Investing in Turnkey? You need to know these 3 things!

[Jeff Wallenius]

I spend many hours a week consulting with potential turnkey investors. I am happy to spend this time, but I can't reach everyone. So let's keep this as short and sweet as possible. 

If your looking to invest in real estate and looking at turnkey investing as a viable option, you need to be aware of a few potential pitfalls. Turnkey real estate can get a negative stigma, due mostly to shady and poor operators who take advantage of new investors. If you're one of these operators, send me a direct message so I can begin the process of shutting your business down. With that said, turnkey rental properties can be a good investment for passive investors. If you have time to pursue flips, house hack, etc. you can do better. No doubt about it. However, if you're a passive investor that wants to own property and collect monthly cash flow with no time commitment, then turnkey can work. I can get into the reasons to pursue turnkey, but this post is meant for those who are actively committed to this investment model. 

For those aspiring Turnkey Investors out there... here's the first 3 potential pitfalls. 

1. Track Record. Find a turnkey provider that has a long (several years) track record. Anyone can spin the numbers on a year of business to make it look solid. 

2. C- and D class properties. Do not buy this asset class. These are properties in the war zones. They were purchased for $5-8K by the providers, rehabbed and are being sold to you at $30K. Imagine the areas these houses are located in, imagine the types of tenants these homes will attract. The numbers look great on paper, but stay in them long enough and they'll eat into your cash flow in no time.

3. In-house property management. Find a provider that has in-house property management or property management very closely vertically integrated into their business. Why? Accountability. A provider that does not own their own property management can pass the house on to a third party property manager after they sell to you and their hands are washed. Poor rehabs, not their problem anymore. Unqualified tenants. Again, not their problem after they move on from it. This is key!

That's a weight off my chest! 

Happy to provide more details if needed, but I wanted to make sure new investors knew what they were getting into and off to the right start.