{"id":88105,"date":"2019-08-20T09:00:03","date_gmt":"2019-08-20T15:00:03","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=88105"},"modified":"2023-11-06T14:12:55","modified_gmt":"2023-11-06T21:12:55","slug":"dont-buy-turnkey","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/dont-buy-turnkey","title":{"rendered":"4 Reasons to Never Invest in Turnkey Real Estate (From a Turnkey Provider!)"},"content":{"rendered":"<p>Curious about <a href=\"https:\/\/www.biggerpockets.com\/blog\/2015\/12\/15\/turnkey-real-estate\/\" target=\"_blank\" rel=\"noopener noreferrer\">turnkey real estate investing<\/a>? Turnkey investments might be right for some, but before you jump in, it&#8217;s important to consider the cons. Without further ado, let&#8217;s dive into the four top reasons why you should never\u2014and I mean never with a capital &#8220;N&#8221;\u2014 invest in turnkey real estate.<\/p>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/5-KhFtsQLi8?ecver=1\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>The Top 4 Reasons to Never Invest in Turnkey Real Estate<\/h2>\n<h3>1. Someone else does the work\u2014and takes the profit.<\/h3>\n<p>So, the first one\u2014and the biggest reason in my opinion why you should never invest in turnkey real estate\u2014is that you are going to be paying someone else an absolute fortune to do all of the work for you. Meaning, instead of you going out and finding the property yourself, buying it distressed, renovating it, getting it tenanted, and managing it all by yourself, you\u2019re going to have to pay for a turnkey company to do that. And then they\u2019re going to put a big, fat margin for their labor so they can make the biggest possible profit, and then they\u2019re going to sell you the property. So that is the first reason why you should never buy a turnkey property\u2014it comes with a big, fat margin in place that you can just avoid by doing all of the work yourself.<\/p>\n<h3>2. You might land a crappy property in a crappy location.<\/h3>\n<p>The second reason\u2014and the likelihood of this happening is huge,\u2014is that you will most likely be buying a crappy property in a crappy neighborhood. And the workmanship that is being conducted on this property is not going to allow it to be self-sufficient and self-sustainable for the long haul. A lot of turnkey real estate companies out there just put lipstick on the pig. And I mean literally they just paint it, and that is all. No mechanical work is done; no electrical work is done. There are turnkey companies out there that are known for taking a photo of a house next to yours that looks prettier and sending you the photo of that house but selling you another house. I mean, I\u2019ve heard horror stories in the past where a turnkey company would send you a photo of a house, but they would sell you an empty lot. It is an absolute nightmare, so you really, really have to look out for these things.<br \/>\n<em><br \/>\n<strong>Related:<\/strong> <a href=\"https:\/\/www.biggerpockets.com\/blog\/turnkey-properties-expertise\" target=\"_blank\">3 Things You Don\u2019t Have to Think About With Turnkey Properties (&amp; 3 Things You Do)<\/a><\/em><\/p>\n<h3>3. You may overpay.<\/h3>\n<p>And that brings me to the third thing you need to guard against: You will be buying these crappy properties for way more than what they\u2019re worth. Now, a lot of turnkey companies out there will justify selling for more than what they are worth with these grand overheads. They\u2019ll say, \u201cI\u2019ve got to pay all of these people, and I offer this amazing service,\u201d even though they don\u2019t. And they\u2019ll justify selling the property for more than what they\u2019re worth by calculating huge overheads. Do not buy into that. Do not buy these properties. You are set for disaster from day one. We all know that you make money in real estate when you buy, not when you sell. And if you are buying a property for way more than it\u2019s worth, you\u2019re not going to have an exit strategy. If you need to sell this property quickly, you\u2019re not going to get what you paid for it. What I want to say is <em>do not invest in a turnkey property unless you can park that money and forget about it.<\/em><\/p>\n<p>Now, there are some turnkey properties out there that are selling properties for more than what they are worth, offering a good product and a good service. But if you need to cash out of that investment, you\u2019re not going to get your money back. So make sure you are buying and holding for the long haul.<\/p>\n<h3>4. Property management may not care about your investment.<\/h3>\n<p>Last, but not least\u2014and this one is one of my favorites\u2014is the subject or outsourced property management companies. So, the first thing they have done\u00a0is absolutely made a fat profit by selling you a turnkey property. Now, unfortunately, they\u2019ve sold you that property in a crappy area with a crappy renovation done to it, then you\u2019ve paid more than what it\u2019s worth. And now you get the cherry on top, guys. The cherry on top is that\u00a0you get passed onto an outsourced property management company that doesn\u2019t care about you, that doesn\u2019t care about the turnkey company. All they care is about their own pockets. They turn tenants over so they can charge you one-and-a-half months&#8217; rent for new tenant placement. They rack\u00a0up those maintenance bills so they can up-charge the maintenance bills. They charge\u00a0you $20 in administration fees every time they scratch their head and a huge $400-$500 annual leasing renewal fee for literally signing one document.<br \/>\n<em><br \/>\n<strong>Related:<\/strong> <a href=\"https:\/\/www.biggerpockets.com\/blog\/2016\/07\/29\/choose-turnkey-vs-diy-rentals\/\" target=\"_blank\">Choosing Between Turnkey &amp; DIY Rentals? This is a MUST-Read Before You Decide!<\/a><\/em><\/p>\n<p>There you have it\u2014it\u2019s coming from a turnkey provider. Am I talking myself out of business? Probably, but it doesn\u2019t really matter; I just want to educate all of you guys out there. I want you to understand all the pitfalls and that it\u2019s not for everyone. It\u2019s not supposed to be for everyone. There are a lot of strategies in real estate that you can utilize to make a lot of money. Many of the most profitable strategies require you to be involved with your time\u2014your blood, sweat, and tears. You need to involve a lot of time in it; that\u2019s when you will make the most profit. Now, if you do not have the time or you do not have the knowledge or just don\u2019t want to do it, there are other strategies for you guys out there that you can get to do it for you, but you have to understand the returns are going to be much lower.<\/p>\n<p><em>We&#8217;ve updated this article and are republishing it to help out our newer readers.<\/em><\/p>\n<p><a href=\"https:\/\/www.biggerpockets.com\/webinars?utm_source=newsletter\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-91217\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01.jpg\" alt=\"\" width=\"700\" height=\"85\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01.jpg 700w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01-300x36.jpg 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/a><\/p>\n<p><em>What do you think\u2014would you consider investing in turnkey real estate? Why or why not?<\/em><\/p>\n<p><strong>Let me know with a comment!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Yes, I&#8217;m a turnkey real estate provider, but I still think everyone should know the truth about turnkey real estate. Here are the top reasons to never invest in turnkey rentals (so you can make a better, more informed decision).<\/p>\n","protected":false},"author":1672,"featured_media":114632,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4252],"tags":[],"class_list":["post-88105","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-deal-analysis"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/88105","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=88105"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/88105\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/114632"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=88105"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=88105"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=88105"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}