Like many single-family real estate investors, I started out finding properties through the conventional methods, such as the local Multiple Listing Services.
I soon found out- after painstakingly analyzing each property- figuring out what I could charge for rent and plugging in the expenses for my return on investment, that I was not competing on a level playing field. I came to the realization that the MLS was to bring retail buyers and sellers together.
As a real estate investor, I was trying to buy a little business and I was not looking through the same eyes as the retail buyer.
I was trying to buy the components of the business and build it from the ground up by buying property, then hiring property managers and hoping our calculations all came together.
It was more work and more risk than I really needed to undertake. Also, there was a time from the closing of the purchase until we could set up tenant showings, evaluate the tenant and get the tenant into the property so they could start paying rent. This delay, where the property was sitting vacant, meant the property was not a performing asset and it took a number of days, or weeks, to get it up to actually being a performing asset.
So I found success by moving to non-listed turnkey properties
Buying turnkey investment property allows an investor to essentially buy a small little business. A turnkey property is buying a residential property that is already rented with property management in place. The expenses to the investment are already established, so you are able to better understand what your true (ROI) return on investment will be.
Plus, it will be a performing asset on day one with no vacancy lost to start off your investment. This allows for a much more purposeful investment decision.
Not all turnkey companies are created equal
Thrilled at learning about turnkey companies that offer these types of products and services, I set out to find the companies that I wanted to work with.
Job one of course is finding the turnkey companies within the best locations for real estate investing. That is another post which you can read here.
Job two is finding the best companies. To this point, and to my surprise, I found many of these companies simply wanted to sell you the property, shake your hands and wish you good luck.
Their business model was simply to find property cheap, perhaps do some renovation work, hire an outside property manager and then sell it to you.
Qualities of a good turnkey company
I have interviewed many turnkey property companies and found key qualities that should be identified. If you want to have a great investment, then it requires the seller to have a vested interest in the success of your business.
Think about it. A successful business wants your long-term patronage. The company wants you to be a customer for life, to sell to you today and strive to gain your future business. This cannot be accomplished by shaking your hand and wishing you good luck.
It can only happen by providing ongoing support, by providing you a great property at a great price with ongoing property management, maintenance and support. I found that the turnkey provider who provides a long-term relationship, who works hand in hand with you to provide a great and sustainable investment, is the key to a great passive investment.
Here are some of the qualities you want in a great turnkey company:
- No. 1 – Micro markets: One who seeks out and acquires properties within the micro markets of an area that represent the best locations within that market.
- No. 2 – Sweet spot: The property and prices that represent the best, most sustainable cash flow with potential to attract the most number of retail buyers at the time of exit.
- No. 3 – Great rehab: Companies that do their own property management do better rehab. To create headache-free property management requires them to do quality rehab work. When a company works side by side with an investor for sustained returns, it is motivated to start with great rehab so it has a great product to manage.
- No. 4 – In house property management: Property management is at the core of a successful investment. When a company sells you a property with anticipation of maintaining a customer for life, it is highly motivated to make sure this most important element to a passive investment is the best it can be.
- No. 5- Exit strategies: It is common knowledge that you make your money going into an investment; the big gains are realized on the exit. For the turnkey passive investor, a sale to a retail buyer on the most highly sought after properties is paramount to accomplish this. Turnkey companies should illustrate this importance from day one, through their acquisition of the properties, the quality of the rehab and the assistance and guidance of the sale.
- No. 6 – Financing assistance: Quality companies who want to do long-term business with you will also have relationships with some of the best and most user-friendly lenders available. When you purchase a turnkey property you want lenders well versed in financing these assets that have income attached to it. Successful Real estate is all about relationships and you want turnkey property companies that form relationships with these lenders who learn all about the products and the operations of the company. These lenders are best suited to get financing for these properties as they believe in the business model and they have a streamlined process to make the financing as simple as possible.
While it seems only like good business that a turnkey property seller would subscribe to a business model that will allow them to do repeat business with you, indeed only a select few do this.
As with any investment, diligence is the key to your success. When you find a turnkey property provider that has vested interest in your success you will have found a great passive investment that will allow you to live a great carefree life while your investments provide the income to do so.
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