No easy button to riches?! 🤔 Well there’s a “Turn-key” to wealth though! 🤗 No walking for properties, no crunching the numbers, no fixing, not even finding tenants or managing the property. Just turn the key to your investment life, where everything is done for you! ✨
What’s “Turnkey”?
Whenever the long-term market is in favour of buyers - it’s cheaper to buy a home than it is to rent one - it’s a great time for real estate investors to buy “turnkey” properties that need a lot less time and effort to rent out.
A turnkey property is a fully renovated home or apartment building that an investor can purchase and immediately rent out. A turnkey company finds, acquires, rehabs, rents, and then sells cash-flowing rental properties to the prospective investors. Their services are usually packaged with their own in-house property management company. This is what sets turnkey companies from other individual property management companies. You don’t have to get your hands dirty, the turnkey investment company manages every aspect of the business for you, at a fee that is!
Why Work with a Turnkey Company?
If you are a busy individual who is interested in creating passive income without getting involved in the process, buying a turnkey property is the best option for you. It allows you to focus on your primary income (day job / business). Your check gets deposited every month in your account. Especially doctors, lawyers and other self-employed specialists choose to enter the investment quadrant through turnkey.
If you are an out-of-state investor looking to invest in another state, city or area, you can work with a turnkey company who could help you buy and manage a property. You might have to talk to them once a month to ensure everything is running smoothly.
A note of caution: you pay a premium to acquire properties in move-in condition, so your potential returns aren’t as high as those who fix/flip for themselves. You also have to pay someone to manage the property, which further cuts into your bottom line.
Benefits are:
Less Time, Less Efforts
Immediate Cash flow
Cheaper Entry point when starting out
Diversification from other Asset Classes:
The down side:
It’s hands off (you don’t learn squad and you have no control!)
Not all turn-key companies are equally trustworthy 😣
Much Lower Net Return On Investment (ROI), don’t be fooled by advertised Gross ROI
Turnkey is not just for the “newbie” investor trying to get in on the “cashflow” game. If you are already a more seasoned Flipper, Wholesaler or Investor you could multiply your income streams with a “Turnkey Business”. It is also a perfect supporting exit strategy for your properties in your Investment Business where you can often make extra money from the different fees, than from just your capital gains alone it’s even an acquisition strategy service for property management businesses!
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You see, beyond just explaining the fundamentals, our true goal is to inspire you to think like and create your own “Turnkey Business” (with a capital “B”!). Something that will allow you to reach your financial goals and create a business that works for you, rather than you working for it. The ultimate goal here is to use “The Big $elling $trategies to propel you into Investing”, the only true way to riches!
How The Process Of Turnkey Works in 4 Steps
First we want to look at the process as an aspiring turnkey investor.
Analyze Your Property; While you’re in for less hassle, you should never underestimate the importance of the due diligence you still must do. The most essential being of course, analyzing the value of the property. It always boils down at knowing your numbers. Don’t get so hypnotized by the label “turnkey”. Not all properties are alike and neither are profits! Seasoned investor’s advice is to always visit the investment before sealing a transaction, it’s always a good idea to get a professional inspection as well. Seeing the property up close also gives you a better feel of the neighborhood and the long-term marketability. Don’t be used as a quick and easy profitable exit for other investor’s sheds!
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Screen Your Property Manager; By definition, turnkey investors are putting a lot of faith in their property management firm. The last thing you want is a company that’s slow to handle problems and can’t get new tenants to replace the ones who leave. A face-to-face meeting is great, but it can save even more heartbreaks down the road to contact referrals from other clients of the firm. This makes it a must to do due diligence on the firm before going down the real estate investment path. Things to consider:
How much experience does the firm have?
On average, how long does it take to find a new tenant for its properties?
Does it provide monthly statements that can help you keep track of expenses and income?
What fees does it charge?
What are the net (not gross) ROI?
Are they currently operating/ cash flowing properties? Why are they being offered?
Review Your Ownership Arrangement; Most companies will sell the home to you outright, but others create a limited liability company or corporation and ask to become a general partner in that LLC or even a Fund. The firm then keeps the title for complexity sake (If there’s a repair to be made, they don’t have to get your approval to fix it). You can always opt to create a separate expense account that the property manager can access as needed for minor repairs and preventative measures. You than remain the sole name on the property title giving you more control over your assets. Always consult with your CPA for tax benefits and your lawyer for the best ownership arrangements. There is no one size fits all!
Financing Your Turnkey Investment; All possible options from your own cash to traditional financing and creative financing are possible. We have many blogs explaining the essentials of financing options and how to get them, here! While you’re on it get your free financing kit 🎁 too!
The Process For A Turnkey Business
In the case you are providing the turnkey concept as a service by running a “Turnkey Business” you are now obviously responsible for all the subsequent processes and should have systems to support the client through all the different aspects of the investment experience. A high-level view of the ongoing business as a process:
Property Acquisition & Negotiation; Every property needs to be thoroughly analyzed to ensure it meets your profit goals. In-depth property analysis should be used to verify properties that are located in areas that will provide the best rental income, and are located in areas considered safe for real estate investment. During the acquisition phase, you should perform a comprehensive cost analysis to provide your preferred cash flow requirements to your clients. We have seen that you can have a business solely on purchasing properties as a Wholesaler or where it would benefit you to work with other “Wholesalers”
Property Renovation; As soon as the acquisition of the property is complete your experienced teams of contractors can begin the necessary renovations. Renovations should typically begin the day after purchase and should be closely monitored for daily project progress thru its completion. This can be done by yourself, in-house by your Flipping agent or department or you could work with "Fix&Flippers" as part of your business strategy.
Property Sales & Buyer Closings ; During and upon completion of the renovation phase, each property is marketed and made available for purchase by an investor. By offering properties on a pre-sale basis, you can help your buyers better prepare for the closing phase typically speeding up the closing process and therefore quickly generating positive cash flow for your investors shortly after the renovation phase is complete. If necessary, you can offer assistance to clients who wish to, or prefer to utilize financing to purchase your investment properties. You should have developed key relationships with mortgage companies and private lenders who are experienced and willing to assist in structuring investment property purchases for your clients. Or you could start your own lending company as a Hard Money Lender or Soft Money Lender!
Tenant Screening, Placement & Ongoing Property Management The last and arguably the most important piece of your turn-key real estate investment process is your ongoing property management services instead of a one and done deal. You could be providing the service yourself or operating through a third party property management business providing the following comprehensive property management services: tenant screening, tenant placement, monthly payment tracking and processing, monthly client statements, ongoing property maintenance, and monthly income forwarding. It is advisable to have paying tenants before selling the property. For one you start collecting cash flow before capital gain, earning back some of your investments and compensating your holding expenses. Additionally making the property, with a built-in tenant, even more attractive to aspiring investors.
How You Get Paid
As a “Turnkey Investor” you get paid the net ROI you arrange with your turnkey investment company. This is the Gross ROI minus all-encompassing fees and maintenance costs affiliated with operating your property.
As a “Turnkey Investment Business” you make money on every step of your process. You make money as would any business within that process. For example, you make money in your Acquisition Process buying great deals as an Investor or by the Acquisition Fees your clients pay you. In your Renovation Process, you make money through Capital Gains when you sell the property. In your Maintenance Process, you make money from the fees you collect as the property management company.
Lastly we can say that “Turnkey Investment” is a great strategy to add to your investment portfolio. If you’re a newbie it is one of the most easy and hassle-free ways to just get your feet wet and get started.
Again, it all boils down to knowing your numbers to make a profit. Start analyzing like a pro today!
As a Business endeavor, however it is presumably the most complex and all encompassing business venture possible. It takes a very experienced and seasoned investor to offer all these separate processes as combined services at scale!
It is also the most scalable business option, since you could offer every individual service by working with other businesses specialized in that specific service such as Wholesalers, Fix&Flippers, Money Lenders and Property Management Companies.
It can scale up to become the ultimate venture. Operating your own investment holding company, within every single process step a business to fulfill that specific service, comprised out of multiple businesses providing multiple active income streams, managing multiple properties for infinite cash flows, forced- & market appreciations, tax- exemptions & deferrals, asset protection and on top of it all infinite wealth. 💰
With real estate investing there is no limit to your growth potential!
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