Turnkey rentals are properties that are purchased by companies who rehab them and then “flip” them for profit. The problem with turnkey rentals is that they are often located in bad neighborhoods and are usually priced way higher than they are worth. It can be difficult to find a good turnkey company that won’t nickel and dime you to death, so you need to know what to look for if you want to take advantage of a turnkey rental opportunity.
In the paragraphs below, we’ll discuss some important things you should know about dealing with turnkey companies and buying turnkey rentals.
What a Good Turnkey Company Should Do
In essence, a good turnkey company should guide you through the entire process. They should acquire the property themselves, rehab it, and find tenants for you. All you should have to do is collect rent each month and watch your bank account to make sure rent is coming in.
Initially, you’ll have to make a bigger investment in a turnkey rental opportunity because of the time and money the owner puts into buying, renovating, and finding renters. The higher cost, however, is worth it since you don’t have to do anything but sit back and watch the cash flow in.
With the above said, as the landlord, you have control over the amount of rent your tenants pay each month, so you could raise the rent slightly to offset the higher cost of owning a turnkey property.
In the end, a good turnkey company should offer you a hands-off approach to real estate investing that earns you income with little to no effort on your part at all.
Turnkey Rentals are Better Suited for Advanced Investors
If you’re a beginning investor, you may want to steer clear of turnkey investment opportunities until you’ve learned the ropes a little better. There are several reasons for making this statement.
- Turnkey companies tend to move quickly, and beginners usually have lots of questions or concerns that slow the process.
- The turnkey model is based on bulk purchases, and as a beginner, you may not be ready to buy in bulk.
- Turnkey companies prefer to deal with buyers who can pay with cash rather than financing because it’s faster.
- As a beginning investor, you may be looking for great customer service, but turnkey companies are not known for their great customer service skills.
The reality is as a novice turnkey rental investor, you’ll likely need to row against the waves to make headway, which can be disconcerting. As such, turnkey rentals may not be right in the beginning stages of your investment career.
If you’re considering a turnkey rental opportunity, you must understand how the process works and have realistic expectations. If you are a beginner in the real estate investing business, you may want to steer clear of turnkey rentals until you’ve gained more experience.