About Turnkey Investing

Having been in the industry for some time I can honestly say that there are good & bad turn-key providers in the area. Much like any business there are good people who honestly wish to help.

However, when you are looking at turnkey you need to look deeper & figure out your goals before even contacting a turnkey company.

One thing you as an investor should think about is what are your goals? Are you growing a portfolio for your retirement, for your children's future? Are you willing to take the hit when the house is vacant & most importantly, are you willing to challenge the property management company when they are trying to charge you for lease out costs or other expenses.

When buying a turnkey property you need to find out about the company you are dealing with. Who are the individuals you are working with, how much experience do they have & will they be around there to help you? Also, will they answer your calls? Do you have a consistent point of contact? Is the company transparent. You may wonder what I mean by transparent....does the turnkey company show you realistic expenses for the house that you are purchasing? Are they giving you information on the renovation that was completed? Can they provide before & after pictures? They may not want to give you a cost breakdown for the house & that is understandable, but they should be able to let you know the age of the water heater, the age of the air conditioner, is it central air, age of furnace, is the roof new, how the foundation is...(is it a cement slab or basement). The bones of the house so to speak should be clearly identified because many times, you may be purchasing a house & not even see it.

You need to trust this turnkey company since purchasing a turnkey property is an investment. An expensive investment. Turnkey is a great way to have an additional revenue source, however, it can be expensive.

The Property Management company will charge you a fee to basically handle the rental income & to pay you (usually 8-10%), however, that does not include repairs...those are added expenses. The company you purchased the property from may offer a warranty or grace period but after that period you are responsible for all expenses. Grant it, the PM company may try to have the tenant reimburse the expenses if it is neglect, but you will be out the initial expense. Will you see invoices for the repairs? The PM company will always markup the expenses, the question is, what is the markup percent? Some PM firms have it clearly identified in their contract & some don't. Always read the contract thoroughly.

You may hear statements from people saying "Turnkey Investment is a great way to earn passive income" which is somewhat true. According to Wikipedia, passive income is an income received on a regular basis with little effort required to maintain it. It is closely related to the concept of "unearned income".

I disagree that it is completely passive. Sure you don't really have to do any physical work to receive this income, however, you as the investor should be reviewing your statement monthly. You should be keeping track of what repairs are needed, if they are completed to your satisfaction. You still have expenses you as the investor will need to make, such as insurance payments, property taxes, loan payments & that does require some effort on your part. Also, you need to ensure regular scheduled maintenance is complete. The PM company can set it up for you, but you the investor needs to make those decisions. Again, how you as the investor takes care of the property will ensure if tenants will stay. Many times, I see investors purchase properties thinking that they will always have the rental income to offset their loan & then run into expenses, vacant houses & not be prepared.

There is a risk to turnkey investment. No matter how much someone tries to paint this picture that you purchase a property, you collect rents & live happily every after, no matter if someone tells you that they have the best PM firm...you as the investor needs to educate yourself. Do your homework. Investigate both the turnkey company & PM company. Investigate the area you are looking at. Determine if the risk factor is aligned with what you can afford.

If you do your homework ahead of time, you have a great chance of finding that perfect turnkey cash flowing house, however, if you just dive into this without knowledge...you could run into buying a house that will not rent, buying for more than what the house is worth or have a worst experience in the world & lose thousands of dollars.