50% less than when the investor bought it. How do you make your investor whole then?

Right now, we are at the top of the market again. No telling what prices will be like in 3 years but all indications are they will go down.

Rents might be stronger, maybe not if the market is flooded with rentals. So, it is hard to guarantee rents. It is hard to guarantee a profit if you sell.

You should visit with an SEC attorney to make sure your offer does not violate any state or federal SEC regulations.

And you need to have a plan B - just in case their is another housing crash.