Turnkey Rental Investments


 PROS:

  • low entry cost (usually financing with 20% down)
  • long-term fixed-rate financing is available
  • low maintenance properties to undertake and get started right away

 CONS:

  • not as easy to scale to a larger portfolio of properties as it requires the same amount of due diligence and oversight as multi-door properties
  • larger impact on cash flow with a single vacancy
  • residential loan caps limit the number of residential mortgage loans an individual can obtain

Who might this type of investment be suited for?

  • someone who is just getting started and wants to invest in a type of property they are familiar with and can easily understand and also have that property most likely be low maintenance
  • someone who anticipates having periodic chunks of money they could put towards a down payment on a property and they like the idea of slowly scaling their portfolio one door at a time as they accumulate more money to invest
  • someone that feels the need to invest out of town/state as the financial projections on properties in their local market are not favorable but they can look to markets well known for cash flow where turnkey providers have offerings and can also manage their property

Process

  • Do some research on what are considered good cash flow markets.  Many turnkey providers have chosen to focus on these markets to be able to provide their clients with cash flowing properties on a consistent basis.  Markets you may want to consider are Memphis, Kansas City, Cincinnati, Dallas, Birmingham, Jacksonville, and Indianapolis among others.
  • Speak with several turnkey operators to get a feel of how they work with investors, what their deal flow is like (yes, some actually have waiting lists!), what their resources are for connecting you to local lenders and other real estate professionals, how long they have been in business, and how their property management services are structured.  Since you will be working remotely with the company for purchasing and managing your investment, you want to make sure the company has a timely, clear communication style.
  • If you have the opportunity, visit the market you are interested in investing in.  However, many (probably most) investors in out of state turnkey properties do not actually visit the property they end up purchasing.
  • Once you choose a property to invest in, the turnkey company will guide you through the process of purchase and setting up management services with them.  Generally, you are not required to use their property management services but many buyers find this to be the easiest transition to management.

Partners