Turn-key investments, do they work?

Question

Hi all,

The idea that investing a sum of money with a seller and receiving passive, residual income sounds like a dream, but does it really work?

I was recently offered an opportunity to make upwards of 40% on my investment in which case I had to decline because there was too much gray area (and no address! Ha)

Anyways, I like the idea, but want to make sure I am using the right sources and that I have an exit strategy.

Thoughts??

Aaron

Ali Boone · Answer

I've always only bought turnkeys. It can definitely work--all my properties cash flow really well and because I bought when I did, I've already had access to some nice appreciation/equity.

So yes, it can work for sure because it has for me, but you very much so need to work with the right outfits. Good call on that gray area and no address issue. And any promise of 40% is bunk. But there are a lot of good ones out there too! Reach out anytime if I can help.

Tom Ott · Answer

Turnkeys can be amazing especially when you are investing out of state, or just want to keep things passive on your end.  Those numbers sound a bit off. Always do your research! make sure the company is a real turnkey provider and not just some agent showing you a home off of the MLS. Also, make sure the market is one you want to get in to.

I would suggest checking out:

How to Find the Right Turnkey Real Estate Investment Company for You

and

The Best Types of Markets for Profitable Turnkey Properties

That should help you get moving or at least form some questions to ask.

Good luck!

Grant Diggles · Answer

Aaron H., that sounds like a whole lot of "nope" right there. While turnkey real estate investing is a very viable and established means to invest, trends will tell you that you can reasonably expect 9-15% returns on most turnkey investments. Some go even higher, but they become very rare as the percentage goes up. 40% would seem impossible within the realm of traditional turnkey investing.

If you're looking for viable strategies to creatively invest in real estate please feel free to reach out and I'd be happy to discuss... but approach this 40% deal with extreme caution.

Happy investing.

Alexander Zurn · Answer

Aaron H. that sounds typical of a turnkey opportunity provider. Giving you a lucrative return… I don't know your experience/knowledge/situation, but if it is THAT good how have other passed on it? Are you the first to hear of the deal?

The important thing with turn key properties are to do your OWN analysis. Approach the property as if you were buying and renting it out on your own. Do you still see the 40% return? WITH the property management fee you would be paying? Find comps (rental & resale value), use the BP Calculator, and understand the numbers going into it.

Ask them questions too! Even though it seems that they have the power because they are offering you money, YOU are in control. Put them on the hotseat, get every ounce of info out of them and read their body language as they tell you more. Ask: "Why shouldn't I do this?" "What am I missing?" they should provide you every detail if they are going to use your money to better their business.

Jeff Keller · Answer

For someone to offer you an investment opportunity to get a 40% return implies they are able to get more than 40% or they don't have enough money to do the investment.

Nothing wrong with turn-key investments. A dramatically over promised investment is a con no matter what the investment is for.