ARE TURNKEY PROPERTIES RIGHT FOR ME?

ARE TURNKEY PROPERTIES RIGHT FOR ME?

Deciding to invest in real estate can be a great decision. However, finding the right niche is an entirely different topic. You need to decide on what type of investments to focus on first, set your foundation and then try to diversify in the future. Most of the time, this is going to be based on what type of properties you choose. If you’re looking for something with less upfront involvement, turnkey real estate may be the right choice for you.

What Are Turnkey Investments?

A turnkey property is one that has already been rehabbed, or fully renovated. It can be purchased by an investor, and be ready to rent out immediately. In some cases, these houses are already tenant occupied. These properties are popular with most investors, especially if you do not have the time, or the knowledge to rehab a house.

BENEFITS

1. Saves Time And Energy

Turnkey properties are fully remodeled, move-in-ready, so the investor does not have to spend time completing the rehab. Investing in real estate is a demanding enterprise, whether you’re doing this part-time or full time. Investors may find it in their best interest to save time, and the hassle involved with a rehab project.

2. Can Be Rented Out Quicker

Purchasing a turnkey property allows the investor to place a tenant right away. Instead of spending time completing the rehab, you’ll be placing a tenant. This means you can be collecting rental income, instead of the months completing the rehab.

3. Gives You The Ability To Invest Out Of Your Area

There are times when your local market isn’t presenting any good investment property deals. Purchasing a turnkey property will give you an opportunity to expand the investment property pool. This even allows you to invest in out of state properties. That’s why some experienced investors are compelled to invest outside of their locale, and search for more income-hefty areas. Turnkey properties remove the inconvenience of having to oversee a rehab project. Better yet, get a trusted Property Management Company to take care of it for you, while you sit back in the comfort of your home without worrying about anything.

These are just some of the long list of benefits that turnkey investments provide. As with all investments there are some risks involved. Here are some of the common items you should consider, along with ways on how to counter them.

RISKS

1. Not Getting Your Money’s Worth

It’s easy to get caught up on offers advertised as “cheap” or below market value turnkey properties. You may think it’s a good deal because it’s already renovated and the price is low, but you need to consider other factors too. Remember, if you’re planning to make a profit off these properties, you should always be diligent with your purchasing decisions. They shouldn’t be based on price alone. Below market value properties can often lead to low rental prices, which means lower income for you as the investor.

Solution: venture for properties that can give you good returns. A good ROI, (return on investment) to start with is at least 8% or above.

2. Having A Property That Is Poorly Renovated

One common mistake is that some investors rely solely on what the seller’s inspection report says, and pass it off as “good enough”. When purchasing from turnkey companies, they usually have their own team that does the inspection for them and investors fall victim to the appealing reports. This may be due to the fact that most people find it hard to set aside their time to personally show up and conduct the inspection themselves.

Solution: hire an unbiased third party inspector to do it for you. Make sure that everything from the interior and exterior of the property is checked including electrical, plumbing, heating systems, roof, structural, etc.

3. Investing In A Bad Market

This is something that’s overlooked by a lot of investors. Often, the investor does not pay enough attention to the property's neighborhood. Even a good house, in a bad neighborhood, can suffer low returns, or difficulty renting. This involves not doing a proper location analysis.

Solution: location and real estate comparables are of utmost importance. If done properly, this allows you to determine whether the property is worth its price, and whether the location can give you a reasonable rate of appreciation in the following years.

4. Not Working With A Reputable Company

Not conducting due diligence on who you partner with can definitely hit you hard in the end. Almost all companies that deal with turnkey properties claim they’re the best in the business. What you’re trying to look for is credibility.

Solution: a company that doesn’t manage their own investment properties is sure to raise some eyebrows. Research those who have their own portfolio of turnkey properties, and take notes of their track record to get a good sense of their overall credibility. Plus, it also helps to know how long they’ve been in the turnkey investment property business.

Purchasing turnkey investment properties is a proven great investment strategy. Now it's up to you to decide, are Turnkey Properties right for you?