Many people look at the world of real estate investing and see dollar signs. There’s so much potential out there to make money from real estate, especially if you own several properties. But many people who are interested in investing in real estate don’t live in an area that stands to be profitable and prefer to buy property elsewhere. This is where turnkey real estate investing comes in to play. If you’ve delved at all into the world of real estate investment, you’ve probably come across the term turnkey property. So, what exactly does it mean?
What is a Turnkey Property?
A turnkey property is one that is considered fully rehabbed and ready to rent out. Usually, turnkey properties are run by a third party and are purely considered a source of income for the owner. There are typically minimal, if any, updates or renovations necessary; the tenant should just be able to rent and move directly in. Because of this, income from turnkey properties is usually very high for the first few years, since recent updates and renovations should have lowered the need for many repairs.
Turn-Key Real Estate Investing Explained
Turn-key real estate investing is the process by which people purchase property, update it, get it ready to rent out, then have it managed from a distance so they can benefit from the income without having to put in much work. Most investors will hire a turnkey company to help them with this process. There are hundreds of turnkey companies across America, and they vary in how they help you with your investment property. Some companies will buy, renovate, rent, and then sell the property to an investor. Others will find you a property to buy and manage it for you once it’s ready to go, but won’t be as involved in the renovation process. Although it sounds like a good deal, turnkey investing has a lot of pros and cons. Here are some things to watch out for if you are considering investing in a turnkey property.
Turn-key Real Estate Investing Pros
Service From a Distance
The most attractive part of investing in a turnkey property for most people is the fact that they can make money from a property without having to live nearby. Many people who might want to invest in prime real estate don’t live close to the area where they wish to purchase. Being a landlord is difficult enough without the added pressure of being far away from your property. That’s why many people who use Turnkey companies live in different states or even in different countries.
The ultimate goal of using a Turnkey company is to make the investment property less of a strain on the owner. Investing in real estate alone, especially if you have never done it before, can be extremely difficult and overwhelming. There’s a lot of moving parts to keep track of that can easily overwhelm an inexperienced investor, even one who owns several properties. By using a turnkey company, you can reduce a lot of the pressure and make it much easier on yourself to manage.
If you choose wisely and partner with a trustworthy turnkey company, you can stand to make a lot of money passively. That is, you could end up making a paycheck from your property without ever having to lift a finger since a good turnkey company should be doing all the heavy lifting for you.
After reading through the pros, turnkey properties sound like a fantastic idea! But there are some downsides to using a turnkey company that you should be aware of before you decide to invest your money.
Turn-key Real Estate Investing Cons
They Cost A Lot Of Money Upfront
Because turnkey properties tend to be on the pricier side of real estate investment, they cost a lot of money upfront to purchase and get up and running. This leaves you with very little equity in the property after the down payment and paying the turnkey company.
You Lose Out On Profit
Since you’re paying a turnkey company to help you with your property, you lose out on a lot of money that you would be able to pocket if the company wasn’t involved. Don’t forget, turnkey companies are in it to make money, and because of that, it means less cash flow directly to you as the investor. You’re often paying someone else to do the work for you, from renovations to managing the property, and that doesn’t come cheap! The turnkey company might buy the property initially for a discount, then sell it to you for a higher price to make money. And on top of that, you’re going to be paying them a lot of money every month to manage the property for you without you needing to do any work.
You Might Not End Up With The Best Property
Buyer beware, especially if you are going through a Turnkey company and trusting them to purchase a property for you. This comes with a lot of risks! Firstly, you don’t have the advantage of looking at properties yourself, picking a good location, and doing lots of research before you invest. You might get suckered into purchasing a mediocre property in a poor location that doesn’t have a lot of potential. Beyond the risk of ending up with a property in a bad location, if you let the turnkey company take care of the renovations, they might not be done to a very high standard. Remember, the turnkey company is in it to make money, so the chances are that they aren’t going to be big spenders when it comes to rehabbing. You need to make sure you find a turnkey company that prides themselves on the quality of their work and not necessarily the affordability of their services.
Can You Trust Them?
This is probably the most significant risk when it comes to purchasing a turnkey property through a company; can you trust them with your investment? The entire process takes a lot of trust between investor and company, and because the company is taking on so much of the work, this is a big risk to take. It’s a big deal to completely trust a company to do right by you when they end up getting paid whether or not you are successful.
Turnkey Real Estate Investing isn’t for everyone, and since there is some risk involved in using a turnkey company, it’s definitely not a decision you should weigh into lightly. If all goes well, you could stand to make a great passive income without doing much work. But be careful which company you trust with your money! If you are interested in going through a turnkey company when investing in real estate, make sure to do plenty of research to ensure that you are protected and can trust the company that you choose.
How to find turnkey investment properties for sale
If turnkey real estate investing sounds interesting to you, you are probably asking yourself: where would I even find a turnkey investment property for sale? Nowadays, the internet makes finding such properties easier than ever. However, having connections in the real estate industry and being in the right location can make a major difference.
A quick google search can help you get started. Try simple search terms such as ‘turnkey properties for sale in New York’ or ‘best turnkey sellers in Chicago’. Adding a location will help you narrow down the results. Companies such as Norada Real Estate Investments or Roofstock are also great places to look as well.
When sorting through the results, you can even use sites such as Zillow, Realtor.com, Yelp, or even Airbnb to find reviews, images, and more information. This can be especially useful if you are unable to visit the property right away yourself.