Top 6 Questions to Ask a Turnkey Provider

The turnkey provider industry has a dark side. Investors need to be wary about whom they choose to do business with. Be patient and do your due diligence before buying a turnkey rental from just anyone, because that relationship is important to your success as an investor. Here are six questions to start with when considering a turnkey provider.

1. Does Your Company Own The Properties?

A lot of companies that call themselves turnkey are actually brokers or property marketers. They may come across like the properties they advertise are theirs to sell, but that’s not always the case. The reason you don’t want to work with companies like this is that they mark up the properties unnecessarily so there’s skin in the game for them. They typically also only represent a handful of companies, so you’re not getting a true representation of available properties within a given market. Worse, since that company doesn’t actually own the property to begin with, they have zero accountability for any problems. You’ll just be handed off to whoever actually does own the property and pay extra on top of it.

You should only deal directly with turnkey companies that own the properties they advertise. They take responsibility to ensure the property is “as advertised” because their reputation is on the line. They have accountability and you have the peace of mind knowing you’re working with the actual owner.

2. Do You Have References I Can Check?

An upstanding turnkey provider won’t be offended if you ask for the contact information of one or two previous clients. You should be able to contact references directly to ask some pertinent questions about working with the company. If a turnkey provider says they won’t give you that due to privacy or some other reason, be suspicious. You’re not asking for investor information; you’re just asking to conduct a standard verification that the company is operating with truthfulness and honesty.

3. What Kind of Renovations Does Your Company Do?

Another scam that some companies falsely calling themselves turnkey pull is not renovating the properties at all. They call themselves turnkey, but the property isn’t turnkey at all. Don’t work with a company that isn’t willing to share up to date photos of the current condition, along with a list of completed renovations. Otherwise you’ll be the one stuck footing the bill on renovations, while paying full price for an over-valued property. In addition, you want to buy properties that are already renovated. You don’t want to delay your rental income because you’re still waiting for the turnkey provider to finish work.

4. How Long Have You Been in Business?

Obviously every company has to start somewhere. But you do want to work with a turnkey provider that has some level of experience in real estate investing. Ideally they will have been in business long enough to establish some kind of track record of helping investors make money. If some of that experience comes from personal real estate investments, it’s okay. You’re just looking for a turnkey provider that didn’t just drop out of nowhere. Not if you’re going to invest your hard-earned money.

5. Do You Deliver Properties With Paying Tenants?

It’s impossible for a turnkey provider to offer occupied rentals 24/7. Leases end and cleaning and repairs have to be made. But for the most part, any reputable turnkey provider should be offering tenant-in-place rentals. Not only does this give you cash flow from day one; it also assures that you’ll have a record to look at of how much the place has been renting out for over a certain amount of time. Nothing spells proof of possible rental income like deposit receipts. Don’t be afraid to ask for proof that a property can rent for the advertised rate before you invest.

6. How do You Handle Property Management?

There are two schools of thought regarding property management on turnkey provider properties. One is that it’s best to look for one that handles PM in-house. The other is that it’s best to have a third-party PM to avoid conflict of interest. In my opinion, either way is fine as long as the PM is high quality, you’re not paying overmarket rates, and all the documentation runs through the investor, not the turnkey provider. Unfortunately, some turnkey providers actually contractually force investors to use their PM for a year after buying. Why? It’s likely kickbacks or some other reason that costs the investor extra money. So make sure that if you do use the turnkey provider PM it’s your choice, not a forced decision.

You should feel very comfortable working with your turnkey provider. If you have any doubts at all, ask more questions or do more research. Follow your instincts so you can be sure to choose one that can be your partner for the long-term.