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Turnkey properties are popping up everywhere lately – and no wonder, since they make it easy for ordinary people to get involved in real estate investing.
Even if you don’t have the skill, knowledge, or time to start the sometimes laborious process of acquiring a rental property, you can still enjoy the benefits of a passive income property.
It’s simple: let someone else handle the hard parts. There are now services that will take care of the entire process from beginning to end. They’ll take care of everything from finding the property, to renovating it, to placing quality tenants.
Of course, you will need to spend some time managing your team, but that seems like a fair trade when you consider the benefits – owning your own investment property in a fraction of the time it would otherwise take.
Of course, as more and more people hear about turnkey investments, I find myself answering a lot of questions about them. That’s why I’ve decided to share with you the top five questions people ask me about turnkey properties.
Are Turnkeys Too Good To Be True? And 4 More Popular Turnkey Questions Answered
1. What’s the catch?
It’s not hard to imagine that many people think there must be some sort of trick involved when it comes to turnkeys. After all, we’ve all been trained to avoid schemes that promise you’ll earn easy money for very little work.
Here’s the thing.
While there really is very little work involved in turnkeys, and plenty of cash flow coming in for good-looking properties that need no renovation, there is one big caveat that turns many serious investors away: many serious investors prefer to force appreciation. Huh? They want to buy properties that cost less and can be renovated or re-purposed in order to immediately increase property appreciation.
Turnkey properties, while offering good cash flow, are sold pretty much at market value and already rehabbed. That gives the purchaser very little ability to force appreciation right out of the gate.
Another downside is that because turnkeys are usually priced close to market value, they are generally more expensive than other types of property (at least at first glance). Much can be argued about whether you’re really saving money buying a property you have to put so work into, but, nonetheless…
There are also investors who don’t like the idea of handing over the running of their property to a management company, preferring to run the property on their own (a.k.a. control issues!).
2. Why should I pay someone else to do everything for my property?
One word—expertise. The guys who work these properties are experts in what they do. They know what they are looking for in properties, they know what to avoid, and they know the ins and outs of their market.
Have you tried evaluating distressed properties, negotiating deals, rehabbing a property, placing tenants, landlording a property, or evicting a tenant lately? The list may sound short, but if you only knew how much skill and expertise it can require to make each one of these parts operate successfully! None of that is for the meek, and there’s a lot of room for [costly error].
The other reason you can consider paying someone to do all of the work is—so you don’t have to! All of those things listed above can require a tremendous amount of time, effort, and headache. Why not opt to go lay on the beach instead? Or spend quality time with your family?
My theory? Why wouldn’t I pay for a service that saves me from having to do something I have no desire to do, so that I can sleep in and lay on the beach instead?
3. Where should I buy turnkey rental properties?
You’re first going to be limited on where you buy a turnkey property because turnkey companies don’t exist in every market. For the turnkey business model to work, the companies need two things: ability to cash flow (i.e. the properties need to be able to make money each month) and a lot of distressed inventory. Turnkey properties’ focus is cash flow and the companies handle them in bulk.
Once you find the markets with the turnkey providers, then you need to decipher the good markets from the not-as-good ones. What are we most focused on here at Hipster to determine if a market is good or not-so-good? Growth. We only care about growth markets, rather than declining markets, for numerous reasons—sustainability, minimal vacancy, tenant pool quality, exit strategy options, property values, rental values, etc.
Once you find the good [growth] markets with turnkey providers, then look at which turnkey providers you like the most and which market offers the types of properties you like the most. Some markets are more single-family (SFR) based, some are more multi-family (MFR) based, some have a more urban feel, some suburban, some offer higher cash flow but with higher risk, some offer nicer houses, and the list goes on. So it starts becoming more and more about preference, once you have evaluated the facts (like the market, the quality of the turnkey provider, etc.).
Typically in any given year, there are 5-8 great markets with great turnkeys. It varies all the time, and the markets are constantly changing, but there’s always something for everyone.
Get Access To Our Latest Turnkey Investment Property Deals Right Here
4. How can I tell if it’s a good property?
Due diligence, due diligence, due diligence.
Did we mention due diligence? This is the part where some investors, anxious to close their first deal, mess up. Especially turnkey investors because when turnkeys are pitched as being hands-off”, they think they don’t even need to verify things.
Yes, it can sometimes be a pain in the neck, but thorough due diligence is the best way to make sure you don’t lose thousands of dollars on fixing unexpected repairs, hidden expenses, and other nasty surprises that can eat up your profit faster than a snake steals eggs from an Easter egg party.
A couple important due diligence items include:
Hiring a professional house inspector before you purchase the property. You then take the report to the seller and require the seller fix those things before you buy the property. They are typically amenable to most items, and if they aren’t willing to fix something, they’ll explain why.
Making sure you check ALL the numbers. For example, if you’re told the rent on a property is a certain amount, get copies of the lease. If the rent is advertised as $1,200/month, call a couple 3rd party property managers and say you are thinking of buying a property in their area and are curious to know their assessment of what they think it can bring in. Maybe offer to throw them a couple bucks to do an assessment. Then see if it’s anywhere in the ballpark of that $1,200/month. You can also check up on the advertised property tax and insurance expenses. Are they legit? Look them up.
A really fine due diligence item? Go see the property before you buy it. Turnkeys are nice because you can easily buy them having never seen them before, but if you have the opportunity, you can learn a lot very quickly and get a feel for what you are buying!
The key is– you aren’t trying to reinvent the wheel here, just verify what is presented to you. That is due diligence.
5. Do I have to see the property before I buy it?
Nope, not at all. Turnkeys are completely done for you.
However, if you can go check them out, I do recommend it! If for no other reason than just so you aren’t taking my word for anything. Plus then you can get the ultimate feel for how you are feeling about going forward with a property. You will learn a ton, you can see everything in person, and you can increase your overall confidence about your property buying.
But again, it’s not required in the slightest! In fact, more turnkey buyers than not that I know of have never seen their properties. I’ve only been inside of one of my own out of all of the ones I own.
If you aren’t nervous at all, don’t strain to get there. But if you are the slightest bit nervous or just want to gain some confidence about what you are doing, take a quick day trip out to wherever it is! Or a weekend trip…whatever. It doesn’t have to take much time or cost a fortune. [Don’t forget, all of those expenses are tax write-offs anyways!]
Ready To Get Started?
If you’ve read this far then you probably like the idea of turnkey properties and want to know more.
I invite you to click here and get access to our latest turnkey deals while learning how to invest in turnkey properties for yourself.
Then, when you’re ready, we can connect you with our trusted turnkey provider to ensure you get an investment property (or many) that’s right for you.
I look forward to welcoming you to our community.
Thanks for your interest in the webinar!
FYI, the webinar is put on by a company we personally trust and have bought our own investments through.
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