For investors who are retired or planning their retirement, there are great advantages to turnkey rental investment properties. Turnkey properties are often in excellent condition from being extensively rehabbed by a turnkey real estate firm. Many turnkey properties are already tenanted at the time of purchase, so the hassle of finding a tenant is not a worry. Finally, turnkey rental properties usually continue to be managed by the firm that offered it for sale.
If this sounds like a dream investment, in some cases it can work out quite well. However, if you’re considering purchasing a turnkey rental property for investment purposes, you need to do some research and investigation before pulling the trigger.
Visit the Property
Before you get too far into the process, take the time to visit any property you are considering. It may look beautiful online, but remember that the photographer may have focused on only the best points of the home. You need to see for yourself. Visiting potential turnkey rental investment properties also allows you to see it in the context of the neighborhood. A great home in an otherwise rundown section of town is more likely to experience high tenant turnover and lose value over time rather than gaining it. The expense of a trip is more than compensated for by peace of mind and a good sound business decision.
Hire a Professional Home Inspector
Every property should have a thorough and independent professional inspection before it is purchased. This holds true for turnkey rental properties as well as a home you buy to live in. Even if a house has been extensively rehabbed and shines with new appliances, you need to make sure the work meets all local building codes in order to rent it. You may discover that this isn’t the property for you.
Investigate the Property Management Firm
You are proposing to put the well-being of your investment into the hands of any property management firm you hire. It makes perfect sense to find out all you can about the company from as many sources as you can. Look into the firm’s experience. How long have they been in business? Are there any complaints against them filed with the city or the Better Business Bureau? You’ll want a team of competent experienced staff to handle tenanting, rent collection, maintenance, and repairs. You’ll also want a team that communicates easily and frequently with you. Finally, be sure you know the amount of all expenses and fees.
While many turnkey rental investment properties are owned solely by the purchaser, in other cases, the management company may suggest becoming a partner with you in a limited liability company. The reason for this is simple: the property can then be handled completely by the management company without your participation. In other words, they can effect repairs and pay for maintenance without needing to contact you for permission. In some instances, this type of arrangement may work well and in others it can create headaches. It will depend on your needs and wants, as well as the reliability of the management firm.
Doing the research is the only way to protect yourself and your investment. Make sure all the pieces fall into the right places before you make a commitment. If a potential purchase just doesn’t seem right, walk away and keep looking. You will find the right deal eventually.
Interested in turnkey rental investment properties? View our recently sold turnkey properties to get an idea of what kinds of returns you could expect from investing with JWB.