# Turn-Key Properties



## JackJac (Mar 13, 2017)

Howdy,

I have been looking at turn-key income properties for investment and I'm wondering if anyone has experience with this or any words of wisdom to offer. 

I know many people opt for leveraging when it comes to real-estate; however, what if I were to buy a turn-key property for cash and start getting positive cash flow from the get-go...would that be a good move? Say I were to buy 4 properties in cash and get a ballpark figure of $2000 per month and decide to live off that...is that a safe, viable way to "retire"? 

Here are some examples of companies that offer turn-key properties. Let me know what y'all think:

1) http://www.ppgcorp.ca/

2) http://thesimpleinvestor.com/

3) http://nippontradings.com/

Many thanks!


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## dotnet_nerd (Jul 1, 2009)

Meh. I buy XRE and forget about it.


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## TomB19 (Sep 24, 2015)

It's not as safe as you may think. Every property you own brings liability.

I like r-e investing as well as anyone but I wouldn't consider unleveraged r-e. Compared to unleveraged r-e, you could do just as well with a basket of REITs.


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## Mortgage u/w (Feb 6, 2014)

You can, if rental properties is your 'thing'. Being a landlord is not for everyone and its never as simple as it seems on paper. You can achieve the same return by investing in good dividend stocks and save yourself the hassle of collecting rent. 

Personally, I would not tie up my cash in rental properties. I'd rather borrow the money (or at least some) and put the rest of my cash at work in other investment vehicles. You'll want to offset your rental income with expenses (such as mortgage interest) otherwise you will be taxed on your full gross rental income. 

Be as diversified as you can with your investments.


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## Just a Guy (Mar 27, 2012)

First off, leverage is where you make the real money in real estate. Second, I always question, if they are so profitable, why would someone else want to sell it to you?

To me, it looks like these people make money off of being the property manager. So they created a way to ensure job security on the backs of nieve and lazy investors. As long as you work with us, we'll give you a steady income, while peobably overcharging you...you don't know any better anyway. 

Not saying this is true in all cases, but I'd find out where the money is actually going. There is a lot of it in real estate, much more than the returns a reit gets if you do things properly. Of course, most people are too lazy, so reins are a good alternative where the investor gets better than average returns and the company running the reins gets lots of profits.


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## JackJac (Mar 13, 2017)

TomB19 said:


> It's not as safe as you may think. Every property you own brings liability.


What sort of liabilities would there be with turn-key properties like those linked in the OP?



> I like r-e investing as well as anyone but I wouldn't consider unleveraged r-e. Compared to unleveraged r-e, you could do just as well with a basket of REITs.


Thanks for the suggestion.


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## JackJac (Mar 13, 2017)

Mortgage u/w said:


> You can, if rental properties is your 'thing'. Being a landlord is not for everyone and its never as simple as it seems on paper. You can achieve the same return by investing in good dividend stocks and save yourself the hassle of collecting rent.


I wouldn't be a landlord in the typical sense though with these "turn-key" properties. I would own the property and have the management company do everything for me for a monthly fee. That seems reasonable to me, if the guaranteed returns meet my financial target. 



> Personally, I would not tie up my cash in rental properties. I'd rather borrow the money (or at least some) and put the rest of my cash at work in other investment vehicles. You'll want to offset your rental income with expenses (such as mortgage interest) otherwise you will be taxed on your full gross rental income.


If my properties are cash flowing $2000ish per month -- and that's all my income -- would I still be heavily taxed?



> Be as diversified as you can with your investments.


Thanks.


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## JackJac (Mar 13, 2017)

Just a Guy said:


> First off, leverage is where you make the real money in real estate. Second, I always question, if they are so profitable, why would someone else want to sell it to you?


Good question.



> To me, it looks like these people make money off of being the property manager. So they created a way to ensure job security on the backs of nieve and lazy investors. As long as you work with us, we'll give you a steady income, while peobably overcharging you...you don't know any better anyway.


True but if I can meet my financial goals while simultaneously acquiring physical property without lifting a finger, well, call me lazy naive, but that works for me. 



> Not saying this is true in all cases, but I'd find out where the money is actually going. There is a lot of it in real estate, much more than the returns a reit gets if you do things properly. Of course, most people are too lazy, so reins are a good alternative where the investor gets better than average returns and the company running the reins gets lots of profits.


But if I am guaranteed secure monthly payments that meet my target and have a physical property to boot, then that's all I really need to focus on, right? I think there might be a thin line between lazy and smart and it really depends on individual circumstances and such, no?


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## TomB19 (Sep 24, 2015)

JackJac said:


> TomB19 said:
> 
> 
> > It's not as safe as you may think. Every property you own brings liability.
> ...


Little things like HVAC, roofs, general maintenance, tenant damage, eviction expenses, back rent, etc.

To me, this is the worst case scenario. Someone else runs the show and you take on the liability.

If my neck is on the line, I'm going to be calling the shots.


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## nathan79 (Feb 21, 2011)

With the cost of real estate these days, your rate of return is going to be very low after all of your expenses. Of course, it depends on where you live, but you'd be lucky to get a 2% return in Metro Vancouver. I'm getting more than that in savings accounts.


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## Just a Guy (Mar 27, 2012)

You're trusting that the people are making good choices. A lot of fraud happens in real estate. 

If I understand you, they want you to pay for the property in cash. What if, unbeknownst to you since you may be too lazy to check, they went out and later financed the property somehow on your behalf (acting as a management company, just sign here, routine paperwork) and then blew all that money. Suddenly your property, which you thought for years was free and clear, paying a monthly dividend, was actually a modified Ponzi scheme.

What if they find other ways of stealing? Watch some episodes of American greed, or read articles on fraud. There's a lot of money in real estate, not so much if you pay cash, so there's a lot of temptation for people to try and take more than they should, while giving nieve investors a steady income.

Even if you're not being rooked, as stated above, there are very few properties which will cash flow long term at these inflated prices. A deal like this may sound too good to be true.


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## james4beach (Nov 15, 2012)

Just a Guy said:


> First off, leverage is where you make the real money in real estate.


By the way, most REITs use leverage. Looking at Riocan for example: $14.2 billion assets, $6.2 billion in loans, and $8 billion in equity. They are nearly leveraged 2x ... i.e. 10% rise/fall in real estate value creates 18% increase/decrease in equity. (REITs amplify real estate exposure)



Just a Guy said:


> What if they find other ways of stealing? Watch some episodes of American greed, or read articles on fraud. There's a lot of money in real estate, not so much if you pay cash, so there's a lot of temptation for people to try and take more than they should, while giving nieve investors a steady income.


I don't have real estate experience, but I do have experience (through my professional work in security) dealing with scam artists of various kinds. I am not saying any of the web sites linked by the OP are scams, but I will say this: I sniff a whee bit of a scam scent when I browse those web sites.

I'm looking at their language, their appeal to "get rich without any work", and the obvious exaggeration of their "partnership with banks" and a listing of various reputable organizations/banks on the web site. One of these places also has a history of marketing exclusively in medical and dental industry publications, obviously trying to attract people with money but who are too busy to do any of this work themselves.

These web sites are super strong on marketing effort, and very weak on tangible, verifiable facts. Another suspicious factor is that they are strongly pushing you to contact them for more details. There's virtually no information on the web sites themselves. If they are such reputable organizations with such clear track records, why can't they post more concrete documentation their web sites?

After seeing that Platinum Properties site, I became suspicious enough that I spent a half hour searching around the internet to see if I can find more traces on them. I couldn't nail down anything truly suspicious about them but that listing of partnership banks, and a few links to charities, is almost straight out of a scammer's playbook. I wonder how the banks would feel about their logos being presented on the web site to make them look more credible. I think this is improper.

In the past, I've encountered various kinds of shady operations that had some of these characteristics. But I want to be clear that I am only smelling _just a hint_ of something weird. I have no concrete reason to believe any of these are scams. It's just a feeling.

I would avoid anything like this. If I wanted low effort real estate exposure, I'd buy a basket of REITs like XRE or ZRE.


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## Just a Guy (Mar 27, 2012)

James, the thing that makes me wonder about reits is, despite the use of leverage, their returns are pretty small. I still wonder where all the money goes or how incompetent management is.

In this market, reits are forced to overpay for properties because they have to. They have to increase their holdings to supply their shareholders, they can't find the true bargains, or the ones which will cash flow long term. Many companies will cut corners on maintenance to maximize profits (I've got many tenants who come from reit run properties who are full of stories). 

Of course, if the market stays hot, and interest rates stay low, the Reits are going to do fine, but in a correction I'd bet they get slaughtered.

An individual has the opportunity to find the bargains, to change strategy to reflect the changing market, to know he real numbers. It wouldn't surprise me in the least if some of these respectable reits also housed shady practices, there's just too much money involved and the numbers often don't make sense to me from my experience in real estate.


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## JackJac (Mar 13, 2017)

Of course I would conduct due diligence and actually go out and physically inspect the property before buying. In terms of scams, The Simple Investor seems quite legit, and the properties seem fair. The other two links are a bit more questionable, although I too was unable to dig up anything incriminating. 

I know I'm not getting the lions share of the profits with an endeavor like this but it seems like a decent move all around. My major worry would be the depreciating nature of these assets and how that would reflect in the maintenance fees. Aside from that, I don't see too many red flags with the whole deal.


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## Just a Guy (Mar 27, 2012)

Scams usually don't show signs of fraud until they collapse. All you can do is look for the characteristics of scams. 

Of course, it's your money, feel free to spend it how you like.


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