3 Turn-Key Myths Debunked

We’ll be the first to tell you how amazing of an opportunity turnkey investments can be, but we’re also aware that it has a less-than-stellar reputation among some investors. Go onto any major property investment forum, and no doubt you’ll see a segment of folks decrying turnkey properties as the worst thing to happen to real estate since the Great Recession of ‘08. They’ll even give you specific reasons, or anecdotal evidence supporting their claims. And while some of them may have valid points, they’re not all true. In fact, it’s pretty easy to debunk some of the more popular myths, including the 3 below.

Myth #1: You’ll get stuck with a terrible property management group.

Part of the appeal of a turnkey property is not having to worry about the day-to-day tasks associated with it, which is why most turnkey groups set you up with a property management group. This group is supposed to have your best interest at heart, acting on your behalf to market the property, vet and secure tenants, and handle maintenance issues, among other duties. While many of these groups truly do go above and beyond to work for you, there are those who don’t – and of course these are the ones that are often unfairly associated with turnkey properties. Here’s the deal, though. As the investor, it’s your responsibility to ensure that all aspects of the investment – including the property management group – are on the up and up. Take the time to visit with the group, ask questions, and do what you can to ensure you’re not being partnered with people who don’t care about your interests. Because at the end of the day, there are plenty of groups who DO care – you just need to make sure this is who you’re working with.

Myth #2: Turnkeys are sold over market value.

This one is so easy to believe, because it has an element of truth to it. When you work with a turnkey group, they need to make a profit too, right? Right….but this doesn’t always mean that you’re getting a bad deal out of it. Many turnkey groups are staffed by experienced investors who have an eye for “special” properties that offer unique opportunities. These people see what others do not, whether it’s a property that’s seriously undervalued or in an area that’s on the verge of booming. When they close the deal well under market value, they’re able to offer it to you at or slightly below market value, and still turn a profit for themselves. Again, before going into business with any group, do some background work to ensure they’re the real deal. Ask for references, get details about the experience level of their staffers, and don’t be afraid to inquire about specific property details and projections – if they aren’t willing to answer these questions, then move along and find a group that will.

Myth #3: Turnkey investing always involves bad neighborhoods and bad homes.

Wrong! This is one of the most common misconceptions we hear, and it’s truly disappointing because this does not define turnkey at all. True, there are turnkey groups that circle around less desirable areas looking for their next lemon that they can then pass to an unsuspecting investor – but this doesn’t mean all turnkey groups or properties fit this bill. The key to avoiding these situations is to have a solid understanding of property classes. If you’ve got your eye on a certain piece of property, you first need to be able to classify it accurately. If it’s B-class, you’ve probably found yourself a home in a good neighborhood that will likely have decent tenants. If it’s D-class, it’s going to be more challenging, and you need to make sure you’re up for that challenge. Bottom line: turnkey runs the gamut when it comes to property classes, and it most certainly doesn’t “always” involve bad homes, bad neighborhoods, and bad tenants.