Turnkey real estate is when you completely turn over the management of the property to someone else. You own the property, but you don’t do any of the day-to-day work of running it. Usually, turnkey real estate refers to situations where the investor lives far away from the property.
If you have a day job and you want to invest in real estate without taking the time to do it yourself, or if your area is not a good place to invest in properties, turnkey real estate might sound like a great idea to you. But is it really a good investment?
Turnkey might be a good idea for you if…
You don’t have a lot of experience in buying, rehabbing, or managing properties.
Turnkey companies will have expert property managers who know the local market inside and out. They’re experienced in dealing with tenants, and they know the best contractors. They also have a marketing person, or a marketing team, who is responsible for finding sellers and driving tenants to the business.
You live far away from your target area.
Not every location has good real estate opportunities, which means you’ll have to look past your local surroundings and invest in a better market. That market may be in a neighboring state or it might be all the way across the country. Rather than traveling all the time and communicating from a distance, you might want to find a turnkey company to deal with every last detail.
You want the easiest possible real estate investing experience.
Not everyone has the time and energy to deal with real estate. Let’s face it—it’s a lot of work, from the initial research to scouting properties to buy, rehabbing them if necessary, finding tenants, managing day-to-day issues, and staying on top of maintenance. A turnkey company is a great way to take all that work off your hands.
Turnkey is a bad idea for you if…
You don’t have a highly trusted person/company to take care of your properties.
You don’t want to leave your valuable real estate investments with just anyone, so if you can’t find a quality, reliable turnkey company to manage your properties, it won’t work out.
You can only find properties at or above market value (not below).
Even if the property has great potential for rental income, it’s not usually smart to buy a turnkey property if you can’t get it for a bargain price. You’ll have to work hard to make a profit, especially if the value goes down or you have unforeseen issues with the property.
You’re looking for the highest possible ROI.
Turnkey is the easiest and least time-consuming way to invest in real estate. It is not the most lucrative. This doesn’t mean turnkey investing is not worth it— it just means that every turnkey property you own will bring in less money than many other methods of real estate investing. If you’re looking to make tons of money on a property, be willing to put in time and effort of your own instead of paying someone else.