What is a Turnkey Property Provider? – Video
Kathy Fettke: Good afternoon and welcome to the RealWealth’s weekly webinar. I’m Kathy Fettke and today, we’re going to be talking about the dangers of turn-key rental property, which may sound a bit of a surprise to some of you because you know that we actually have a handful of turn-key companies that we really like, but we do a lot of vetting and we talk to a lot of people. You might be surprised at how many we don’t work with and we’ll tell you exactly why, at the end of this webinar. It’s really important for you.
Sometimes, I feel responsible and a little guilty about getting people really excited about investing in property and talking about how good certain turn-key companies are, and so sometimes people will go out and google turnkey in a certain area and think because that is what it’s called, then it must be so, and then we hear the horror stories later. That is why we have a three-part vetting system in place, and even that isn’t enough because that’s just the beginning of the vetting. After that, the vetting has to continue and that really happens on your part. We might do the initial due diligence and research, but a year later, things might change in that market or with that team. Again, we’re going to talk about that in a little bit.
The whole purpose of this webinar today is to protect you, so that you will really be able to grow tremendous wealth through real estate, and not have to be experiencing the downside of it as much. There are so many ways that you can protect yourself in real estate, but most of it starts at the buy. People don’t take it seriously. We tend to be trusting people and we want to believe what people tell us, but it’s not always a safe thing. It’s rarely a safe thing to do in real estate. What is turn-key income property? Well, doesn’t it just conjure up this idea that you don’t have to do a thing, somebody else does it all for you? They do the buying, the renovating, the leasing, and management, of your property and all you have to do is sit on the beach with your iPad and deposit rent checks.
Wouldn’t that be beautiful? Well, that really is more of a passive investment and I will tell you that being a landlord, being the owner of a rental property is not passive. It’s more passive than being a flipper for sure, but it’s not totally passive, you still have to pay attention to your property and you certainly need to pay the most attention at the outset when you’re buying it, but ongoing, you do need to be aware. Whether a company is turn-key or not, no situation where you’re a landlord is going to have you be able to just totally check out. I want to make that really clear because I see it happen too many times.
If you just want to throw your money into something and not think about it again, then you need to probably consider investing with somebody else in a syndicate or trust syndications, those are managed by developers and experienced operators. Again, you don’t have to be actively involved in those. As a landlord, even with a property manager in place, there are things that you need to pay attention to. There really is no such thing as turn-key.
Unfortunately, again, turn-key means absolutely nothing in the same way that slick marketing can be excellent, but the product maybe not so much. Hopefully, if you bought a turn-key property, it doesn’t look like this, although I can tell you thousands of people have. I know this because having been in this industry as the CEO of RealWealth for over 10 years now, I’ve seen it all. Believe me. Please, use us as a resource because we don’t want you to buy this property unless you are really good at flipping property or fixing it up. I can tell you, I had people come to me back in 2009 and say, “Hey, we bought this tape of properties.” A tape, we meant a bunch of properties that you got from the bank. The way the bank would work it is that you just had to take it all. You couldn’t really hand pick most of the time, so sometimes you ended up with this.
Now, the companies that bought those tapes wanted to get rid of these ones, right? They kept the good ones. Some companies, not all, but many, tend to look after their own interests before the needs of others and that for some reasons, happens quite a lot in real estate. At the time, we would have these people come to us and say, “Hey, these are the last of the properties that we didn’t keep. You can buy them from us for $5,000, but sell them to your investors for $20,000.” They can sell, or finance it, and sell it to somebody for $40,000 and tell you the payment would be just a few hundred bucks a month. It’s cheaper than rent.
Wow, it sounded fantastic, $15,000 markup, and we could have literally sold hundreds of these. It would have been really, really lucrative, but I knew what it meant. I knew that people would end up with properties like this and no amount of money is worth that to me. That’s not the case for other people. You’ve got to be careful and know that marketing is just that. It’s just marketing and you are responsible for really understanding what you’re getting beyond the marketing. Okay.