Turnkey Opportunities - Good or Not?

Question

I've seen a number of websites that offer turnkey opportunities for real estate investing. I'm a busy guy with a family and a full time job. This seems like a simple way to go.

For those of you who have experience with this... is this a good idea or not? What are some of the pitfalls to watch out for?

Thanks,

Nick

Joshua Dorkin · Answer

To all whose posts were deleted, I again apologize.  It was an absent minded mistake.  We're putting in procedures to prevent that from happening agin.

Thanks,
Josh

Marc Freislinger · Answer

My response was deleted as well...

It is very important to do your own due diligence. You can find great deals that meet 50% rule, and cash-flow, but make sure the property isn't priced way too high for the neighborhood. I know investors that couldn't sell if they wanted to, without bringing a ton of money to the table.

Mike McKinzie · Answer

I am going to give a slightly different twist on this as I have owned several investment properties that I never laid my eyes on.  But that doesn't mean that I didn't do "due diligence, research and investment calculations."  Personally, I like to treat Investment Real Estate like I treat stock investments.  I don't need to go to the factory to buy a stock, I need to go to the financials.  When you buy a piece of investment real estate, you are not buying lumber, brick, wiring, plumbing and a green lawn, you are buying an INCOME STREAM.  Never get emotionally involved with a piece of Investment Real Estate.  I have known many 'investors' who drive by their investment, almost weekly, and brag to their friends, "I own that house."  But what they don't say is "...but it cost me $500.00 a month to own it, and that is when it is rented..."

If you follow the guidelines that are posted on here, the 2% rule, the 50% rule and the other parameters, a TURNKEY investment can work to your advantage.

Again, you have to do your research or else you will be easy PREY to the PREDATORS!

Michael Rossi · Answer

When someone else does all the work for you, they also keep all the profit!

If you want to be in the real estate business, you've got to learn to do it yourself.

Mike

Joshua Dorkin · Answer

Tim - 
I screwed up and removed your comments and mine.  Sorry. (we're working on something that will prevent that from happening in the future, BTW)

The gist of my remarks were as follows:
If you are thinking of investing in turnkey properties, you need to still have the knowledge that any other real estate investor has.  If you don't have the education, or capacity to manage your investment properties, you shouldn't be buying them.

There are many other true "passive" investments that are probably best for you if you can't set aside time to keep up with your investments.

Just because a property has been pitched as tunkey, doesn't mean that you won't have to do anything.  What happens when management isn't doing a good job?  Are you not going to set standards for tenants?  What about maintenance issues?

The list goes on.

So . . . if you don't want to do the work when buying a property, turnkeys may be for you, but I strongly advise against buying any kind of investment property if you're not going to have the time to keep up with it.

Timothy W. · Answer

Whoa....I posted a reply and it disappeared.  Was going to second Josh's post on this.  Every person I know who's done alright with one of those turn keys was already an experienced investor.  They knew what they were getting into.  If you are a complete newb to it, you won't know when your professional management is screwing you on things like maintenance or office overhead.

Will Barnard · Answer

Good is in the eye of the beholder!
Turn key is just taht, made easier for you, but quite often you will have to pay more for it. That said, and judjing from your lack of available time to dedicate to RE investing, turn key may be the option for you.

Just make sure you know what you are getting, what "turn-key" items are supplied, and complete your DD (due diligence) on all of it. Just because they say it is turn-key does not mean you can skip the DD.

I personally like the turn-key properties, as I avoid the high maintenance investments as far as single family holds are concerned, but that is a personal or business choice of mine and every investor is different, just as every market is different.