Buying a turnkey investment property is a very straight-forward process, but that doesn\u2019t mean you should let any due diligence slide. Or, if you\u2019re like some and leery about turnkey providers, there are simple things you can do to hopefully make yourself feel better about going forward with a purchase.<\/p>\n
I have no idea how long the concept of turnkeys has been around, but I believe it is a concept that has been picking up steam more in the last few years and will most likely continue to be a growing niche. Reason being, people are busy. Not everyone wants to flip a house, or manage a rehab crew, or find motivated sellers, or interview tenants, or take repair calls at midnight. All the while, people do want to move their money out of banks and into something more promising. So what do you do? You buy a turnkey property that you own outright and reap the benefits as you would any other rental property, but yet all the work is done by someone else. The property is fully rehabbed, tenants are already placed, and property managers are standing by waiting to oversee the property once you buy it. Easy. The name says it all- turnkey (or turn-key, or turn key, or any other numerous ways to spell it). The idea is all you have to do is put the key in the door, turn it, and voila! That\u2019s the most work you had to do. I think it is even easier than that though because I\u2019ve yet to have ever even had my hands on a key to any one of my properties.<\/p>\n
So as this booming industry keeps booming and more people are getting interested in this concept, how can everyone be sure they aren\u2019t being taken advantage of or getting ripped off or buying a totally bogus investment property? As with anything else, especially real estate investing, education is your biggest safeguard. So allow me to educate you.<\/p>\n
Before I go through the due diligence process of buying a turnkey investment property, you need to understand one simple premise that may seem kind of dumb, but it has meaning. And that is:<\/p>\n
You are buying a property. You are not<\/i> buying into a seller.<\/p>\n
Let me explain. All that matters at the end of the day is the property. It doesn\u2019t matter who sold it to you and it certainly doesn\u2019t matter how much they made on the deal. After you close on the property, it\u2019s all you so all that should matter from day one is the returns. You will probably never talk to the seller again (unless you go back to buy another one), so if anything is wrong with the property or there are any problems, the seller will doubtfully be there to pet your head while you cry. Contrary to this idea is that if you don\u2019t like the seller, the seller is a jerk and severely lacking customer service, or even if you looked him up online and he has some kind of felonious past, that doesn\u2019t matter either because all that matters is the property. I bought a turnkey from a company one time who had this real estate agent I just couldn\u2019t stand who not only stunk (like, literally stunk), but he was an outright ass, and often. If I had been in it for the customer service, I would have been out of it without a second blink. I had to remind myself numerous times that I\u2019m not buying into this company or into this agent, I am buying this rockstar rental property and once I close on it, it\u2019s all mine and that\u2019s all that matters. Since then, I\u2019ve met some turnkey providers with amazing properties and deals, only then to find out about past real estate convictions on their records. Do I care? Nope. I\u2019ll find out what the convictions were for, and as soon as I see they aren\u2019t related to their current business I\u2019m usually cool with it. Why? Because all that matters is the property I\u2019m getting.<\/p>\n
Related<\/strong>: 4 Most Common Mistakes When Buying Turnkey Real Estate<\/a><\/em><\/p>\n So now that you know the guy who is about to sell you a turnkey property is a convicted felon and will be nowhere to be found if you need any help after you close, how can you protect yourself against any of this affecting your investment? Simple. Due diligence.<\/p>\n (Okay, way extreme on the worst-case scenario there, and to be totally transparent, most turnkey providers don\u2019t have sketchy backgrounds and even the ones who I know of that do, I love and would still work with any day. \u00a0I am also referring to no one on BiggerPockets who is associated with turnkeys; the guys I know of who fit this bill have probably never even heard of BiggerPockets. Even better, almost every provider I know will still be in touch after you purchase if you need any help, but understanding that they don\u2019t have to be is important.)<\/p>\n There are a few easy things you can do when pursuing a turnkey rental property that will protect you from most worst-case scenarios. Not only are they easy things to do, but they are extremely low-cost to do, if not free. Bonus!<\/p>\n Remember, any repairs that are done before you close are at the expense of the seller. Any repairs done after you close are on you. Make sure you find everything you can about that house so a) you don\u2019t have to pay to fix an already-existing problem and\/or b) you have a chance to bail on the property if a problem is too bad.<\/p>\n Doing those three things should save you from most catastrophes when buying a property. They won\u2019t help with chronic vacancies or bad tenants down the road (you\u2019re on your own for those and why I recommend going with higher-end properties), but they should prevent you from any unexpected major repairs right out of the gate and avoid any scamming or sketchiness in terms of ownership. The only other things that may help in your turnkey buying experience is finding reputable providers, either by asking around for who other investors have used or recommend (perfect use of the BiggerPockets forums!), and you can also ask providers for references. I\u2019m always leery about references because I assume anyone can have you call their best friend who will pretend to be a buyer and say positive things all day long so long as they are being paid with a case of beer, but I think references can help. More than just asking about the company and their properties, you can ask for references for the property management side as well so you can get a feel for how well your property will be managed.<\/p>\nSimple (yet effective) Due Diligence When Buying a Turnkey<\/h2>\n
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