Real estate investments can take up a lot of time, even when the investor is not taking on "fix and flip" tasks or landlord responsibilities.
Many investors are seeking a more passive income that requires little or no time commitment. Turnkey investment properties are about as passive as it gets, and that's why these commodities are currently a hot topic. Not only do they require little or no day-to-day time commitment, but turnkey investments also have an easier learning curve and offer greater access to out-of-state investors, thereby offering better portfolio growth potential.
Although turnkey investment properties are the most passive option, they still require the time of looking for good properties and looking for a reputable turnkey real estate investment company. A good company is knowledgeable about their market. They know which areas are profitable and can provide detailed information about various locations to potential investors. A well-established company can also help an investor get the jump on competitors for a hotly-contested piece of property.
There are several variations in turnkey real estate investment companies that you need to consider when looking for properties. You should consider whether the company uses in-house management or outsourced management. Do they offer properties with tenants or not? Do they have solid references and offer proof of renovations? Not only is it important to find a profitable turnkey investment property, but it's just as crucial to make sure you choose a turnkey real estate company that's right for you.
What should you look for when choosing the right turnkey investment company?
Are they local or out of state?
Not everyone wants to invest in local real estate. Your local market may not be appealing or offer the right price point. By searching out of state you are able to get in on hot markets that show the most potential profits.
Looking nationwide for turnkey investment properties offers many advantages, but there are also some downsides. Buying property in an unfamiliar area can be a bit scary. When investing in far-away properties, you are dealing with something unseen and have to rely on photographs and word of mouth. This makes it even more crucial to make sure you're dealing with a reputable turnkey real estate investment company.
Are they just a seller?
If a turnkey company doesn't offer any property management services, this may be cause for concern. When a company only functions as a seller there is a risk they could cut and run, leaving you with a property that has undisclosed problems. Find out what their procedures are after the sale. If they don't have an in-house property management company, investigate whether or not they have a reputable outsourced management company.
Do their properties have tenants?
In general, you don't want a turnkey investment property without a tenant. Without a tenant, the property is not generating any income. A turnkey company should disclose tenant status, lease agreement details, and explain how tenants are vetted when signing a lease. They should also be willing to give you an idea of expected tenant turnover rates.
Do they exaggerate their promised income projections?
If the numbers seem too good, check the turnkey company's records to see if their projected numbers match their previous numbers. Don't be afraid to ask questions and grill them if something seems unrealistic, and don't be afraid to move on and find a more honest company.
When considering a turnkey investment company, talk to other investors that have worked with them. If they're established it will be easy to get references and recommendations from other investors. Don't just accept the word of the company, but do outside research through Google or turn to your personal network for recommendations.
Established turnkey companies will also have records of seller success that go back several years. These records will include management costs, vacancy rates, and maintenance expenses. A reputable company will provide these records.
Are they honest and competent?
When looking for an honest turnkey company, your instincts are your best guide. If they are unwilling to disclose details about the property or allow you to get involved, it should raise a red flag. They should be willing to disclose all financial details and offer support after the sale.
However, in some cases when the numbers don't add up or you end up losing out on an investment, it's not due to dishonesty, but inexperience or poor business practices. Before making an investment, make sure to verify that the turnkey company is both honest and knows what they're doing.
There are many turnkey investment companies that offer unrealistic promises and take advantage of unwitting investors. When passively investing in real estate, especially properties that are out of state, it's just as important to find the right turnkey company as it is to find a good piece of property.
By using the criteria listed here, you should be much better equipped to find the right turnkey investment company and succeed in your next real estate venture.