Turn-Key Real Estate – Who Should and Should Not Buy Turn-Key Properties

by | BiggerPockets.com

Turn-Key real estate investing seems to have exploded in popularity over the last few years.  With new websites and marketing ads announcing new companies on a weekly basis, turn-key companies seem to be sprouting up in every city and offering services in every corner of the country.  In a recent international real estate publication, over half of the ads were touting turn-key real estate companies and their particular brand of done-for-you real estate investing.  Business school graduates everywhere will tell you that when there are this many options there must be plenty of demand.  I didn’t graduate business school, but I can tell you that demand or not, investors must be honest with themselves on a few key points before buying turn-key properties.  If they are not, the result can be a miserable experience for everyone involved.

Too Busy For The Details

I get a kick out of investors who cite Donald Trump as an inspiration for buying real estate.  It’s not that he shouldn’t be used as a role model.  What makes me laugh is wanting to skip the learning curve that Donald Trump went through, and investors not realizing that Donald Trump has a team around him that he trusts implicitly to watch the details for him.  For an investor,  purchasing a turn-key property does not mean you leave ALL the details to others.  From the very beginning, an investors’ best attribute with a turn-key company is the willingness to ask questions.  You need to know who you are doing business with and exactly what you get in return for using that turn-key company.  I often tell new investors that the professional investors do 3 key things to find success:

1.  They research to find ideal markets for their investment plan.
2.  They interview and surround themselves with the best team.
3.  They are VERY CLEAR about their expectations.

It is their ability to do these three things that sets professional investors apart from average and beginning investors.  They have taken the time study the details and their buying decisions are made very easy.  If an investor is too busy for the details of due diligence, then turn-key properties are going to be a risky venture.  An investor that takes everything on faith, is an investor who is bound to fail.

D.I.Y. – Do It Yourself

We all have our personality traits that make us who we are and we can not change those traits anymore than a zebra could change its stripes.  For better or worse, our traits make us unique and some investors are not cut out to purchase turn-key properties.  For an investor who has spent his or her life being in charge, and is a hands-on type of person, purchasing a turn-key investment property is a recipe for disaster.  The very definition of turn-key means that a product or service can be utilized without any additional work being required by the buyer.  When it comes to real estate, that means that the property is renovated and often occupied and there really are no decisions left to be made.  Most turn-key companies are designed to provide every possible service for an investment property and leave very little control or decision making process to the investor.  That is, in fact, the point of using a turn-key company in the first place; to make fewer decisions!  If you enjoy the process of renovating a property, working with your tenants, or would have any trouble letting go of responsibilities, then turn-key investments may not be a good idea.

Turn-Key Real Estate: The Bottom Line

One of my first real estate mentors taught me that when evaluating a deal, the only price I should worry about was my price.  If I wasted my time worrying about what the seller was making, I would end up buying all the wrong deals.  When purchasing from a turn-key vendor, investors will absolutely pay a premium for the service they receive.  Whether that service is any good or not is a whole separate story, but that company is adding a premium to provide services.  It is up to the investor to decide if the price for the property meets their needs.  They need to decide if the return is going to be adequate for their investment strategy.  Worrying about the companies profit margin takes an investors eye off the important numbers.

Understanding that the returns are going to be smaller and the purchase price points will be higher is a great first step for an investor buying turn-key properties.  If an investor wants the services provided by a turn-key vendor but wants to dictate what that service is worth, then that sets up a never ending circle of negotiating that leaves no one satisfied.  Again, that does not mean not to ask questions, but turn-key companies provide convenience for investors and an investor should want to do business with profitable, successful turn-key companies.  These, after all, are the companies investors are asking to manage their investment portfolios and their success is a big part of an investors success.

Turn-key companies provide a very valuable service for real estate investors, but that does not mean all investors will find success when buying turn-key properties.  Many investors find themselves in markets where long-term buy & hold strategies are not possible and they have to look elsewhere to find good properties to buy for long-term gain.  They instinctively begin to look for opportunities and invariably will find turn-key companies.  An investor who can see past the possible road blocks listed above and work with a turn-key provider can find success and should be able to build a good long-term portfolio.  An investor who can be honest about the road blocks listed above and realize that turn-key solutions may not be best for them, will save themselves and others a lot of time, energy, and headaches.

Photo: steven depolo

About Author

Chris Clothier

In 2005, Chris Clothier (G+) began working with passive real estate investors and has since helped more than 1,100 investors purchase over 3,400 investment properties in Memphis, Dallas and Houston through the Memphis Invest family of companies.


  1. Chris –
    Great article. What I appreciate most about this article is that you, who has an interest in the turn-key business, are so straight forward about who should and shouldn’t participate. While most people might think that it is not in your interest to tell people that they shouldn’t be doing business with a company like yours, I think that this article will bring you an incredible amount of credibility, and it should.

    It would be naive to think or announce that these kinds of investments are for everyone.

    Great work and thanks for sharing a little more insight for everyone!

    • Chris Clothier

      Josh –

      Thanks for replying after you read the article. There can be no such thing as a “scarcity” mind-set if you want to be successful in business. So it’s always easier to educate than to try and sell. There are plenty of investors who need this type of service in order to invest in real estate and yet there are plenty of investors who do not. The quicker a company can distinguish between the two and start to serve the investors who need them, the quicker they will be a profitable and respected company.


  2. Chris-
    Great article. In fact, yesterday under “Partnership Idea – Viable” Todd Brittingham responded and gave his website http://www.michiganturnkey.com. Ths company does turnkey operations as well and I was very impressed with both his and your websites. I would like to follow both of you and others with similiar operations. I may in future decide to use one of your services.

    • Chris Clothier

      Hi Carole –

      Thank you so much for taking time to read the post and to reply. Hopefully, there were a couple of tips in there that you can use when deciding if using a Turn-key company is the right way for you to invest. I appreciate the compliment and don;t hesitate to ask if I can ever help answer questions for you.

      All the best,


  3. Chris,

    Good information. My first 2 rentals were “turn-key”. I think the definition of turn key is very loose. The properties I bought were marginally rehabbed and tenant placed. I was on my own after that. Other turn-keys are like owning paper. Send or receive a check each month, everything else is handled.

    I think you present an extremely strong point. Due diligence is needed with any investment.


    • Chris Clothier

      Jason –

      Thanks for reading and commenting on the article. Your point is crystal clear and there are so many more conversations to be had and articles to be written about the Turn-Key niche in real estate. Investors and the turn-key companies can both make bad decisions that ultimately hurt the investor. ON the other hand, there are many examples where both teh investor and company line up perfectly. Do your homework!! Know who you are dealing with and be very, very clear about what you expect.

    • Sean Ward

      Hello, I am new to bp. I’m very excited about getting started in real estate and love the idea of a turnkey property for my first property. I was wondering if you still have your properties and how they how been working for you over time? Thank you

    • Chris Clothier

      Susan –

      Thanks for the response. You are correct, investors come in different varieties and all need different services. An investor who knows what they are looking for can make great decisions on whether to use a turn-key company or not.

      Thanks again fro reading and responding.

  4. Perhaps it would be beneficial for the larger turnkey vendors to disclose the ACTUAL returns existing clients have earned with them. Or at least a range of returns over various holding periods. The data exists. Actual rents received, vacancy and maintenance (some companies don’t even include these to in their advertising)…etc. It’s the one question prospects really need to make a decision. “How much are you making for your clients?” Not too much to ask.

    Most important would be to know what clients have made over a longer period, say 3-5 years. Problems with rentals (new roofs, furnaces…etc.) don’t seem to surface in the first 1 or 2 years (although some do).

    Also, I don’t think investors care that much how much the vendor is making. The care most about what THEY WILL LIKELY MAKE.

    Phil Gainey, Memphis Turnkey Purchaser

    • Chris Clothier

      Phillip –

      Thanks for reading the article and taking the time to reply. I would definitely read a couple of the other articles posted on here on deferred maintenance and on 3 biggest mistakes for real estate investors. Deferring maintenance is a bug mistake and when buying turn-key investments that is one of the biggest things to look for when deciding who to work with. In the biggest mistakes article, you will see I noted an investors willingness to do their due diligence and ask questions is really their first line of defense. Don’t take anything on faith, make sure you are willing to ask questions and taking the time to feel comfortable with the investment – especially expected return – before buying.

      Again – thanks for the reply!


  5. I’ll provide some feed back on a property that was purchased retail but has time tested performance. My first rental in south Dallas, the property was converted in 1993 from my home. Purchased for 110k, 18 years later, I have lost 5 months rent from vacancy, the property has been paid off mostly by the tenants. Remotely managed, with a property management and currently rented below market. Total expenses, repairs over the period is under $9,000.

    For a passive investor, I’ve made about 64k before taxes and I have a paid off house. My down payment on the property was 12k or so in 1991. The property has not appreciated and probablly will loose 10k or so on sale. In the mean time, I make about 800 a month. This was on a RETAIL purchase.

    I’m sure the original returns are not that of a professional investor, but for a “passive” investment, not that bad. I do manage the management company. Also, as Chris as stated, purchasing a property thatis in good repair is the key.

    Repairs are necessary and unfortunately there are unscrupulous people that will sell you a money pit. A good inspector and or appraiser will help. I have investments with Chris, and so far no lemons, only cash. If I don’t like what I see I don’t buy, if it does not meet my criteria for the area, roi, size, construction,I don’t buy.

    Pehaps slightly off topic, but shows that even a retail investmentmif properly managed and repaired can be a good investment.

    • Chris Clothier

      Sorry i missed your comment back on the 4th. Thanks for taking time to read and comment on the posting. You are correct that Turn-key investing is not right for everyone and not every company is right for each investor.

      At the end of the day, investors do business with people that they like – they trust – they respect. If a turn-key company earns those three with you after doing your due diligence, then I would say you should be on your way to a good relationship.


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