{"id":161517,"date":"2023-11-01T12:47:21","date_gmt":"2023-11-01T18:47:21","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=161517"},"modified":"2023-11-21T02:56:47","modified_gmt":"2023-11-21T09:56:47","slug":"myths-of-turnkey-investing","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/myths-of-turnkey-investing","title":{"rendered":"Debunking the 7 Myths and Misconceptions About Turnkey Investing"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC7688559931\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p><span data-preserver-spaces=\"true\">When it comes to the rabbit hole of real estate investing options, the word &#8220;turnkey&#8221; is among the most commonly used but poorly applied terms around. In fact, many businesses use \u201cturnkey\u201d in their marketing materials just to capture a large audience.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Turnkey investing is still a highly valuable investment strategy that offers many clear advantages that would otherwise be difficult to come by. The most obvious reason to use this strategy is that the properties are already livable\u2014you won&#8217;t spend nearly as much time on renovations and repairs.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">I&#8217;ve found that these properties are also more affordable in comparison to building from scratch. Good prices are necessary at a time when property values are increasing rapidly. You won&#8217;t need to consider material costs or try to find affordable contractors, which will make it easier for you to maximize your returns.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Turnkey investing allows you to add real estate to your portfolio quickly while benefiting from good loan terms and low down payments. In fact, this might be the simplest way to get into real estate investing if you don&#8217;t have much experience. Keep in mind that&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/best-countries-in-europe-to-invest-in\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">international real estate investing<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;is also more feasible with turnkey properties.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">When properly utilized, turnkey investing is among the best strategies you can implement when you&#8217;re trying to grow your investment portfolio. As with any investment, regardless of whether it&#8217;s classified as turnkey, you must develop a clear idea of your investment goals before making sure to properly vet any investment opportunity you find.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">There are also many preconceived notions about what exactly turnkey investing is, why someone should or shouldn&#8217;t invest in these properties, and what the pros and cons are. These ideas come from the assumption that \u201cturnkey\u201d can be placed under a single category, which is impossible.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Over the past decade that I&#8217;ve been in the industry and part of the leading turnkey investment company, I&#8217;ve observed how the industry has evolved over time and why it&#8217;s necessary to address the most common misconceptions about turnkey investing. Here\u2019s a look at them.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Myth Number 1: Turnkey Investing Is Fully Passive<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Turnkey investing is often more&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/passive-real-estate-investing\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">passive<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;than other types of investing when you&#8217;re self-managing, attempting to rehab\/BRRRR properties, or investing on your own. However, this approach isn&#8217;t entirely hands-off. You&#8217;ll need to manage the property manager you hire and make sure that everyone on your team is operating as they should.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">If you&#8217;re working with a great turnkey team, all the necessary systems should already be set up for you. That said, you&#8217;ll still be tasked with spending some time on this investment strategy.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">In fact, I would argue that there&#8217;s no such thing as fully passive income. You always need to manage your money, which requires at least a small level of involvement. However, in the world of real estate ownership, turnkey investing can be more passive than other forms of active investments.<\/span><\/p>\n\n\n\n<p><strong><em><span data-preserver-spaces=\"true\">Related:&nbsp;<\/span><\/em><\/strong><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/turnkey-vs-fixer-upper\" target=\"_blank\" rel=\"noopener\"><strong><em><span data-preserver-spaces=\"true\">Should You Invest In Turnkey Properties Or Fixer-Uppers? Here\u2019s The Pros And Cons Of Each<\/span><\/em><\/strong><\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Myth Number 2: Turnkey Offers Lower Returns Than Investing on Your Own<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Another turnkey investing myth is that it offers lower returns than investing on your own. This can be true if you&#8217;re an experienced investor with a proven business model where you add value to rental real estate. I do think, however, that the risk is higher if you&#8217;re a new investor.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">It&#8217;s fine to do things on your own, but you should expect to make more mistakes in the beginning as you learn. Some of those mistakes can wipe out decades&#8217; worth of returns, which is just part of the game. Having a consistent experience with a long-term tenant in a strong market is far more important for long-term returns versus trying to force equity through rehab or buying a below-market property in a location that might not provide consistent long-term returns.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Over the years, I&#8217;ve learned that choosing the right market location is much more important for long-term equity growth than trying to rehab a property in a market that has low returns in an attempt to force equity. I&#8217;ve been able to create way more equity and cash flow in properties I didn&#8217;t rehab in good markets than properties I rehabbed in markets that weren&#8217;t as attractive.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">We&#8217;ve all heard the saying &#8220;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/breaking-down-the-location-location-location-principle-in-real-estate\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">location, location, location,<\/span><\/a><span data-preserver-spaces=\"true\">&#8221; so I guess there&#8217;s some truth to that.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Myth Number 3: There Is No Equity in Turnkey, and They\u2019re Overpriced<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">This myth is certainly not true with many of the markets that turnkey investors focus on, especially with new construction. In this case, many properties have immediate equity that can be as high as 10% to 20%.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">There have definitely been some bad actors in the past that have overpriced inexpensive homes in poor locations while also requiring all-cash sales, where you can&#8217;t obtain an inspection or appraisal. However, this isn&#8217;t true of the turnkey industry as a whole. I believe that a few of the businesses that have attempted this strategy didn&#8217;t survive for very long. This is likely where the misconception came from.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">All sellers want to offload their homes at the highest market value possible, especially if the home was newly built or recently renovated. In the turnkey industry, however, there are times when the buyer has more negotiating power and incentives that the average seller wouldn&#8217;t provide.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">When looking at it from a volume perspective, it&#8217;s possible to achieve below-market pricing in situations where there\u2019s volume. By partnering with a real estate investment company, individual investors are able to benefit from wholesale pricing in certain new construction locations. This option exists because the real estate investment company is able to commit to many transactions.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The company can then use this position to negotiate discounted prices that the individual investor otherwise wouldn&#8217;t have access to. If an individual investor is purchasing one or two properties, they&#8217;ll likely pay at or above the market price. This is yet another example of how buying properties via a turnkey group allows for discounted pricing that you wouldn&#8217;t be able to access on your own.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">There are also many additional benefits that occur when you buy with a reputable turnkey provider that will stay on even after the transaction. The turnkey provider you partner with can assist with things like management and potential maintenance or tenant issues. This benefit isn&#8217;t available when you buy from a random seller on the MLS.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">In short, there are turnkey solutions that can be purchased below market value and may come with added benefits.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Myth Number 4: Investing in Turnkey Removes All Risks<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">If you own&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/are-rental-properties-a-good-investment\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">rental real estate<\/span><\/a><span data-preserver-spaces=\"true\">, you&#8217;ll invariably be subjected to the same&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/what-are-investors-ignoring\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">risks<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;as everyone else, including market changes, costly maintenance items, property management issues, and unfavorable tenants. While many of these risks can be mitigated by investing in real estate with a well-established team that has the right systems in place, they will never be fully removed. Make sure you keep adequate reserves for any investment property you buy and know that, ultimately, you are the owner of the property.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Turnkey can be an easy, effective way for investors to get started, diversify their portfolios, and scale their holdings. Whether you&#8217;re a new or seasoned real estate enthusiast, the turnkey strategy can be advantageous to your position.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Myth Number 5: Turnkey Operators Won&#8217;t Rehab Older Homes in Cheap Markets that Won&#8217;t Appreciate<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">This is partially true because some rehabbers give turnkey a bad name. However, it&#8217;s certainly not true of everyone in the turnkey space.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">There are turnkey providers across the country that operate in almost every market throughout the U.S. Remember, turnkey investing is a diverse industry that has many different business models.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">There are some turnkey operators that specialize in&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/on-the-market-138\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">new construction<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;in growth areas, while other investors focus on more affordable markets like the Midwest. It&#8217;s important to match your goals with the team and market that makes the most sense for you.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Garnering long-term success with this strategy is only possible with the right approach. Look for great growth markets that have low maintenance, strong cash flow, some amount of immediate equity, and the ability to attract quality tenants.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Myth Number 6: You Need a Significant Down Payment to Buy Turnkey Properties and Have Limited Financing Options<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Among the most common misconceptions about turnkey investing is that you need to make a sizable&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/down-payment\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">down payment<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;to purchase turnkey properties since the financing options are limited. This is simply not the case at all.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">In my opinion, a turnkey operator should never dictate what financing you need to use or require things like all-cash purchases. These are red flags that you should be on the lookout for during your research.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">If a team wants to set you up for success, they&#8217;ll present multiple financing options and help you understand what they mean to you based on your goals. However, they&#8217;ll leave the final decision up to you.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">You can get some great terms when it comes to seller financing or investor loans. For example, some&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/how-to-find-investor-friendly-mortgage-lender\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">investor loans<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;are available with a down payment of just 5% to 10% and no private mortgage insurance. These are true portfolio loans that don&#8217;t require the same underwriting as a conventional loan. If you want to use conventional financing, however, you certainly could.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">It&#8217;s ultimately up to the investor as to what type of loan options they&#8217;d like to use that makes the most sense to them. There are numerous loan options you can select from when investing in turnkey properties, which include low&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/rookie-259\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">down payments<\/span><\/a><span data-preserver-spaces=\"true\">,&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/dscr-loans-what-are-they\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">DSCR loans<\/span><\/a><span data-preserver-spaces=\"true\">, and&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/seller-financing\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">seller financing<\/span><\/a><span data-preserver-spaces=\"true\">. Having multiple financing options at your disposal is a tremendous benefit at times when interest rates are highly dynamic.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Myth Number 7: Turnkey Properties Are Only Single-Family Homes<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">As mentioned, turnkey investing is a very diverse space with a myriad of business models. Turnkey operators can specialize in alternative investment options, multifamily properties, commercial investments, etc.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">You can invest in single-family, multifamily, commercial, new construction, and development projects, all of which are classified as turnkey properties. It&#8217;s also possible to put your money into syndication funds. There are plenty of opportunities to engage in turnkey investing without limiting yourself to single-family homes.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Don&#8217;t Walk Away From Turnkeys<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">I hope this has helped you understand how to further research and consider turnkey investing to determine if it&#8217;s a strategy that will assist you in accomplishing your investment goals.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">At Rent to Retirement, we can help you find the right turnkey properties for your portfolio. Call us today to schedule your first appointment.<\/span><strong><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/strong><\/p>\n\n\n\n<div class=\"wp-block-group border border-gray-200 p-6 rounded-md has-slate-50-background-color has-background\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\">\n    \n  <div \n    id=\"segemnt-view-event-block_624f52525847f\" \n    class=\"  \"\n    x-intersect:enter.once=\"\n      analytics.track('DoorLoop Blog Sponsor View', {\n        referrer: 'https:\/\/www.biggerpockets.com\/blog\/myths-of-turnkey-investing',\n              })\n    \">\n    \n  <\/div>\n  \n\n\n<h3 class=\"wp-block-heading has-text-align-left mt-0\"><strong>This article is presented by Rent To Retirement<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/03\/rtr.png\" alt=\"\" class=\"wp-image-147742\" style=\"width:294px;height:207px\" width=\"294\" height=\"207\" title=\"\"><\/figure>\n\n\n\n<p>Rent To Retirement is the Nation&#8217;s leading Turnkey Investment Company offering passive income rental properties in the best markets throughout the US to maximize Cash Flow &amp; Appreciation! Rent To Retirement is your partner in achieving financial independence &amp; early retirement through real estate investing. Invest in the best markets today with a comprehensive team that handles everything for you!<\/p>\n\n\n\n<div id=button-custom-event-block_63c9a33918e17 class='button-custom-event'>\n      <a href=\"https:\/\/renttoretirement.com\/\" x-on:click=\"window.analytics.track(&#039;Sponsored Blog CTA Click&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/myths-of-turnkey-investing&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\" rel=\"noopener\">Learn More About Rent To Retirement<\/a>\n  <\/div>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\"><\/div>\n<\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>When it comes to the rabbit hole of real estate investing options, the word &#8220;turnkey&#8221; is among the most commonly used but poorly applied terms around. Here are seven common myths and why you should invest in these properties.<\/p>\n","protected":false},"author":613655,"featured_media":161519,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7380,7119],"tags":[],"class_list":["post-161517","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-long-term-rentals","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/161517","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\/613655"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=161517"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/161517\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/161519"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=161517"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=161517"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=161517"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}