{"id":117530,"date":"2019-10-13T11:00:42","date_gmt":"2019-10-13T17:00:42","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=117530"},"modified":"2023-11-06T14:16:25","modified_gmt":"2023-11-06T21:16:25","slug":"how-to-vet-turnkey-provider","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/how-to-vet-turnkey-provider","title":{"rendered":"3 Ways to Vet a Turnkey Provider"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Let\u2019s talk about three ways to vet a turnkey provider.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The number one stigma in real estate is probably that which is attached to <a href=\"https:\/\/www.biggerpockets.com\/blog\/2015\/12\/15\/turnkey-real-estate\/\" target=\"_blank\" rel=\"noopener noreferrer\">turnkey providers<\/a>. Unfortunately, it is their fault. They have created a bad name for themselves, and many folks hate them. They consider them the devil, and it\u2019s like 666\u2014stay away. <\/span><\/p>\n<p><span style=\"font-weight: 400;\"><em>&#8220;I don\u2019t want to buy turnkey, and I don&#8217;t want to buy from anyone that is a turnkey provider,&#8221;<\/em>\u00a0they think.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For the minority out there who are looking to buy through a turnkey provider, I\u2019m happy to share some unconventional tips with you on what you should look out for. So, here we go.\u00a0<\/span><\/p>\n<h2>3 Things to Look for in a Solid Turnkey Provider<\/h2>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/W9FFYWKIvsc\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h3>1. Price<\/h3>\n<p><span style=\"font-weight: 400;\">The first thing you need to do is make sure that they are not selling you the property for more than what it is worth. Now, this is really hard to do because a lot of turnkey providers have a sustainable business because of the volume they deliver. When they buy volume, they can\u2019t be diligent in the acquisition process. So, sometimes they have to pay more for the property than what they would. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">They still tend to renovate it to a decent standard, but then they have to make their margin to continue to have a growing business. They have to do this, because if you\u2019re not growing, you\u2019re dying. So, they tend to oversell properties.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Personally, I don\u2019t see anything wrong with this. If you are getting a good return on investment and if you\u2019re buying from a reputable provider that\u2019s been around the block and has great property management in place, I don\u2019t see any issues with paying more than market value for a property if it&#8217;s going to deliver. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">I see issues with paying more than market value when you are getting scammed\u2014you\u2019re buying a crappy C-class property and paying more than what it\u2019s worth. There\u2019s a lot of volatility with that. And then you\u2019re getting passed on to a third-party property manager that will absolutely nickel and dime you to death. That is a recipe for disaster and why turnkey real estate has such a huge stigma surrounding it.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In my opinion, I think you should do your best to try to buy properties for fair market value. If you\u2019re looking at using leverage, a lot of the turnkey providers will only allow you to go through a preferred lender where the appraisals are controlled. So, you might think that you are buying it for fair market value, but I can promise you right now you\u2019re probably not. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Also, a lot of turnkey providers have a monopoly in a particular market. They record their sales on the MLS so a lot of those sales are manipulated and inflated. At the end of the day, if someone is going to screw you, they are going to screw you.\u00a0 <\/span><span style=\"font-weight: 400;\">What you need to be very diligent on and focus on is finding the right people, finding the right provider, and not investing until you find the right provider. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">So, the first vetting tip would be to ensure you are buying a property for fair market value (or a little bit more). If you\u2019re not, please make sure that property management is sound and that the provider has a proven track record.\u00a0<\/span><\/p>\n<p><strong><em>Related: <\/em><\/strong><em><a href=\"https:\/\/www.biggerpockets.com\/blog\/dont-buy-turnkey\" target=\"_blank\" rel=\"noopener noreferrer\">4 Reasons to Never Invest in Turnkey Real Estate (From a Turnkey Provider!)<\/a><\/em><\/p>\n<h3>2. In-House Property Management<\/h3>\n<p><span style=\"font-weight: 400;\">I think in-house property management is vital. Over the years, I have wanted to sell my property management company so many times, because I absolutely hated it. It\u2019s just a very thankless job. You can\u2019t win with tenants and toilets, but I knew if I did get rid of it that I wouldn\u2019t be able to offer the ongoing service that I believe our investors needed. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">I also believe that another way to vet a turnkey provider is to ask the question, \u201cIf property management isn\u2019t in-house, why?\u201d <\/span><\/p>\n<p><span style=\"font-weight: 400;\">I say this because anyone can find, fix, and sell a property these days. It\u2019s easy, right? Well, it\u2019s easier than managing successfully for an extended period of time. It\u2019s a very thankless job, as I mentioned, and it\u2019s a crappy part of the business\u2014not many people want to do it. So in my opinion, if you want ongoing success, if you want long-term success, you should partner up with a turnkey provider that has in-house property management. That way, they are vested in your long-term success.\u00a0<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-90636\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/07\/property-management-team.jpg\" alt=\"property-management-team\" width=\"702\" height=\"336\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/07\/property-management-team.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/07\/property-management-team-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<p><span style=\"font-weight: 400;\">Guys, getting to where you need to be is not going to happen overnight. Real estate is a long-term play. It\u2019s going to take five, 10, or 15 years. So, all those one-night-stand providers that just want to fling you the property and move on, that is not how you\u2019re going to get to where you need to be. You need a great bunch of people. You need a great company on board that will stand the test of time and will be there for you many years into the future.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Now, if they don\u2019t have in-house property management, they have to be very well correlated and be in sync. And I think you should <a href=\"https:\/\/www.biggerpockets.com\/blog\/due-diligence-ultimate-guide\/\" target=\"_blank\" rel=\"noopener noreferrer\">conduct more due diligence<\/a> if they do not have in-house property management. It\u2019s not necessarily a bad thing, but it does raise a few red flags that you definitely need to keep your eyes open for. <\/span><\/p>\n<p><span style=\"font-weight: 400;\"><em><strong>Related:<\/strong> <a href=\"https:\/\/www.biggerpockets.com\/blog\/most-common-turnkey-rental-misconceptions-solutions\" target=\"_blank\" rel=\"noopener noreferrer\">The Most Common Turnkey Rental Misconceptions\u2014And Solutions<\/a><\/em><\/span><\/p>\n<h3>3. Pushiness<\/h3>\n<p><span style=\"font-weight: 400;\">Last but not least, anyone who is pushing you to buy a product, influencing you, or shoving it down your throat, watch out. Don&#8217;t be swayed by turnkey providers who are saying things like, \u201cIf you don\u2019t buy now, you\u2019re going to miss out! The market is going to go up in value! This is a once-in-a-lifetime opportunity, and we don\u2019t get deals like this that often.\u201d <\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you start feeling uncomfortable at your core, turnaround and run. I hate sales. In fact, I like talking myself out of business. I truly believe that if you\u2019re not comfortable, if you\u2019re not ready, if you don\u2019t know what you want, you shouldn&#8217;t have someone else telling you what you want. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">You need to be the one who has conducted their due diligence on the market, on the properties, and on the provider. You need to know what your long-term end goals are and when you want to take that next step. So, anyone who&#8217;s pushing you or influencing you, run and don\u2019t buy. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">The fact it, where one door closes, another one will open. I strongly believe that there are so many opportunities to make money, and there are so many markets\u2014so don\u2019t succumb to the pressure. Take your time.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">So, those are my three tips for you guys on how to vet a turnkey provider. A bit unconventional, a little different from what you\u2019re used to hearing from the others.<\/span><\/p>\n<p><a href=\"https:\/\/www.youtube.com\/user\/BiggerPockets\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-114268\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/08\/6.jpg\" alt=\"ad-youtube-channel\" width=\"706\" height=\"125\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/08\/6.jpg 706w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/08\/6-300x53.jpg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/08\/6-702x125.jpg 702w\" sizes=\"auto, (max-width: 706px) 100vw, 706px\" \/><\/a><\/p>\n<p><em><span style=\"font-weight: 400;\">Do you think I\u2019m right or wrong?\u00a0<\/span><\/em><\/p>\n<p><strong>I\u2019d love to hear from you in the comment section below.\u00a0<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The number one stigma in real estate is probably that which is attached to turnkey providers. Unfortunately, it is their fault. They have created a bad name for themselves. But for the minority out there who are looking to buy through a turnkey provider, here are some unconventional tips on what to look out for.<\/p>\n","protected":false},"author":1672,"featured_media":113672,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7363],"tags":[],"class_list":["post-117530","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-reits-passive-investing"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/117530","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/1672"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=117530"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/117530\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/113672"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=117530"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=117530"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=117530"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}