Turnkey Due Diligence

[Sal Mazzone]

Exploring the idea of investing in turnkey/out of state properties.  Before everyone starts bashing the idea, I've read enough on here to see there's 2 points of view- you either hate the idea or love it.  I believe I fall right in the middle.  I own rental properties locally in a very expensive market and would like to diversify my portfolio and explore several turnkey providers around the country.  

I've put together a list of questions to perform some due diligence on the turnkey providers and wanted to see if anyone can suggest anything else I am missing or should focus on.

Below is the rough list I put together.  Thanks!

Cities/Neighborhoods Available

Price Range by class

Pro Forma ROI

Neighborhood class range

Cap rate

Vacancy Rate

Average Rental rates

Management company (internal or external)

Years turnkey in business

Years management in business

Properties under management

Monthly Management Fee

Other Management fees

Tenant Screening process

Can properties be independently appraised?

Can properties be financed?

Available Inventory

Any Guarantees?

Crime Rate of Area

Market Growth

[Matthew Fritz]

Hey Sal,

Great list, just a few things to add!

Tenant Turnover - Do they have strategies in place for when my property becomes vacant? Do they have a standard for their paint, flooring, siding, etc. to cut down on turnaround costs? 

Boots on the Ground - Do they have an office that I can visit to meet the team?(this is a huge one for me, I need to know that they have boots on the ground and have a personal interest in the area I am investing in.) 

Marketing Vacancies - Does the property management company do this or do I have to? What strategies are used when marketing the property, for instance, holding open houses, listing on top listing sites, staging the property, etc.)

Occupancy Rate / Properties under management - Make sure you ask the property management company how many units they have under management and what the occupancy rate is.

Lease Term - Ask if they have a minimum lease term for their tenants. I don't want tenants to constantly move in and move out, making me touch up the property every time and cutting into my turnaround costs. I need to know that the tenants they place will be there for at least a year. 

Evictions - If a tenant needs to be evicted who handles that? Do I have to go to court or does the property management company go on my behalf?

Hope this helps and happy investing,

Matt