WHY you do NOT want your Turnkey Tennanted before you close.

[Jay Hinrichs]

For some background I have been funding Turn key operators since basically the inception of that Niche  2002.

And I know there is a HUGE marketing push that describes TurnKey as  renovated and Tenant in place.

this is done to give the buyer cash flow day one..  While that sounds nice and all for your spread sheets It creates a lot of issues

for the buyer for the turnkey operator and for the lenders appraisers etc.  WHY.

Well when you have a tenant  who just moved in the last thing they want is to be bothered by scheduling home inspections or appraisals.

this leads to delays and your tenants don't like it so you already start out with a tenant who has been inconvenienced and let someone in their home maybe multiple times  IE inspections and things are found and now you have to send workers back in. GREAT for the buyer terrible for the tenant and the TK operator.

* So this leads to longer hold times for the TK operator so their cost of capital goes up and now that is passed on to the buyer .

* Tenants unhappy

* A rush to put a tenant in Because buyer wont close this can lead to picking not the best tenant.

So what a buyer wants or should want is a vacant house so they can do their inspections and appraisals without interference.. Keep in mind especially C class which is the majority of these homes the tenants live their life and rarely as neatly as the buyers do.. So the appraiser walks in and your very nicely renovated home has crap all over the place.. cloths on the floor kitchen dirty etc etc.. so your not putting your best foot forward for your pictures and appraisals.  Your inspectors are not going to have free run to walk through you home .. they will miss things.

Lastly you want some input on who is going to live in your home..  Not just slam a tenant in there thinking you NEED cash flow first month I mean that's just one month houses rent in a month no problem. U can have a methodical close with out all the nightmare scheduling issues etc.

Many of the Australian resellers learned this the hard way and refuse to close on houses unless vacant.

My clients are really pushing back on the must be tenanted to be turnkey for the reasons above..  Some of my clients to mitigate the one month of vacancy will credit at close one month of mortgage payment tax and insurance..  this is far cheaper and easier on everyone.. And the buyers will get a better deal a better house and by and large a better tenant when there is not financial urgency to get a tenant in the home .