​Is Turnkey the Right Strategy for You?

As a turnkey provider who believes 100% in this model, I will still say that turnkey investing isn’t right for everyone. Yup. I said it. And you know what? A lot of my fellow turnkey providers won’t admit to this, because it’s bad for business. That’s unfortunate, because when you get investors involved in turnkey who simply aren’t a good fit for this strategy, you get angry, disgruntled people who will wind up badmouthing it to others.

And THAT’S what’s really bad for business.

But how do you know if turnkey is right for you?

Well, you start by understanding exactly what turnkey is, and what it is not. From there, you analyze the various pros and cons of the model, and you start looking at markets that have turnkey providers operating in them. You evaluate the markets and the providers themselves, trying to absorb as much information as possible. After you’ve learned all you can, you factor yourself into the equation and you see how this investment strategy would work with your life, both now and in the future.

And that’s when you can really begin to see if turnkey investing is right for you.

What is Turnkey?

First, let’s discuss what turnkey is and what it isn’t. The word “turnkey” has been thrown around so much in recent years that I feel like its definition has become a little blurred. What one provider markets as a turnkey property, another company is calling it something else. To me (and to most investors), turnkey is this:

A property that is purchased by Investor A (the turnkey provider), fixed up, and then sold to Investor B (you). Investor A provides virtually everything Investor B needs to make the deal: They connect Investor B with the property, they line up the tenants, they provide property management, etc.

Turnkey truly is a passive investment for most investors, because there is little to be done short of providing the capital to buy the property and making financial decision regarding it after purchase. This model works best for investors who are interested in holding the property for a longer time period, because it’s not a “get rich quick” investment. It’s profitable (or it should be, anyway), but those profits are spread out over months and years for long-term wealth-building.

So here is what turnkey is not: it’s not flipping a property, it’s not a short-term strategy, it’s not a hands-on investment, it’s not a solo endeavor.

What are the Pros?

The main advantage to turnkey is that passivity I mentioned. A good turnkey provider should handle most aspects of the investment - before and after purchase - so that you don’t have to. They are there to get to know you, find out what your investment goals are, and match you with a cash-flowing property that will help you reach those expectations. They’re a partner, of sorts, and they’re there to tackle most of the time-consuming aspects of securing an investment for you. They’re also available post-purchase, as their property management team will take on all management-related tasks, such as maintenance and rent collection.

So, to summarize, the biggest pro to this investment strategy is the time-savings you’ll experience. It’s ideal for people who work full-time or who are investing outside of their own market and need a local expert to help them out. It’s also great for new investors who don’t know much about real estate.

What are the Cons?

Every investment strategy has some disadvantages, including turnkey. The main one that comes to mind first is the “higher” cost to get in. I put “higher” in quotes for a reason, and here’s why: you’re not going to find a killer deal with turnkey. You’re going to pay market value, or maybe slightly above, for your investment. For some investors, this is a dealbreaker. They want to nab a property for a steal, and if they can’t, they think they’re getting ripped off and paying “higher” prices. But the reality is that you’re not overpaying with turnkey, because you’re buying an already-rehabbed, move-in ready property that already has paying tenants secured. You’re paying a bit more upfront so you don’t have to put any extra money into the property after you purchase it.

(Personally, this does not really qualify as a con to me, but since so many cite it as a disadvantage, I feel I have to include it.)

Other factors that may be considered cons include:

• There’s not a lot of flexibility in terms of the property management, so if you don’t like them, you’re kind of stuck until your contract runs out.
• You’re not actively involved in tenant screening, so like the management aspect, you’re stuck if you don’t like who’s renting your property. They signed the lease and there’s not a lot you can do about it unless there are grounds for eviction.

Is Turnkey Right for You?

Now that you have a few more facts, let’s come full circle and go back to the original question: is turnkey the right investment strategy for you?

The answer is this: only YOU can decide that. As the investor and the owner of the capital you’re using to invest, only YOU know what is best for you. It’s your job to research turnkey and other strategies, comparing and contrasting them, and ultimately determining which one appeals to you most.

A word of caution if you do go with turnkey, however...be wary of which turnkey provider you partner with. Unfortunately, this industry has some shady characters who want to take advantage of you, so be thorough in your investigation of any potential provider. Ask about their experience, ask about their local knowledge, and most importantly, ask for references who can verify this information.

Turnkey is an excellent investment strategy that has proven profitable for many, many investors. It’s not without its faults, but if you do your due diligence and make smart decisions, you can be one of turnkey’s success stories.