While there are a lot of moving parts to the Turnkey business model, none is more important than the renovation. With just about everything we all do in our lives, success on the front end positions us for success on the backend. I would say from 2018 and before, most of the homes we bought were out of foreclosure. These homes were in terrible shape, but after spending $30,000, the home would be restored back to its original glory. Today, foreclosures are rare thus the properties we are buying are forgotten homes that have been neglected for years and are in much worse shape; a couple have required a hazmat suit to trash out. Add in labor cost increases and material shortages, our renovation cost for a full turnkey home is up about 35%. The upside here is offering a higher level Turnkey home with updates & repairs that have not been necessary in the past, but the condition upon our acquisition requires gutting a large portion of our homes. Also, something I do not talk about often, but is important to us, is the positive neighborhood impact of these home transformations. Our Turnkey homes contribute to neighborhood stabilization by creating a higher base level of what a renovated home is worth, making the street more desirable for would be tenants and home buyers and eliminate the possibility of mischievous activity that can happen when run down homes in a neighborhood sit vacant. By requiring 4x the rent and 2 year minimum leases, we are increasing our chances of stable, long term residents.
Bottom line, thorough renovations on the front end will position the property for long term success by reducing maintenance cost in the first few years, attracting more showings during the vacant home marketing and increasing the chances of a long term resident looking for a place they are proud to call home; we hope for a long time.