When investing in real estate, you have to ask yourself “Do you want to be a landlord or do I want to be an investor”? If you say yes to both, then it is time to quit your full-time job and do both. If you thinking you can do both on the weekends, great but why would you want to take that time away from your family. Most prudent investors invest into real estate for return on their money. Some are short-term flippers and others are buy-and-hold for long-term cash flow reasons. You have to ask yourself which one makes sense for you.
I am personally a buy-and-hold investor and do not want to have anything to do with property management. I’ve tried it and failed gracefully. All it takes is one tenant that knows more than you do, especially when you’re in front of a judge trying to evict them. I had to learn the hard way. As far as maintenance and rehabbing property, I’ve also engaged in that on several of my properties over the years and found that the time it took to accomplish these repairs and the cost savings, it still did make sense on paper. I can make more money at my regular full-time job than trying to be a maintenance man.
This is why I like turnkey real estate providers. They do it all. If all you’re looking to do is invest your money into real estate and have somebody do all the work for you, turnkey companies are the best way to do it.
What are Turnkey Properties?
In simple terms, turnkey properties are the easiest way to get started as an investor. All of the hard work that is involved with acquiring properties, fixing them up and finding tenants is already completed. Turnkey property companies have expert staffs that handle every aspect of property investing. If you are new to real estate, working closely with a turnkey property company is a normal first time investment strategy.
Pros of Turnkey Property Investing
- One of the biggest resources that are used up when you are involved in real estate is your time. It takes many hours of research to find properties, do title searches, contact attorneys to review real estate documents and have homes inspected. If a property is in a well populated area, many times it will be sold quickly to someone that knows how to expedite the legwork required. Many new investors that have not achieved a smooth workflow miss out on would-be properties due to the time consuming nature of research. Turnkey property companies have already done this research saving you a huge amount of time.
- A reputable turn-key company will know where to buy and where not to buy in a particular market. This is especially important for an out-of-state investor that may not have any local knowledge of the real estate market.
- A turn-key company can sell a house that has already been fixed up. This is a huge benefit to an investor who doesn’t want to pay for repairs out of pocket.
- A larger turn-key company typically has economies of scale when it comes to rehab costs. These savings are typically passed on to the buyer.
Working through a turn-key company eliminates the hassle of trying to manage multiple contractors (ie. Plumber, electrician, roofer, HVAC, handyman, painter, etc.)
- Most turn-key companies have relationships with lenders who are familiar with their product and know how to get an investment loan closed. There are very few lenders out there who can consistently get investor loans done. Having a good lender already in place is a huge benefit to an investor.
- Turn-key companies almost always have property management in place. With so many fly-by- night property managers out there, having a property manager you can trust to place a quality tenant, collect rent and take care of your property is crucial to an out-of-state investment.
- Having a relationship with a turn-key company gives you direct access to a vested party when any sort of need arises with the property. Turn-key companies operate off of referrals from their investors and as such, are very willing to stay involved with any investor throughout the life of their investment.
Cons of Turnkey Property Investing
- An investor may pay a slight premium for purchasing through a turn-key company rather than managing the entire process on their own.
- If you are a do-it-yourself investor, a turnkey property might not be the right choice for you. You have no say so in the acquisition, property management or previous construction that took place. You buy properties “as is” and might not love the decorations or the interior or exterior. If you prefer to dig in and do things all by yourself, a turnkey property might not satisfy your need to have your hands involved in every aspect of property ownership.
With the vast amount of opportunity in multiple markets throughout the country, the ability to work through a turn-key company can be a great strategy for an investor looking to diversify a real estate portfolio.