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What Can Turnkey Do For You?
Every time I go to a convention, I talk to investors and ask them, “What do you think of turnkey?” I won’t lie, a lot of them are leery of this investment model. The reasons they give for this usually have something to do with feeling like they’re not getting a good deal, or a belief that turnkey companies are jacking up the prices for their own profits.
To be fair, there are some sleazeball turnkey providers out there who do exactly that. They take advantage of people simply because they can. As with anything, though, it’s not fair to generalize and punish ALL turnkey companies just because of a few bad eggs. There are plenty of honest providers who want nothing more than to connect investors with good quality, cashflowing properties.
Here’s what a great turnkey company can, and should, do for you:
Find the Property
The turnkey provider’s job is to scout properties that will provide decent returns for investors. They know their market, and they target specific neighborhoods to locate revenue-producing properties with low maintenance and vacancy rates.
Buy It
Once a property is found that meets that criteria, the turnkey company buys it. The property is added to their inventory and will soon be available for investment.
Rehab It
Most properties are purchased in poor condition. They need to be updated with new flooring, paint, and usually new roofs, HVAC, and plumbing systems. Working with their own group of vetted contractors, the turnkey provider rehabs the property to get it up to code and make it an attractive option for renters.
Tenant It
With the property now move-in ready, the turnkey group begins to actively market it to local renters. All prospective tenants go through an extensive vetting process that includes background, employment, and rental history checks.
Manage It
Some turnkey companies partner with management groups so they can continue providing services to investors even after the property has been purchased. This is an excellent deal for the future investor, as the property manager will handle everything from complaints to evictions.
In short, a great turnkey can, and should, handle virtually everything for you. When you enter the picture, your only job is to supply the capital and make sure the property is the right fit for your investment goals. As the owner, there will be decisions you’ll have to make regarding the property, but the turnkey/management company will execute all decisions and handle the day-to-day business of property ownership.
For investors who are new or who are looking for a truly passive investment, turnkey is the best option. Don’t let the naysayers scare you away. This is a tried-and-true model that works, so long as you’re partnered with a knowledgeable and experienced company. Do your homework, read some reviews online, and get referrals before moving forward with a turnkey provider. If everything checks out and you’ve got a great company to work with, you’ll be well on your way to a profitable investment.
Comments (1)
As someone who is leery of the turnkey model myself I can offer some insight on this topic. Every once in a while I'll look into real estate for an investment. Living in the NYC area the "great deals" I'm offered on some 4 family dump for $1.5 million along with the too tenant friendly laws, in my opinion leave a lot to be desired. I look on this website and others to research turnkey and most of the things I find are discouraging. I've seen companies offering a house for $120,000 claiming they can rent it for $1400 a month ( if you didn't put a penny down and got a 6% mortgage, you'd pay 1/2 of that to own it- who in their right mind is going to rent it for twice what it would cost to own?) Another company was selling a dump that needs renovation for 30% more than other houses in the area ( houses which don't need renovation) Another company showed pictures of the inside of a house they renovated, it looked nice but in the picture you could see out the window what a warzone the neighborhood was. Others have property in questionable areas while others have referral programs which in my opinion creates a conflict of interest when it comes to recommendations.
As for reviews, most reviews I've read are from people who just bought a property and tell of how nice or how professional the person they dealt with was and how fast they closed on the house. That tells me nothing. Of course if someone's selling you something they're going to be friendly and get the deal closed as soon as possible, as a potential investor the only reviews I'm concerned with would be from other investors who have dealt with a company for a number of years and have bought or would buy more property from the company. Those investors in a good company might not want word to get out cause it would mean increased competition for them, so I can understand why I don't find many of those reviews I'd be looking for.
Companies that don't show any of their properties for sale on their website unless I give an email or phone number are a no go from the start- I get enough knuckleheads calling me trying to sell me investments and such. Last but not least, I've seen people offering turnkey properties who live nowhere near the city the properties are located which I'm sure inflates the price.
So ,ya, if the investors you're talking to have been looking at the same stuff I have, they're going to be very leery about it. Hope I didn't sound too negative in my writing, I'm just giving you a point of view that potential investors see when we look into turnkey investments.
Patrick Buttermark, about 7 years ago