Imagine investing in real estate without the stress of managing properties, dealing with tenants, or navigating complex market conditions. Welcome to turnkey real estate investing—a game-changing approach that enables you to build wealth effortlessly!
This guide walks you through the ins and outs of this hassle-free investment strategy, uncovering the advantages and disadvantages of turnkey investing, key considerations for this investment strategy, steps to finding a reliable turnkey company, and how RealWealth helps investors like you achieve success. Whether you’re a busy professional seeking passive income, a first-time investor eager to expand your real estate portfolio, or doing a 1031 exchange, turnkey investing offers a gateway to financial freedom.
Let’s dive in and explore how you can transform your financial future with turnkey investments.
What Does Turnkey Investing Mean in Real Estate?
Turnkey real estate investing is a unique investment strategy designed to minimize the complexities and time commitments traditionally associated with owning investment properties. At its core, turnkey rental property investing involves purchasing a fully renovated or new-build property, which is marketed to tenants (some may already have tenants in place) and managed by a third-party company. This allows investors to generate income right from the start!
Where do you find a turnkey investment property? Typically, turnkey rental properties are sold by specialized turnkey real estate companies that handle everything from acquisition and renovation to tenant placement and ongoing management. This approach enables investors to generate passive income without the need to manage tenants and perform maintenance. Turnkey property types vary, from single family rentals to multi-family properties to new build construction.
It is essential to note that the definition of “turnkey” varies across the real estate industry, and there is no standardized quality standard for renovations and management of turnkey rental properties. We discuss this further in the disadvantages section below.
Why Busy People Like Turnkey Rental Properties
For many people, turnkey investing is appealing because it offers a hands-off approach to investing in real estate. Unlike conventional real estate investments, where investors may spend significant time fixing up properties, screening tenants, and handling maintenance issues — essentially creating a second job for themselves — turnkey rental properties are designed to be as effortless as possible. This means that investors can easily diversify their real estate portfolios and enter new markets without physically being involved in day-to-day operations.
Turnkey real estate investing is particularly attractive for busy professionals, retirees, or anyone looking to create a passive income stream. By leveraging the expertise of turnkey real estate companies, investors can focus on their jobs or other pursuits while their investment properties generate returns. This hassle-free approach saves time and reduces the stress and uncertainty often associated with real estate investments.
If you want to learn more about how to successfully invest in turnkey properties, watch this Real Wealth Show podcast with investors Kathy Fettke, Leah Collich and Krista Fettke.
Advantages of Turnkey Real Estate Investing
Turnkey investing offers several advantages for investors seeking a more passive approach to property ownership. Here are some key benefits:
1. Immediate Cash Flow
One of the most compelling advantages of turnkey rental properties is the immediate cash flow. Since these properties are ready for tenants, investors can begin earning rental income immediately, or close to it. This immediate cash flow can significantly enhance the financial stability of an investor’s portfolio, providing a steady stream of income that can be reinvested or used to meet other financial goals. To determine a property’s potential cash flow, conduct a real estate pro forma analysis.
2. Geographic Flexibility
Another advantage of turnkey real estate investing is the potential for diversification into nationwide markets, allowing investors to spread out their investment properties across different states. This geographical diversification can mitigate risks associated with local market fluctuations.
For instance, if the real estate market in one city experiences a downturn, properties in other locations can help balance the overall performance of the investment portfolio. Additionally, turnkey rental properties come in a variety of property types, such as single-family homes, multi-family units, or condos, further enhancing diversification.
3. Reduced Stress & Hassle
Turnkey real estate companies typically have a team of experienced property managers who handle everything from tenant inquiries to maintenance and repairs. With professional management handling day-to-day operations, investors can enjoy a more hands-off experience, reducing the stress commonly associated with property management.
This professional management ensures that the property is well-maintained and that any issues are addressed promptly, thereby protecting the investor’s income stream and maintaining the property’s value. Having a reliable property management team reduces the likelihood of vacancies, as these professionals are adept at tenant retention and marketing.
4. Saves Time
Not everyone wants to flip properties or Buy, Rehab, Rent, Refinance, and Repeat, known as the BRRRR method. Many busy professionals enjoy their jobs and are not interested in the time and expertise it takes to manage a renovation or new-build project.
Turnkey real estate investing offers busy individuals the opportunity to create a real estate portfolio and generate passive income without the hassle of property renovations and tenant placement, as turnkey rental properties are move-in ready and come with management services already in place.
Disadvantages of Turnkey Real Estate Investing
While turnkey investing offers a hands-off approach, it’s crucial to conduct thorough due diligence and consider these potential disadvantages to ensure alignment with your investment goals.
1. Higher Upfront Costs
Turnkey rental properties are typically fully renovated or build-to-rent properties that are ready for occupancy. Since they are rent-ready, properties are listed at a higher purchase price compared to properties requiring improvements. This premium can reduce your initial return on investment.
2. Subpar Renovations
Not all turnkey real estate companies have the same definition of “turnkey.” Because of this, some turnkey investment properties may not have the quality of work you are looking for. While turnkey properties are marketed as move-in ready, it is essential to inspect the quality of the renovations.
In some cases, renovations may be superficial, leaving underlying issues that could result in costly fixes if left unaddressed. Alternatively, some renovations may not comply with local building codes or lack proper permits, which can lead to future complications and revenue loss. Hire a professional inspector to evaluate structural integrity, electrical systems, plumbing, HVAC, and other critical components to avoid unforeseen repair costs.
3. Dependence on Property Management
Turnkey investment properties often include property management services. While this offers convenience, it also means relying heavily on the management company’s integrity and competence to take care of your property as you would. If the managers are inexperienced, it can result in tenant dissatisfaction, maintenance delays, and increased vacancies. All of which affect your return on investment.
You may also like: Property Management Horror Stories
4. Challenges with Long-Distance Ownership
Investing in turnkey properties often involves investing in out-of-state real estate, which can be located miles away from your primary residence. This distance can make it difficult to monitor the property’s condition, oversee management, or respond promptly to issues.
Challenges associated with long-distance ownership can be avoided when you choose the right turnkey real estate company from the outset. This is where RealWealth can help you be successful. We thoroughly vet the turnkey real estate sales and property management teams before they become part of our network. Learn more about how we set you up for success here.
Key Considerations Before Investing in Turnkey Properties
1. Market Analysis
Before diving into turnkey real estate investing, it is crucial to thoroughly research and understand the market in which you plan to invest. Market analysis involves evaluating factors such as 1) local economic conditions, 2) job growth, 3) population growth, and 4) affordability. Once you find a market, you’ll want to dive deeper to analyze potential neighborhoods.
A strong market with growing demand for rental properties will likely yield higher returns and more stable rental income. Additionally, understanding local laws and regulations regarding rental properties is essential to ensure compliance and avoid legal issues.
2. Fully Assess the Turnkey Provider
Another important consideration for being successful with turnkey investing is the credibility and track record of the turnkey provider. Not all turnkey real estate companies offer the same level of service or quality of properties. It’s vital to conduct your due diligence by reviewing the provider’s history, customer testimonials, and any available case studies.
A reputable turnkey company should have a proven track record of successful property renovations or new-build construction, tenant placements, and ongoing management. They should also be transparent about their fees, services, and the condition of the properties they offer. Be very cautious if the team you are considering is not forthcoming with any of this information.
3. Understand Your Financial Situation
Investors should assess their financial readiness. Turnkey rental properties require a significant initial investment, including a 20% down payment, as well as any associated closing costs and fees. It’s essential to have a clear understanding of your budget, including the money set aside to cover any rent losses or unexpected maintenance expenses, as well as financing options, so you are prepared.
4. Know Your Investing Goals
Defining your turnkey real estate investing goals, such as desired cash flow, appreciation potential, and investment timeline, will help you select properties that align with your financial objectives. A well-thought-out investment strategy will guide your decisions and increase the likelihood of achieving your wealth-building goals.
How to Find a Reliable Turnkey Real Estate Company
Finding a reliable turnkey real estate company is crucial for a successful and stress-free turnkey real estate investing experience. Here are key steps to help you identify trustworthy providers:
1. Research Turnkey Provider Reputation
- Get recommendations from other investors: The best way to gauge whether a turnkey provider is legitimate is to hear from real people. Ask other investors or join a reputable real estate investment club, such as RealWealth.
- Read online reviews and ratings: Check out the turnkey real estate company’s reviews and testimonials online.
- Proven track record: Look for a company with a history of delivering turnkey investment properties for sale in stable rental markets that are fully renovated or newly built and occupied.
2. Evaluate Transparency and Services
- Clear Financials: As a potential investor, the turnkey real estate sales and property management company should provide you with specific financial details, such as property prices, rental vacancy rates, management fees, and information on renegotiating lease fees. While they will provide you with a pro forma, be sure to do one on your own and verify their numbers for accuracy.
- Comprehensive Services: A reputable turnkey real estate company should handle property acquisition, renovations, tenant placement, lease renewals, evictions, and ongoing management and maintenance.
3. Assess Renovation & Property Management Quality
- Renovation or new-build experience: Ask about their experience and standards for the types of properties they provide, including why they invest in certain neighborhoods.
- Property management experience: Inquire about the property management team’s experience, tenant screening processes, and protocols for maintenance and eviction.
- Performance Metrics: Request data on occupancy rates, average tenant turnover, and response times to maintenance requests.
4. Ask Critical Questions
By diligently researching and asking the right questions, you can find a turnkey real estate company that aligns with your investment goals and risk tolerance. Here is a list of questions to get you started:
- What markets do you operate in, and why?
- What neighborhoods are seeing the most growth, and why?
- How do you source your properties?
- What is your renovation process and standard?
- Do you personally invest in these markets?
- How long have you been operating a turnkey real estate company?
- What is the scope and quality of the renovations for the properties you rehab?
- Can you provide references from past investors?
- Is the property management handled in-house or outsourced?
- What fees are included in property management? What fees are additional?
- Are properties sold with tenants in place? What is the vacancy rate?
- What is the tenant screening process?
- How do you handle vacancies and unexpected maintenance issues?
- What guarantees or warranties do you offer on renovations and tenant placement?
- What support do you offer if I decide to sell the property in the future?
The RealWealth Difference: How We Vet for Member Success
One of the things that sets RealWealth apart is that we have been in the business of helping others learn how to invest in real estate and connecting them with turnkey investing companies for over 20 years.
We’ve been in the turnkey investing space for so long that we’ve developed a rigorous process for vetting new turnkey real estate sales and management companies, allowing our members to stress less about purchasing and avoid real estate scams.
What does our vetting process look like? Our team physically goes into the market and inspects everything they do, including:
- Rehabs or new-build projects
- Track record
- Background checks
- Reference checks
- Management practices
To learn more about our process, watch this video featuring Kathy Fettke and the RealWealth Property Team Managers, Grant and Rebekah Anderson.
Additionally, our recommended turnkey property teams must adhere to our REAL Income Property™ Standards. These standards provide the turnkey real estate companies we work with guidance on the quality of work we and our members expect.
REAL in REAL Income Property™ stands for:
R – Renovated or built (to REAL Income Property™ Standards)
E – Examined (through inspections) and due diligence
A – Appraised (purchase price at or below market value)
L – Licensed property management
These standards are also beneficial for members, as they provide confidence when working with RealWealth’s recommended turnkey real estate companies. Additionally, members can use them as a checklist when conducting due diligence to assess potential teams and turnkey rental properties for sale.
Our goal is to always connect our members with the best turnkey real estate companies. We do everything possible to ensure that the turnkey teams we choose to work with align with our commitment to quality and investor success.
Where to Find Turnkey Rental Properties for Sale
A simple online search will bring up potential turnkey rental properties for sale. However, we do not recommend you go this route. As we mentioned earlier, there is no industry standard for the definition of ‘turnkey’, and you could find yourself working with a shady turnkey real estate company and put your money at risk.
To find the best turnkey rental properties for sale, we strongly recommend using a reputable real estate investing company or club, such as RealWealth. The turnkey teams we recommend sell off-market single family and multi-family investment properties in top U.S. markets. In addition, we never mark up the properties. Other turnkey investing clubs don’t follow the same standards as we do. If you go out on your own, be sure to assess everything they do, as a bad location can tank your ROI, and a property mark-up can affect your bottom line.
View Turnkey Rental Properties for Sale Now
Disclaimer: Real Wealth is an educational company only and does not act as a real estate broker. The information listed on this page was provided by the property owner/seller/broker. All information is deemed to be reliable, but not guaranteed. Pro formas may include limited-time buyer incentives which should be verified with the seller.
It is the responsibility of a prospective buyer to confirm the accuracy of any pro forma, including estimated rent ranges, closing costs, taxes, insurance, appraisals, and third-party inspections before purchasing any property. Mortgage interest rates are subject to change and actual rates will vary.
It is also recommended that buyers set aside reserves for potential vacancies and/or maintenance costs (typically calculated between 3-6% of rents).
This property may or may not still be available, but you can connect with the seller here to learn more about the current inventory.
Turnkey Real Estate Investing in Action: Your Next Steps
Turnkey investing offers a unique and hassle-free approach to building wealth through real estate. While you could go it alone, researching markets and vetting turnkey teams and property managers, it does take time and commitment. We’ve found that extra time is one thing most people lack.
When you choose to become a RealWealth member, you’ll save yourself time and hassle. We provide everything you need to be successful, from direct connections to turnkey property teams to a wealth of resources designed to help you achieve your financial goals through turnkey real estate investing.
If you are ready to start your turnkey investing journey, join RealWealth today.
