Are you pressed for time?
Do you want to make money before you get out of bed?
How does financial freedom and living life on your terms sound?
You want to invest in real estate, but you don’t really have the time to manage your properties. It’s quite common, and while some of you will be ok with investing in stocks, a lot of you will be looking to invest in something more stable.
To many of you who don’t want to go through that hard work of managing all the details that can come with real estate, turnkey real estate investing presents a good opportunity to diversify your assets and get more cash flow right from the beginning. Typically, investing in real estate means you have to take care of your invested property, and you have to ensure all needed repairs are done each time a piece of equipment fails or there are other issues with the property. You also have to look for prospective renters. There is a lot of running around to be done after you buy an investment property.
This is where turnkey real estate comes in. A turnkey real estate company allows you to buy a property without the headaches attached with its maintenance and rentals. This simply means that while you own a property, someone else will help you buy that property, manage that property, find renters for you, decide on the rental rate, and also advise you when the time is right to sell that property. The renter for your property is already there and the property repairs are already done even before you make the final payment and close on the property.
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
Why Invest in Turnkey Real Estate?
Investors attracted towards turnkey properties often find a lot of reasons to invest in such properties. Here are some solid reasons for investing in turnkey properties:
Ease of Investment
Investing in a property, especially when it’s located in a distant location, is not always easy. The issues that come up with finding a good team, a reliable real estate agent, a trustworthy contractor and a good property manager not only take up your time, but can also consume a substantial amount of money.
However, a turnkey real estate investment allows you to invest in a good real estate market, whether near or distant, without your in-depth involvement and the need of your physical presence at that location. Nowadays, a lot of people rely on turnkey properties to invest in out of state locations where cash flow tends to be higher. For example, a lot of investors living on the East and West Coast of the US, along with other markets across the world, approach turnkey property companies in the Midwest, as cash flows are pretty decent here.
A good turnkey company knows the heart of the market in which they’re operating. They know the local laws, the pros and cons of investing in that area, the social changes that may affect the economy and the property rates of that area.
Basically, a good turnkey company knows the ins and outs of a market, which an outsider seldom knows. But that’s not only important when you’re investing in a distant location. Even in your own backyard, if you don’t have the proper experience or a good support team, you might run into issues.
A good turnkey company’s staff displays a professional attitude that can go a long way. They’ll answer your call each time you ring them to ask a question, and they’ll be prompt in carrying out the repairs of your property. They’ll be agile in finding you a tenant and signing the lease with them, and they’ll also be proactive in sending you updates about your property. On the contrary, when you invest on your own, you’re solely responsible in carrying out all these tasks.
Since a turnkey provider company is in the property business, they’re pretty good at getting you tenants fast. Through their different marketing approaches supported by their experience, they can attract a lot of sellers to their business. Also, their experience of many years in this business allows them to make wise decisions on your behalf. Without a turnkey provider company, you might find it difficult to find a suitable tenant without the proper network at your fingertips.
Instant Cash Flow
One of the most obvious reasons for investing in a turnkey property is the immediate cash flow that starts coming your way after you buy the property. You don’t have to wait. Your property is renovated and has a tenant in it from day one, so all you have to do is sit back, relax and collect the monthly rent.
Any other form of investment, be it shares or mutual funds, is subject to a lot of market risks. Sure, you can get knowledgeable people to manage your portfolio for you, but the risk is always higher. Turnkey properties are a stable form of investment without putting a lot of hard work into investing and maintaining the property. In my opinion, bricks and mortar will always be a more stable investment than paper.
4 Tips for Those Interested in Investing in Turnkey Properties
For a busy investor, a remote investor or an investor who’s just starting out, turnkey real estate sounds like a dream investment. But still, potential investors must keep certain key points in mind before going ahead with the investment.
Perform Thorough Research
The first condition is quite obvious. Thorough research about the turnkey provider you’re going to be working with is absolutely key. These days, there are many companies that do turnkey. There are so many that it can be hard to distinguish between the good and the bad ones. Take your time to find out which ones are reputed turnkey companies that are known for delivering good results.
You can start off by narrowing down on your preferred location and then look for existing turnkey provider companies in that area. Then, simply call these companies and ask them pertinent questions about their business model and operations. Also consider the reputation and the background of the company. Make your expectations very clear with the company to avoid any issues later on.
Be Willing to Entrust Responsibility
If you are the type of investor who wants to have absolute control over your investment and be a part of every decision, you should think twice before investing in turnkey real estate. Most turnkey provider companies provide holistic services to their investor clients, be it repair work of the house or managing the tenants for the house. This often leaves very little decision making for the investor. If you like being involved in every detail of the investment process, turnkey investment is not a good option for you. I jokingly stress to our investors that if they think they know to all, then they should also do it all for themselves.
Remember to Inspect the Property
Since it’s a turnkey property, the service provider will get the repair work done before your final payment. Do not rely on the pictures of repairs that the company shows you. Either go personally and inspect the repairs or hire an building inspector to look over the property thoroughly on your behalf. Keep in mind, though, that inspectors are paid to find faults no matter how miscellaneous they might be. Consult with your trusted turnkey provider after the inspection on what really needs to be fixed and what can just be left alone.
Look for After-Sale Support
Avoid investing through turnkey investment companies who have minimal or no investor support programs once the deal closes. Apart from the property manager who handles your property, it is also the responsibility of the seller company to address the issues of that property. A good turnkey company will have policies to manage your account after you’ve bought the property. Prompt communication is key to this approach. Someone who doesn’t respond in a timely manner from the start definitely won’t respond in a timely matter later down the road.
So Who Should Be Investing in Turnkey Real Estate?
Thirty-five-year-old neurologist Frank says, “Turnkey investing is a much more passive form of real estate investing for busy professionals or investors who simply don’t want to put in that much work themselves, but still would like to own rental property. Turnkey investments definitely make investing easier for busy people. If you work 80+ hours per week like I do and prefer the convenience and peace of mind, you’ll find turnkey real estate a pretty good fit.”
Beyond that though, there’s another type of investor who might benefit quite a bit from turnkey. Due to its hands-off nature, turnkey investments are also good for investors who can’t find lucrative properties in their state and hence need to invest in long distance properties. These investors often have to rely on professional investment companies to manage their properties. A long distance property managed by professionals allows decent cash flow with minimum work — and, of course, minimal travel.
When investing in turnkey real estate, a lot of your success will come down to the team you entrust with your hard earned funds, rather than the actual location itself.
Never forget that TEAM WORK makes the DREAM WORK.
Find the right people and you’ll be on your way.
Do you invest in turnkey real estate — and if not, would you consider it? Why or why not?
Leave a comment, and let’s talk!