Ever since I moved to the wonderful sunshine state of Florida back in Oct of 2003, I began living my philosophy of live where you wish while investing where it is best”. Moving from the cold midwestern state of Minnesota just before winter set in, I was thrilled to escape the cold. My quick discovery was while it was much better weather in Florida, the investing climate (at the time in 2003) was terrible.
My investments back in Minnesota were doing well, but there was no way any investor could purchase any investments in this new overly inflated sellers’ market I was now living in. This is when I started investing in turnkey properties within emerging markets.
A whole new world of investing lies within this wonderful world of turnkey real estate investing.
What is turnkey real estate?
As the title suggests, it is an investment (typically a single family home) that all you really need to do is turn the key to the front door and you are open for business. The old way of investing is to continuously search for property. Then you would have to do all the due diligence on the property itself and the potential for rental income. You would then research the demand for tenants in the area, establish a hypothesis as to what you can get for rent, how long it will take to rent, find a property management company to operate the business and try to establish a pro-forma for the property. Meanwhile, you would have to do any renovations or upgrades or perhaps simple cosmetic upgrades to make it a nice rental home.
On the other (easier) hand, a turnkey property is typically sold by a company whose business model is to buy (usually distressed properties, in the best neighborhoods) at economy of scale pricing from lenders. They then renovate the property with their own renovation crews. Meanwhile their in-house private management company leases it to a tenant. These components are all under one roof making for a complete and efficient business that is the foundation for a turnkey investment system. Turnkey properties are homes with tenants in place and have a true pro-forma based on actual expenses rather than hypothetical projections.
7 benefits of turnkey real estate investing
Full investment system: The acquisition, the rehab, the tenant placement and the ongoing management.
Benefit from economies of scale: Turnkey companies create economy of scale pricing for all their expenses. These companies are able to make a profit from the sale of the property as well as the ongoing management. The combination of economy of scale pricing and multiple income streams allows them to keep their expenses reduced so they can sell the properties to an investor as a fully performing asset while providing a nicer property at a better price than neighboring homes.
In house repair crews: No need to worry about inflated markups on repairs. Most turnkey
companies have their own renovation crews. These renovations are done knowing they will be managing the properties so they are renovated to eliminate and or reduce potential repair issues. When they do arise they of course have their own crew do the work and bill you just for the cost of the repairs. Many management companies have to hire all their work done and then they mark up the invoice so they make a profit before sending the invoice on to the investor. So again you can benefit from economy of scale.
Thorough knowledge of the market: It takes more than just investing in a great city. Within any city are little micro markets that we call the sweet spots. The turnkey companies know the dynamics of these markets better than anyone as they tend to buy 20 to 30 houses a month. They understand which properties in which locations will be the best tenant and future owner occupied properties.
Power teams: As turnkey companies work with so many investors they have relationships with many local lenders, home inspectors, real estate attorneys and accountants to help you with financing or entity structure set up or tax preparation work. These long-term relationships are paramount in getting you the best services for the best prices.
Vested interest in your investment portfolios’ success: These turnkey companies have a vested interest in helping you, the investor, to build a strong investment portfolio. They, like any great business owner, wants to earn your future business and the only way to do so is to sell you a great property at a great price and provide hassle free investments that perform according to the Pro-forma you received.
Best markets: As an investor you want to invest in the best and most sustainable real estate markets. Turnkey companies understand this and (for the most part) they only exist in these best markets, they too have to make money and markets that are not poised for long term sustainable growth will not provide them with future business. While it is always recommended and prudent to do your due diligence on a market, it will be rare to find a turnkey company in a bad market.
Which way makes more sense to you?
I know there are active investors who have the time and like to do all the “traditional investing” details themselves. But for busy investors who want long-term sustainable income that is as hassle free as an investment can be…Turnkey properties are a great real estate investment vehicle.
One Problem! Most turnkey properties are unlisted
One thing that you might have noticed around the internet is that there are not scads and scads of these properties on the marketplace like there are traditional real estate listings.
This is because turnkey property companies wear a number of hats and they run a finely oiled machine. As you work with these companies, you will really appreciate their business savvy.
The way they sell these properties is equally as efficient. Most of them do not promote or sell their properties online. This is simply to eliminate talking to all the looky loos or tire kickers. They work with their power teams and contract this out to real estate investment companies to promote them and weed through the questions and vet the people to find the serious investors.
The Equity Builders Group Buyers Club is pleased to be on the list of preferred representatives for a wide range of these types of companies all round the country. From the oil boom towns of North Dakota to the hot humid flatlads of Texas, we find the best deals out there with the most reputable companies and match them up with our Buyers Groups members that we feel would be a good fit.
If you wish to meet one of these turn-key locations or companies give us a call we can make those introductions. Larry 941-718-7761 or visit our turnkey real estate investing properties page.