So most of my investing lately has been in turkey rental properties. Some people discourage turnkeys because the purchase prices are seemingly higher than what they think you should be able to get a good investment property for, or because the calculated returns aren’t “as high” as if you buy a normal property and rehab it yourself. Well, to briefly counter both of those arguments- if you have the desire to rehab a property yourself, find tenants, and do everything else manually, have at it. But remember your time costs you money. I do turnkeys because I want to be as hands-off as possible. It’s worth the extra money to me to not only have everything done already for me, but also to know that I have a big team behind my purchase and supporters of it, versus doing a property all by myself with little to no support. Then, for returns, most often the property you buy with those high returns will end up with less than stellar tenants who will end up costing you a ton in vacancy, repairs, and possibly evictions. Maybe not, maybe you bought a gem, but just remember the returns you calculate before you buy rarely account for true vacancy and repair expenses. *If you buy that $20,000 property, how good do you think your tenants are going to be?* I prefer the $90-100k houses right now. The cap rates are showing around 8-10% initially, versus 11-14% on the cheaper properties, but believe me…the long term returns balance themselves out. I have properties in both ranges. There are differences. Oh, and none of those numbers quantify my sanity levels either. That’s important.

Now let’s go over market analysis. When you are looking to invest in a particular market, you want a market that is advantageous to an investor. The advantages may come in various forms, but you want a good combination of these advantages. I’m going to give two examples of qualities about a market that make it an investor-advantaged market.

Does the state favor the tenant or the landlord? You want to invest in a state that is considered “landlord-friendly.” What does that mean? It means the owner of the property can easily get rid of a bad tenant. A lot of states are considered “tenant-friendly”, meaning tenants have a lot of rights and the state has a lot of patience for them being delayed on payments (if they are even making them at all). In these states, it take a horrible amount of time to get a bad tenant out. This is not good for an investor. Detroit, for example, one of the biggest investment flops in recent history, can take months to get rid of a bad tenant. I know one guy with a house who had a tenant stop paying, and it took 7 months to get that tenant out. Guess what happens during that 7 months? You aren’t making any money. And not only are you not making any money because the tenant isn’t paying rent, the tenant has a heck of a lot of time to do even more damage to the property while they wait to get kicked out. This investor, after that 7 months of no payments, ended up spending $7,000 to fix damages.

Price-to-rent ratio. Best example of what a good price-to-rent ratio is *not*- Los Angeles. The last townhouse I lived in there cost me $2,250 in rent each month. The owner of the property bought the townhouse for $460,000 (thanks, Zillow). My rent payment to her each month barely covered her mortgage. She had little to no cash flow on a normal month, but what about the months where there were repairs? She was negative cash flow. Price-to-rent ratio means you want to be able to get enough rent for a property to cover all of your expenses, and then some. One of the best price-to-rent markets right now is Atlanta. I grew up in Atlanta and originally bought myself a house for $165,000. I can only get right at $1,000 in rent per month for that house. That covers my mortgage, but not by much. Well I bought that property a few years ago (and when I was still real estate dumb). The first real investment property I bought there, a year ago, I bought for $55,000 (turnkey) and I get $975/month in rent. Holy sh#&! So after all my expenses, including the mortgage and estimates for vacancy and repairs, I pull in about $400-500/month. Now do you see the difference? That’s price-to-rent ratio. It better be good.

So what is the general list of things to look for in a market? Price-to-rent ratio, landlord-friendly state, a trend that strongly suggests population growth, and a variety of industries so that no one industry tank could hurt the market as a whole. That is not a complete list, but it covers the big things.

Furthermore, realize the difference between a macro-market and a micro-market. The macro-market is the overall city you choose. The micro-market is where in that city you choose to invest. Those small areas make a big difference too. My suggestion? Neighborhoods and areas that are predominantly home owners rather than renters. Better exit strategies available, more likely for appreciation, and better tenant quality.

Comments
  • Delanda Lewis
    Reply

    Are you still looking to purchase turnkey properties? What is your feeling about Chicago? I have one under contract now and keep running into turnkey leads.

    • Ali
      Reply

      Are you trying to connect us with turnkeys for sale? That’s not how we work.

  • Lynne Locklin
    Reply

    Hi Ali,

    I am a Las Vegas broker who works with both buyers & sellers all throughout the Southeast, Midwest & Texas. I have 2 larger groups that have asked me for Atlanta turnkey rentals. The sellers I currently work with can’t get me the cap rates these people are looking for. I stumbled upon your blog & think you could be a good source to work with. I would like to see if we can work together. I do need your help.

    Thank you,
    Lynne Locklin

    • Ali
      Reply

      Hi Lynne! Yes, absolutely. Reach out to us on our Contact Page and we can talk more there. As far as Atlanta goes though, the cap rates there aren’t what they used to be, so no major promises on that front, but we can certainly talk to you about what we have.

      • ANGY
        Reply

        Hey Ali,

        Loved your article, do you have referrals on the turnkey providers you used in past? I am trying to buy my first turnkey in Atlanta.

        • Ali
          Reply

          Hi Angy! Yes, we can send you referrals. Reach out on our Contact page or send an email to melissa@hipsterinvestments.com. We’ll hook you up!

  • Aldi
    Reply

    Hi Ali
    Do you have any recommendation (one that you had excellent personal experience with) on any turnkey or property management company?

    On a second note do you also consider new (or relatively in good shape) homes being advertised by realtors to buy and then pass them to property managers?
    Thanks
    Aldi

    • Ali
      Reply

      Hi Aldi, thanks for writing. We can definitely give you recommendations. Feel free to reach out on our Contact form to get that information. As far as advertised properties, we don’t work with those currently, no.

  • Brian
    Reply

    Used to live in Chicago, loved it but am in L.A. now where it’s tough to get started as an investor. I’d love to see your recommendations on turnkey companies in Chicagoland — could you send me an e-mail also? Thanks.

    • Ali
      Reply

      You bet Brian. En route!

  • Ted Wang
    Reply

    Hi Ali,

    I don’t think I’ve received your e-mail yet…just wanted to see if you could send that out to me?

    Thank you!

    • Ali
      Reply

      Hey Ted! EEK, I am so sorry. I thought that was en route to you. Standby for email…

  • Ted
    Reply

    Hi Ali,

    Can you also send me turn-key provider recommendations in Chicago? I’m visiting in late April-early May so would have a chance to check out some places.

    I’d also love to hear your recommendations on providers in other markets.

    Thank you!
    Ted

    • Ali
      Reply

      Hi Ted! You bet. Info getting emailed to you shortly.

  • Sol
    Reply

    Hi Ali,
    I’m interested in buying multi-family property in Chicago. Can you recommend a turn-key provider? What do you think of Chicago?
    Please shoot me an email.
    Thanks.

    • Ali
      Reply

      You bet Sol! Email coming your way.

  • Michael Gunn
    Reply

    Hi Ali,

    I am an investor in Indiana thats offering funding for purchase and rehab of turn key properties for an end buyer. If you know of anyone wanting to purchase properties in this turn key form please get with me as I’d like to discuss with you out possibilities of making this a great year for anyone involved. Thank you for any help you can give to all of us. God bless, Michael

    • Ali
      Reply

      Hi Michael, thanks for reaching out. If you want to send me a couple property samples of what you can offer, email them to ali@hipsterinvestments.com and I’ll take a look. I don’t refer anyone to companies I haven’t had personal experience with though, so I would need to show your stuff to a couple experts to go over as well.

  • Daniel
    Reply

    Great article, thanks! I am very interested in Turn key properties in Atlanta, Memphis or Dallas. I currently own one in Dallas. I live in NY and the numbers just don’t make sense for me in my market.

    It would be great if you can share which turn key company you work with. I know you don’t share publicly based on the previous replies but there are quite a few out there and it’s hard to know who to trust.

    Thanks again

    • Ali
      Reply

      Hey Daniel! I’ll shoot you an email. I don’t put the names out publicly because the turnkey providers usually require me to register, or at least let them know, of anyone I give their names to. They are usually swamped if if I (or anyone) open the flood gates by releasing their names, they are bound to get swarmed with non-serious buyers and they don’t usually have a sales coordinator or someone who can handle that volume. So they leave it to people like me to do some filtering for them 🙂 But I’ll gladly give you names of who I like in those markets, just offline. Email you in a bit.

      Ali

      • kenneth
        Reply

        Ali, I am new in the turn key business. first one coming, Could you send me the best turn-key operators in Atlanta?
        Thanks kenny

        • Ali
          Reply

          Hey Kenny! You bet. Keep an eye on your emails.

  • Michael H.
    Reply

    Hi Ali, from reading your articles, it looks like Atlanta and Phoenix looks like hot markets. Do you have a turn key company that you can refer me? I really like that Chicago duplex you posted.

    I have around 30k and I have a full time job so turn key properties really interest me. Can you share with us the different properties that you are invested in? Maybe how much you got in for and the respective cash flows…etc

    Thanks!

    • Ali
      Reply

      Hi Michael, I used to post my buys on here with the price and returns and all that, but I changed it now to where I just show an available property with all that information. The numbers I got on my properties aren’t really realistic now in the current state of the real estate economy. But I can always show you those breakdowns on current properties.

      Atlanta and Phoenix are actually not the best markets anymore. They were by far the best markets for their time, but Phoenix for sure is done now and Atlanta isn’t far away. I would recommend you to Chicago and Houston right now of everywhere. Those will change for me at some point, but for now that’s where I’m suggesting people go.

  • AJ
    Reply

    Hi Ali, Can you send me the referral for turnkey properties?? Thanks!

  • David
    Reply

    Hi Ali, your opinion on turnkey properties has really opened my eyes. What turnkey companies do you work with the most? I am thinking Atlanta and Texas.
    Thanks,
    David

    • Ali
      Reply

      Hi David, I’ll have to give you the names offline. They aren’t typically open to the public so I don’t usually shout the names out. Feel free to email me though! ali@hipsterinvestments.com and I can get you hooked up.

  • Mel DARWISH
    Reply

    I am landlord for few years now and I always buy properties based on rent /price ratio . Now based on low interest rate 1% Can produce positive cash flow but when the interest rate was higher like 6-7% , 1% ratio did not work.

    I need to know how to get money from the bank to buy more properties . I am stuck , the banks say to me your credit is great 750, but debits/ income ratio is high .
    I have great deals but I need private money or bank money.
    Do you have any ideas? Thanks

    • Ali
      Reply

      Hi Mel. Oh the famous conundrum. I’m in it myself. I do have access to private financing on some properties if you are interested. It is 50% down though. It’s the price you pay for private these days! If you are interested, shoot me an email at ali@hipsterinvestments.com.

  • Angie Menegay
    Reply

    Hi Ali,
    Do you mind sharing which turnkey company you’re working with in Atlanta?
    Thanks,
    Angie

    • Ali
      Reply

      Hi Angie, absolutely I can share my folks. I can’t do it on here however because you really have to get in through the side channels, but I’d be glad to email you about them.

  • Carlos
    Reply

    Hi Ali, thanks for the article. For a given city, how do you go about finding out about trends like population growth, as well as industries? What other trends you look for? Thanks!

    • Ali
      Reply

      Hey Carlos!

      You can Google pretty much anything these days. Just a week ago I typed in a city name and found every statistic you could imagine within the first couple links. There are tons of sites that give historical and statistical data.

      In terms of what I look for, population is definitely the biggest. I look at it over a span of 5, 10, 20, 30 years. The 5-20 year range being my focus. It’s hard to debate consistent population rise or decline. Industries are a good one. Where there are jobs, there will be people. Like Michigan… lost jobs = lost people. Atlanta… growing jobs and industries = more people.

      You can certainly check out crime and schools and all that, but those aren’t as much my focus for the macro markets as they may be for the micro markets, meaning look at population and industry for a big city like Chicago, but look at crime and schools for the small suburbs within the Chicago area.

      Hope that helps!
      Ali

  • Zachary Freeman
    Reply

    I sent you a prior email a few minutes ago but decided to elaborate a little. For investment rental properties I’m currently looking in the cheapest areas of LA and some areas like Ventura county and Palm Desert area. As you mentioned the ROIs aren’t very attractive here. I’m hesitant to invest out of state but have been looking at PHX area Scottsdale specifically due to a partners knowledge of the area. When you say new construction is cheaper, but that has passed. Are you saying that cap rates on existing properties are no longer good? Or just not as high as they used to be?

    Thanks

    Zach

    • Ali
      Reply

      Hey Zach! I’ll email you to chat more. I can’t say for sure because I haven’t done any calculations there (in AZ) lately but I’m tempted to answer with “both”. “Good” is a relative term of course because as long as it’s positive it depends on what a particular person wants to see for a return, but they are for sure not as high as they used to be.

      Atlanta, for example, is following the Phoenix trend now. About 4 months ago, and even more so about 6-8 months ago, I had one seller that every property he sold gave the investor about a 10-11% cap rate and were well over the 1% rule, meaning the monthly rents were at least 1% of the purchase price. Now, it’s rare that you can get over about a 6-7% cap rate and the majority are far from meeting the 1% rule. Still great deals, especially with the quality of his, but it’s definitely a different ballgame. Very soon Atlanta will be just like Phoenix- new construction is cheaper.

  • Mario Alexandrou
    Reply

    Hi Ali, wanted to say, you have some great information here. Lived in US for about 8 years and have resently sold some property overseas and am interested in investing the same here in the US. I am able to get credit from banks, so the idea of getting multiple and turnkey properties sounds great. Would appreciate talking to you about this. Thanks again for all this information.

    • Ali
      Reply

      Awesome, Mario! I’d love to talk to you. I can definitely get you the best of the best when it comes to the turnkeys. I’ll shoot you an email! Talk soon. -Ali

      • Ben
        Reply

        Greetings Ali,

        Loved your article on bigpockets regarding turnkey investment properties. Would love to get some advice and recommendations on reputable turnkey providers in the houston area. Email me if you can. Thanks!

        • Ali
          Reply

          Sure thing Ben!

  • John K Conway
    Reply

    Ali,

    Great website! I saw your article on Bigger Pockets and would love to hear more about your experience with beachfront property in Nicaragua.

    All the best,

    John K Conway

    • Ali
      Reply

      Hey John! You bet, I’ll shoot you an email!

  • Wayne
    Reply

    Ali, I am an expat living in Denver past two years. I have approx. 80K to put down on investment properties and I am keen to get maximum amount of return and buy into properties in next 6-8 weeks. I can borrow up to 320k with my 80k down. I would like to see similar style of turnkeys that you are finding. can you assist.

    • Ali
      Reply

      Wayne, sounds great! I’ll shoot you an email.

    • cal
      Reply

      Wayne or Ali,
      I write this with great optimism. My funds are the same but my siituation is a little different. (Gainfully employed and not an expat, yet.) Please contact me and let me know about the deals you have done together.
      Thanks , Cal

      • Ali
        Reply

        Hi Cal, thanks for contacting. I have used investor partners in the pass and done cash vs risk cash flow splits. Not sure if I can give you solve-all advice, but definitely having an investor partner helps!

  • Kevin
    Reply

    I saw on BP that you had resort or beachfront properties out of country and with rental and turnkey properties such as these what are the additional fees associated? I am new to the game and very young and I am doing much like you have to start in gathering as much information as possible before jumping “in” to the market. Thanks love the posts

    Kevin

    • Ali
      Reply

      Hey Kevin, thanks for writing!

      I’d love to talk to you anytime about the properties I’m involved with. Even better, there are no fees associated. I’ll shoot you an email and talk in more detail.

      Ali

      • Roger
        Reply

        hey i was interested in being a landlord, i would like to invest somewhat small first and i would do a turn key to start out i have been looking at a few places but would like some advice thanks 🙂

        • Ali
          Reply

          Thanks for reaching out Roger. I can try to help, but being a landlord and dealing with turnkeys don’t go hand-in-hand unless you are wanting to buy just a rehabbed property and somehow buy one locally so you can landlord it.

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