PODCAST EDUCATION

How to Find a Good Turnkey Provider

Episode 008

John Larson and the Real Estate Cowboys talk passive income real estate investing.

Hear new episodes every Sunday morning at 8 a.m. The Cowboys talk the good, the bad, and the ugly of choosing a turnkey investment provider.

Keep the #CowboyCoffee hot while listening to John, and the Cowboys talk about how to #BeACowboy and earn passive income in real estate.

Episode Transcript

Announcer: Have you thought about becoming financially free through real estate investing, but don’t have the time or knowledge to get started? Welcome to the Real Estate Cowboys podcast. Each week we discuss passive income investment opportunities in the red-hot Texas market. John Larson and the Real Estate Cowboys will show you how to leverage their team to build wealth in real estate through passive investment opportunities. And now, here’s John.  

John Larson: Hello everyone, and welcome to another episode of Real Estate Cowboys Radio Show. This is your host, John Larson. This week we’re going to be talking about turnkey providers. How to find a good turnkey provider. So turnkey providers are great if you are an investor that you just don’t have the time or don’t have the knowledge or don’t live in the market that you want to invest in.  A good turnkey provider is a great way to leverage someone else’s system, someone else’s knowledge, someone else’s process to get you involved in building wealth through real estate, and building a rental portfolio. Um, I myself am the owner of a turnkey company called American Real Estate Investments. I’m sure most of you who are listening know that. But you know, the thing about being a turnkey provider and looking for a turnkey provider, it seems like they’re a dime a dozen. It seems like there’s a group of turnkey providers, multiple turnkey providers in almost every major market across the US.  

So how do you know you’re working with the right group? That’s what we’re going to talk about today. It’s very, very tough to find a group that you can actually really trust and rely on. Um, you know, like I said, to become a quote-unquote turnkey provider, really all you got to do is have some working capital, some relationships with some lenders who can help you acquire properties in your own backyard.  And you know, you do a renovation to the home and many turnkey providers will just hand the property off once it’s rent ready to a third party management company to do the management. Pretty much wipe their hands clean of the situation. And just then at that point it’s up to the management company to ensure that the investment performs for the investor. I myself have a different philosophy about that, and many other, a large turnkey providers across the country also had a different view on that, and they pretty much cover everything from beginning to end. So they do acquire the property, they do the renovation, um, but then they also have an in-house management solution and a customer support team so they can continuously watch that investment for their investors and make sure that everything’s performing top notch. And I believe that that is what you really need to look for, number one, in a good turnkey provider and someone that you can trust and make sure that you know, this out of state portfolio that you’re building, it’s going to run smoothly. And so the reason I wanted to talk about this subject. I was in Detroit a couple of weeks ago with Real Wealth Network and we held a mastermind group where all of their turnkey providers that they work with, that Real Wealth Network works with.  

We were all in Detroit for an event and started off that weekend with a mastermind. And so there were turnkey providers from Houston and Jacksonville and Cleveland and Cincinnati and I believe Pittsburgh, so there were a lot of different turnkey providers from all over the country, so it was good to kinda hear what they’re doing. And then also it gives them information on what we do at American Real Estate Investments. And I’ve found that there was definitely some differences in our companies. I definitely think that everybody that was there was  a credible person and owns an incredible company and, and is trying to do the right thing for the investor. So can’t say anything about that. Um, what I will say is that there were some differences in the way that we run our businesses. And not to say that one is right or one is wrong, but there was definitely some differences.  

And so, you know, I decided to do this show and just kinda talk to my audience about what you should look for in a good turnkey provider. And I think the number one thing is identifying the market that you want to invest in. And then searching out a turnkey provider from there. I don’t know if it’s really smart to just pick a turnkey provider and say I want to work with this turnkey provider no matter what market they’re in. I think number one, you need to do a little analysis yourself on what market is going to be best for your goals and what you’re looking to get out of an investment. And so I wouldn’t go to a turnkey provider just because they have a good reputation in the business and just follow them into the market that they tell you to invest in.  

I think that you should do your own due diligence and even fly out to some of these markets. Maybe meet the turnkey provider in person. I think that that’s very beneficial, but I definitely recommend, you know, doing your own due diligence and doing your own research on all these markets and discovering what you want to do, what do you want to get out of this investment? And so people who follow me and my company and the Real Estate Cowboys, you know, that I mainly focus on A class properties, I mainly focused on A class growing markets because I believe that’s where I can set my investors up for the most success, and really mitigate the common risks that are involved with real estate investing, and real estate investing passively and leveraging a turnkey provider to put together the investment for you and manage it for you.  

And so I guess as an investor from California or New York or New Jersey or Phoenix, Denver, Atlanta, many of these other markets that are experiencing rapid growth to where it’s becoming very tough to get your hands on good investment opportunities in your own backyard because prices are inflating due to the demand for property and a low supply. You’re also seeing interest rates that are creeping up. It’s just compressing the cap rates that we’re accustomed to, or that we’re accustomed to over the past five to 10 years coming out of the recession. Those cap rates just aren’t there anymore. But you as the investor, you need to kind of focus on, what am I looking for out of this investment? Do I want something that’s very safe and stable and very headache free? Well, if that’s what you’re looking for, I recommend, like I said, and talked about on other episodes, you know, making sure that you’re focusing on A class markets, growing markets, markets that are experiencing a high amount of population growth, and then also making sure that you’re buying very close to whatever the median value is in that market.  

Uh, because as I’ve said before, if you deviate too far below that median value, you’re gonna get yourself into trouble. That’s where the risks are going to greatly increase. And I really don’t care how great the management company says they are. The fact of the matter is, when you’re buying in a more distressed neighborhoods and you’re dealing with lower income earning tenants and things like that, you’re definitely going to be focused in an area that has very high crime, and you know, the chances for things to go wrong or vandalism or break-ins or evictions definitely goes up. So if you are the investor that’s looking for maybe riding the appreciation wave that some of the markets that we have in America are experiencing, then I definitely would focus on an A class growing market in the area that’s receiving a lot of population growth. If you’re just really more concerned with cash flow supplementing income, maybe you don’t have as much working capital to work with, well, then maybe you’d want to focus on some areas in the Midwest or in Memphis or you know, Arkansas. Some of these areas that have very low, low priced properties. I myself even invest in St Louis and Kansas City and have invested in Detroit before. I haven’t been actively buying properties in Detroit of late, but I still have properties in St Louis and Kansas City in my portfolio. Those markets are ones where you can get properties below 200 K. But on the flip side, if you’re looking into Dallas or Houston market, if you want to be in an A class property and an A class neighborhood, you’re going to be more so above the 200K price point. So I think you have to decide as an investor how much capital am I looking to invest, but also be very cautious about what you invest in because just because a spreadsheet, an Excel document tells you that you’re going to get this high rate of return and it’s very little money out of pocket, it does not mean that those numbers are actual. All the stars need to align for you to see those returns. And so on a macro level, you definitely want to look at the market. Is this market receiving new people year over year or are people moving out year over year? Um, you know, what are the economic drivers in these markets? How diverse is the economy? Does the economy really just kind of hinge on one type of industry? Like Detroit, for example, is very reliant on the automotive industry and the Midwest itself is very reliant on manufacturing. Um, so when we’re not building stuff or we’re in a down economic time, it seems like the Midwest tends to be the first and it really gets depressed. So you’ve definitely got to look at that. And then on a micro level, I definitely recommend if you have the time to go out and visit these markets and meet the turnkey provider that you’re thinking about working with in person, tour the properties, actually get into the neighborhoods, drive down the streets, get into some of the homes. And, and I think if you’re an educated investor or even a new investor, you should be able to get a good feeling about the area in the market and the neighborhood just by visiting it and also by the provider and the type of renovation quality that they’re putting into the investment. So I think that’s very, very important. I think when you’re looking for a turnkey provider, you also want to look at the price points, right? Like we just mentioned. Um, I wouldn’t want to be a slumlord. I started in this business, as I said, producing C and D class assets coming out of the recession, buying properties in and around the city of Detroit for a very, very low price, um, and just ran into a lot of issues with that.  

But at the time, I didn’t have a lot of money to work with and I think that’s why you see a lot of turnkey providers in the country focusing on more of like a C asset. It’s just because, you know, the numbers look good on paper and it might be easier for them to sell the properties because the numbers look so good on paper, and because it’s a lower acquisition price for the investor. So not every investor has 40, 50, 60K or more to put to down on an investment property. Or they’re trying to spread that $60,000 that they may have over multiple properties, and I wouldn’t say it’s a bad strategy, but they just also need to understand the type of risks that they’re going into. Um, you know, risk for evictions and risk, for turnover and risk for damage to the home and risks for crime in the neighborhood and break-ins and all that’s just going to go up. And so you just need to understand that those risks are going to be there. And it doesn’t matter how good the property manager is. Like I said, you’re gonna run into some issues. It just is bound to happen. And so, uh, you know, I myself, in the position that I’m in, in my life, in the company I run, capital is really not an issue. I will say that debt service is one of my biggest expenses in my company because I purchased higher priced assets even on the acquisition side. And so my money out of pocket is higher and my holding costs are higher because I’m buying more expensive homes, but I do that because I’m really trying to set my investors up for success. And I’ve found in my career that the best way to really set my investor up for success is to really focus on those true middle class neighborhoods and not deviate too far below the median value in the markets I’m investing in.  

And so definitely price points is something you want to look at. And from there, you want to look at the renovation quality, and I think photos are great, don’t get me wrong, but there’s photographers out there that are really, really skilled at what they do, and they can really doctor up the photos and make these renovations look a lot better than they actually do in person. Um, and so I really recommend going out and visiting your turnkey provider that you’re thinking about working with, just so you can actually see their renovation quality firsthand. I think it’s very important to get into a property they just acquired. And then get into a property that is under rehab currently and then get into a property that’s completely finished, ready to go to the property manager. I think it was very important to meet the property management team as well.  

And we talked about what to look for in a good property managers a couple of weeks ago. So if you want to listen to that episode again and just put together a list of questions and keep your eye out for things to look for on the property. Management side that will save you a lot of heartache in the future. You know, I’ve said this time and time again that we can produce the best property possible, we could have the best management solution possible, but if the wrong team is looking after your asset, outside of your own backyard, things can definitely go wrong. And I experienced that, as I’ve said before, in my St. Louis market, trusting a large national company to manage my assets and my customers’ assets, and things didn’t work out so well. And we kind of had to use them as a buffer to get my brokerage set up in Missouri, so we could actually manage all of our properties in Missouri- to now we manage all of our homes in all of our markets in-house, which is a beautiful thing. And it’s really turned into a much better experience for us as a company and also our clients.  

We have better relationships with our clients; our clients are seeing better returns, our clients are having a more passive experience. And that’s because we do everything in-house. I’ve made the mistake too many times of passing off properties to a third party company and trusting what they said and trusting that they would deliver on what they promised and it just didn’t work out that way. I just don’t feel like the customer service level was kept consistent from what my customers were experiencing on the front end, dealing with my investment coordinators to identify a property, dealing with my transaction coordinators to carry them through the closing process. It seemed like once they went to a third party management company, just the customer services fell off the end of a cliff.  

And so, as I’m saying, renovation quality, very important. It’s very important for your long-term strategy. You want to make sure that you’re getting quality rehabs. You want to make sure that you’re investing in homes that are gonna be very desirable for tenants, now and in the near future. You also want to make sure that the turnkey providers doing a very solid, durable renovation as well. You don’t want to buy a house with a bad roof that’s going to need to be replaced a year or two. You don’t want to buy a house with a very old furnace or very old air conditioning units. You know, those things are very costly. You want to make sure that things like the foundation and driveways are in good working condition, because those are very, very costly, expensive. And so it’s very important that the turnkey provider not only provide you with a property that’s cosmetically appealing, but it’s also very, very important that they are handing off a durable property too.  

So I definitely recommend that you request an inspection and get into these properties and hire a home inspector to get in and show you exactly what type of renovation this has gone through, and give you a good understanding of what you are purchasing. And don’t get me wrong, some of the things that will pop up on an inspection report are sort of frivolous. You know, it’s the inspector’s job to find things wrong. And as long as the home is in safe working condition, it’s visually appealing, you yourself can see, okay, I can see all the tenants that would want to move into this house. But then also make sure that you know, if there’s not new furnaces, new air conditioning units, new hot water tanks, new roofs, make sure that there’s, at least you know, that these things are only into one-third of their useful life.  

So you have two thirds of their useful life left and with roofs, an average life on a roof, I mean it’s going to probably be about 25 years, so I wouldn’t really buy anything that doesn’t have, you know, at least 12 to 15 years left on it, probably better served at that point. Same thing goes for a furnace and hot water tank. You might get 12 years, 15 years out of that. So I’m looking at for at least 50 percent of life left on a hot water tank, and depending on where the property is located on the air conditioning unit, and you could get an AC unit to last a lot longer in a market like Detroit because you’re only dealing with three or four months of summer. Whereas an air conditioning unit in Texas might not last as long because it’s going to be 100 degrees for four months in a row. And so people are going to run those air conditioning units pretty hard. So you’re going to invest in a state in the south, an American market in the south. Definitely be wary and be sure of the amount of life left on that unit because those things can break down pretty pretty frequently.  

Alright, let’s take a break really quick. I’m going to come back with some more things to look for in a good turnkey provider, so I’ll look forward to the second part of the show. Stick around.    

John Larson back with the Real Estate Cowboys talking about what to look for in a good turnkey provider. So we talked a little bit about the market itself. We talked about the macro level, looking at the micro level, looking at a market. We talked about price points and and being weary of buying properties well below the median value in any market. And we talked about renovation quality as well, making sure you’re buying a property that’s visually appealing, so you know, you’ll be able to easily rent the property out to a tenant and hopefully keep them long term, but that also makes sure that you’re getting a very durable investment property as well. Something that’s going to have very low capital expenditures for ownership and capital expenditures are basically going to be things that, you know, you’re going to have to replace roofs, furnaces, air conditioning units, hot water tanks, uh, things that break down over time.  

You also know obviously that after a few years, three to five years, you’re going to have to probably replace things like carpet or maybe flooring. Um, you know, cabinets will eventually get dated. You may be updating that stuff, but you want to make sure that kind of stuff is updated early on in ownership right when you first purchase the property so you know, you’re not going to have to really revamp this property at least for the first five years. That’s what we’re looking for. So no major expenses, no major repairs within the first five years. And then also not a situation where your  kitchen or bathroom becomes super outdated in the next five years and you have a tough time renting out the property at fair market value for the neighborhood. And it’s always my goal really. I deliver, I believe, a very good product that’s fully renovated, fully cosmetically overhauled to make sure that I’m even able to charge slightly above market right in the neighborhoods that I’m at because the house looks so good, it looks so clean, so updated that the tenant really doesn’t have an issue paying a little bit above market value to get into that property.  

And so going from renovation quality, I want to talk about warranties. So I believe if you’re looking for a good turnkey provider, they should offer some sort of warranty on either a rental warranty or both. actually. A rental warranty and/or a maintenance warranty. And I think any turnkey provider who’s producing good properties should have no issue warranting those properties for a certain amount of time. Talking about the guys at Real Wealth Network and the other providers. There were some that were doing year-long warranties and we all kind of decided that that was too long. Um, what we do at American Real Estate Investments and what a lot of other companies have followed suit. We provide a 90 day warranty and that 90 day warranty starts right when you close on the home. Now let’s say you buy a property from me and it doesn’t have a tenant in there already.  

Well, the warranty still starts from the time that the property is purchased by you, the investor. But when we place a tenant, I still give you an additional 90 days after that tenant is placed, because what I found being a real estate investor and producing thousands of properties, although the home may pass a third party inspection or looks visually appealing like, “Oh wow, what a great rehab.” You know, until you get a live person or a family living in this house and using the electricity, plugging in all their electronics, taking showers, taking baths, you know, using the sink every day; until you actually have live people living in the house using everything, everyday unforeseen things could arise that even in inspector might miss. So me and my company, what we like to do is we like to provide that 90-day warranty after the tenant is placed.  

So if anything unforeseen that inspector wouldn’t have been able to find in his initial inspection; that stuff pops up, it usually will pop up in that first 90 days. We’re going to go in and clean that up for you no charge. And I do that because I understand that, you know, investors out there that, this is your money, you know, you’re really putting a lot of trust into a company like mine and other turnkey providers out there. So you want to make sure that you’re getting a certain level of quality. I understand that completely. And you also want to make sure that, you know, hey, if I’m going to go and trust these guys, and a lot of times these investors haven’t even seen these houses in person, um, I always recommend that they do. But you know, a lot of people are busy.  

They just want to get their money working for them. They want to get their money working in a market that makes more sense in the market that they’re currently living in. And so I get it. They’re excited to move forward and get investing. But, you know, that’s how I’m able to set their mind at ease. Okay, we have this warranty in place and then another warranty that we do, um, you know, there’s a lot of times where in most cases my investors purchased homes when they’re unrenovated. They’re still going through the renovation process. Now we lock those properties under contract with a purchasing agreement and in an earnest money deposit that sits at the title company in escrow and they basically wait for the property to be completed, get the finished photos, get past the inspection report, and then, you know, at that point I’ve delivered a turnkey asset.  

So we have to proceed to close a lot of times, the lenders waiting on us and you know, I also have debt service on these properties, so I’m looking to get them off my books as soon as possible. So there may be an instance where I sell a property to an investor that is not occupied yet. It’s unoccupied, but it’s completed, and it’s on the market for a time. So what we do in that case is we give a 45 day grace period for my leasing team of property management to get this property leased. If for whatever reason within 45 days I’m not able to attract a highly qualified tenant. Um, then what we’re going to do in American Real Estate is we’re going to start paying your rent for you. And so I think that that’s a really great incentive for an investor.  

I think good investors to understand, okay, we can’t wait till we get a tenant to close on the property. It’s done. We have to move forward closing, the lenders waiting. You know, a lot of times there’s a rate lock that could be expiring, so we have to move towards closing. We have to close on the property. But I think my investors feel comfortable because they know, okay, well even if within 45 days I don’t get a qualified tenant in this home, American Real Estate Investments is putting their money where their mouth is, and they’ll start paying the rent for me until we get a qualified tenant in place. And so, you know, I think when you’re looking for other turnkey providers to work with across the country, if they don’t have any sort of rent warranty, if they don’t have any sort of maintenance warranty in place, you know, I will be a little bit cautious about that.  

Um, I get it. I know a lot of other turnkey providers have the mindset that, hey, look, there’s a lot of value in what I do. And there really is. You know, finding good quality properties in good markets is a challenge itself. Renovating these homes professionally is a challenge in itself. Managing the crews, making sure you’re getting the most out of your crews, making sure that the crews aren’t, you know, getting one up on you and, or cutting corners or charging too much. That itself is a job, you know, that we have to designate an employee to watch these contractors everyday day in and day out to ensure that our investors are going to get a very quality property. And you know, so there’s a lot that goes into it. And I think that, you know, there’s a lot of turnkey providers out there that just feel like, “Hey, the money that I’m making on these homes, it really stops there.  I’m providing this client a fully turnkey asset that’s ready for a tenant. But I’m not going to manage it. I’m not gonna provide any warranties and I’m not going to provide, you know, any sort of extra care to the client.” I mean that’s fine. And there’s some people that get through with that kind of business model. But I believe to be fully turnkey, you know, there should be some sort of warranties in place to make the client feel comfortable moving forward and understand that they’re not going to get, you know, they’re not gonna buy that asset or a lemon. You know,  I’m very cautious. I’m and investor myself. So I feel like if I’m going to work with a turnkey provider, somebody else in the country, I’m going to want these things, you know, or otherwise I’m going to feel very cautious or very nervous about moving forward with a company like that. That’s not willing to put their money where their mouth is. So I feel like we have some really solid warranties in place to make our customers feel comfortable and make our customers want to come back and invest with us again. And so yeah, I would definitely pay attention to any sort of warranties that are in place. And if a company’s not offering warranties, I’d be a little bit skeptical, you know, that would make me really want to fly out and meet them and see the type of work that they’re doing. I would not buy something from someone who’s not willing to put a warranty on it without going to see it myself, that’s for sure.  

From there is, the in-house management solution, and I think that that’s one of the most important things with this entire process.  I believe that to work with a truly solid turnkey provider they need to have in-house management. I really do. I know there’s some companies out there that have gotten by with third-party management company and my company, myself, we actually did that for a long time. We didn’t open our management company until 2016 and I’m so glad that we did because our customer experience has improved greatly because of it and I’ve seen more and more VP business, more and more clients come back to us, invest with us again because we’re still able to stay in contact with them. You know, if something goes wrong with one of their properties, since we’re managing in-house, we’re aware of it when we can quickly come to the table and help them fix the issue because what I’ve learned in this industry as well, these properties grow tails and if you don’t clip that problem, clip that tail off quickly. It will just continue to grow and grow and grow to really get to a point where it’s just, you know, you’re thinking so much money into this investment. You’re sitting here thinking, why did I do this? And so management, like I said, it very, very much is a very important process and very important factor in the whole turnkey experience.  

So in-house management is definitely something that you want to look for in a good turnkey provider. Um, from there, uh, I think this kind of goes hand in hand is what is the follow up look like? How does the provider stay in contact with you? I think that’s a very good question to ask any turnkey provider, you know, what is your follow up process look like? How often am I going to hear from you? Are we only going to hear from you if something’s going wrong? If everything’s going right, am I just going to be collecting checks? Me, if I’m going to be, and I still have investments outside of Texas where I live now. Um, you know, my properties in Detroit, I had my friends and family looking after them, so I feel pretty good about those homes and really they only reach out to me if anything’s going wrong, but I think a good turnkey provider needs to reach out with their customers at least every 90 days even if things are running right, just to kind of do a portfolio overview.  

And so we do that here at American Real Estate Investments. Your property manager is always available to reach out to. You also have an online portal where you can track your statements and things like that, and I think any good turnkey provider should also have some sort of online system that you can log into and track statements, print off year-end statements for your CPA.  So any good property management company should have that as well, which we talked about that in our property management episode. But I believe that that’s a very, very important thing, is customer follow up, customer contact, staying in touch with your clients. Like I said, even if things are running right, it’s still good to hear from the team that you’ve trusted your money with that, okay, they’re gonna follow up with me and just kinda let me know, hey, things look like they’re running pretty good on our end.  

It’s just continuing to build that rapport with our clients and that’s what I believe keeps our clients coming back and wanting to invest again. So definitely find out what their followup procedure is; once a month is good. I think there are some companies out there, some of our competitors that follow up once a month, and I think that that’s great if that’s what the client’s looking for; a monthly phone call or a monthly email. But yes, I believe that what we do, in my own personal philosophy, we follow up every 90 days and that would be your investment coordinator that will follow up with you who’s on the American Real Estate Investment side that’s just trying to track your progress and try to track, you know, what your experience has been like, and that’s how we’re always changing our company and making it better. Just going back to our clients and getting feedback from them; things that they liked, things that they don’t like, so we can continue to mold the company into a really, really solid turnkey solution for our investors. Another thing that I would kind of pay attention to is ratings. I definitely think it’s good to Google the provider. You know, do a little research, uh see, are they on the Better Business Bureau?  Look for comments, for reviews online, maybe look at Bigger Pockets and see if there’s anybody that’s had an experience working with some of these companies. Now I know that, you know, Bigger Pockets and blog forums can kind of be like Yelp and you know, not everybody’s going to have a great experience, right? So usually you only have people that talk about their bad experience, not their good experience online. So I’ll take some of this stuff with a grain of salt, but if you’re seeing a lot of bad reviews and the reviews are consistent, then that should be a red flag. If they’re not on the Better Business Bureau, that should be a red flag, you know, any reputable company should be on the Better Business Bureau and should have a good rating.  

And so when we come back, we’re going to talk a little bit more about how to locate a good provider and what’s provided. In the meantime, listen to the show, you want to go to RealEstateCowboysDFW.com. We have a lot of great things on that a website you can go to. We have my passive income guide that’s coming out very shortly. You’ll be able to download that from RealEstateCowboysDFW.com,  we also have our investor quiz our 10 question quiz that will tell you what type of investor you are, what type of passive income investor you are. There’s a lot of different passive income options out there and there’s three that I focus on, primarily single-family rentals, private money lending, and also vacation rentals in Belize so you can take that quiz and find out exactly what type of investor you are. So that’s a cool thing to do. You can also download the Passive Income Starter Kit, which is basically information on the options that I just talked to you about, and that will also get you on our list to receive weekly updates on passive real estate opportunities that we have available to you investors out there and we’re ready to take action. I definitely recommend you get on the website and fill in your information and get on the weekly update for passive income opportunities that we have, and you can do that right now at RealEstateCowboysDFW.com. 

Welcome back to the Real Estate Cowboys Radio Show. We’re talking about what to look for in a turnkey provider, and so we mentioned quite a few things. And this whole topic came about because I was in Detroit and we had all the providers nationwide in a room together. It was a mastermind event that we did and so I got to hear a lot about how other companies run their business, what type of warranties they offer, what type of warranty they don’t offer, do they have in-house property management group; this group does, this group doesn’t want to do management because of this, this group believes that in-house property management is very key to the turnkey experience. And I’m on the side of, I do believe you need to have the in-house management solution to ensure that the client’s going to have a very good experience. My own experience with third-party management groups, it’s been a lot more bad than good.  

And so that was what prompted me to start my own in-house management solution back in 2016. And things have just been getting better and better at my company. And my customers are having a better experience and coming back for more. So I believe that that’s very important. Um, we talked about how to look at a location from a macro level and a micro level, a location or market. We talked about the price point not deviating too far below the median value in any market. So for example, DFW median value currently is $280,000. A medium value in Kansas City is about $180,000. I myself, because of that, would not buy, really, below $200,000 in the Dallas market because now I’m getting into a different class of property that I’m not going to feel comfortable with because more risk is going to be involved in it.  

Maybe it’s not as good of a neighborhood, not as good as schools, maybe higher crime. And on the flip side, in Kansas City, you know, if I was to buy a sub $200,000 home in Kansas City, I’d be getting a very good property, right? There’s immediate value. There it’s 180K. But if I delve below 100K, maybe in Kansas City, I might run that higher risk again, where just the risk, in my opinion, outweighs the reward. So we talked about that. We also talked about renovation quality, what to look for, what are the turnkey provider’s standards, making sure that the properties are very cosmetically appealing to tenants, but then also very durable for the investor to lower capital expenditures. Have very low capital expenditures early on an ownership. I believe that should be the goal. Uh, we talked about warranties and what type of warranties these turnkey providers are able to offer you.  

We talked about what’s the in-house management solution. We talked about followup. Um, I think it’s a very important question to ask. What is the followup process? How will I be in touch with you after I closed on this property? I hope that you’re not going to be a company that just sells me a home and I never hear from you again. And we talked about ratings and reviews and definitely doing your due diligence. And so the last part to that, I would say is, you know, to ask the turnkey provider, are you willing to provide references? And you know, when clients ask me that I feel kind of bad giving out my client’s information. I definitely call my clients first and say, “Hey, if I put you on my list of references would you mind, and some of them don’t mind and that’s okay, but you gotta keep in mind; I get a lot of leads that come into my website each each month, you know, up to 300 leads in a month I get. 

They’re looking for passive income, real estate investment options. And you know, you don’t want a bunch of people calling these references. So, you know, I make sure anytime I give out a list of references, that this investor is serious and they’re pre-qualified, and they’re actually a real buyer because the last thing I want to do is keep having my people calling my clients and bugging them. But I am willing to give a list of references, and I have a list and, like I said, I’ve checked with these investors and made sure that they were okay with me providing their information to a potential investor. But you know, if the turnkey provider’s not willing to give references out, I think that that’s another red flag. I think if you have a good solid group of clients that you’ve reached out to you and just set the expectation, you know, maybe what I do is I buy them a gift card every year for Christmas just to kind of show my appreciation for being on my reference list.  

But, you know, I think if you’re a good turnkey provider and you have happy clients, you should have no issue giving out any references. And so I think that that’s very important. And I would caution any potential investor as long as you’re serious. You know, if you’re just a shopper and you know, you’re not really certain that you want to work with a certain provider yet or you’re not really certain that you want to invest in a certain market yet, you know, maybe not try and bug these people, but if you’re really serious about working with this company and you’ve identified that this is the company I want to work with and this is the market I want to be in and really all I need to do is to speak with somebody and get some reassurance that everything John and his team, or everything Joe and his team in Jacksonville or whoever it is, you know, everything that they’re saying is actually true, I don’t think it’s wrong for you to ask for a reference.  

And you know, like I said, maybe that’s just the last piece of the puzzle to get you to move forward with a person, your first property or two with this turnkey providers. So I definitely recommend asking for references for sure. Don’t, don’t feel ashamed or embarrassed or feel like you’re a nuisance asking for that. But like I said, you know, I would wait to the very end to make sure that, okay, this is the company I want to work with this market. I want to trust these guys to an extent; I just need that last reassurance from a reference to make sure that everything is comfortable.  

So that’s it. That’s all we have on the show for this week. The topic, what to look for a turnkey provider. Hope you found the information highly useful. Like I said, I mean I’ve been doing this for a long time, so I’ve met a lot of different people that run the quote-unquote term the operation. I’ve seen a lot of good ones and I’ve seen a lot of poorer ones. So just take the information that I gave you today and apply it to your own vetting out process. Make sure that you’re working with the right company. And so just in closing for any of you who are interested in learning more about passive real estate investment options, maybe finding out more about Texas market, Dallas, Houston specifically. Those are the two markets in Texas that I really love to go to RealEstateCowboysDFW.com, put in your information, download our Starter Kit there.  

Uh, we’ll also have my Passive Income Guide; it’s actually going through editing right now. It will be available soon. You can actually download Passive Income Guide it’s great information on all the different passive income options that we offer, and all the passive income real estate investment options that are available to you. Oh, we also have the investor quiz on there. Very fun, 10 question quiz. It’ll tell you, hey, am I a single-family rental investor? If I had a private lending and master in my vacation investment investor, maybe I’m all three. Maybe I’m two or three. Find out. Take that quiz. It’s a really fun quiz to take. So I hope you all can go to RealEstateCowboysDFW.com, and then everybody who opts in is going to be on our weekly newsletter that gives updates on the passive income opportunities that we have available to you. So Real Estate Cowboys. Thanks again for tuning in. This is John Larson signing off.  

Announcer: All opinions expressed by the host of the show are the opinions of American Real Estate Investments LLC and do not reflect the opinions of guests or sponsors. No personal or professional advice on this program should be considered an endorsement to follow a real estate financing or investment strategy. Before acting on any information, seek advice from your financial tax, mortgage or real estate advisor, as the information is not guaranteed and investment strategies have the potential for profit or loss.