Turnkey real estate investing is a booming industry. In the past two decades, the number of books, websites, how-to manuals, and advertisements geared towards getting people involved in this business has absolutely exploded. Let’s get past the hype, though, and ask the real question:
Is Turnkey Investing Right for You?
Successful investing means doing lots of research and asking lots of questions. First, you’ll need to find the right market. This seems obvious, but it isn’t. Many times enthusiastic investors dump their money into a market with no real future because they get excited by a deal on some property. Keep your head, do your research. One promising deal does not mean the entire market is sound. Second, ask yourself if you’re going to do this on you own. If you really want to make money at turnkey investing, you’ll probably need help. Interview people and hire the best team you can. Don't take people at their word that they know the business, follow up on references. Their success is your success. Lastly, but very important, be super clear about what you want. Make a plan. Simply saying you want to make money in an investment is too vague, figure out your plan of attack and a realistic timeline. Ambition is great, but be sure to keep your feet on the ground.
The Route of Passive Investment
Turnkey property investing means that the property that you’re investing in is ready to go, without any further interference from the buyer. Many companies specializing in turnkey properties already make all the regular decisions necessary for maintaining the properties under their domain. What they want from an investor is the capital, not advice or micro-management. Your job, as a potential investor, is to find the company that will best service your money in the most efficient way, not to tell the management how to renovate or what to do with the properties. If you’re an A-type personality, this kind of hands-off approach may be difficult for you. This is why it’s important to understand the investor-management relationship and be sure you’re comfortable with it.
Working in the Margins
Price points for turnkey investments can be higher and the returns may be smaller; that’s just a fact of the industry. As an investor, it is not your job to dictate the service offered by a turnkey vendor or property management company. Asking questions about how the company will manage your investment in their portfolios is appropriate. Keep in mind, that as an investor in this sector, your goals should be long-term and big-picture.
Turnkey investing has its own sets of road blocks and challenges, which may require moving investments to other areas. Developing a strong relationship with a turnkey provider is the key to establishing a solid, long term portfolio.
Questions to Ask Yourself about Turnkey Investments:
- Are you interested in long-term portfolio development?
- Are you clear about your personal, financial goals and how you want to achieve them?
- Are you able to do the leg work at the beginning?
- Are you able find a team you trust to help you manage your investments?
- Can you allow property managers and vendors to do their job while you do yours?
- Can you financially handle the initial costs?
- Are you stable enough to sustain your portfolio?
Answering these questions will help you take the first, few, tentative steps toward the world of turnkey property investing. It’s a daunting task, but cautiously pursued and logically managed, it has the potential for great long-term development.