7 profit reasons landlords stop landlording
Do you want to be a property manager?
So you own a few properties maybe 4, 5 or 6 properties and you are proud of the accomplishments you have made. You have purchased the investment property, perhaps did some rehab work and like all investors you have experienced some trial and tribulations and with each one of these you became smarter and wiser. You have saved money by doing your own property managing and this has helped your overall balance sheet.
Investing is now in your blood and every once in a while you buy another property. You are seeing your portfolio grow and your accountant tells you, you are doing well.
How do you break through your current level of success!
This is a very common question and one that most investors go through at some point. The short answer is you may want to seriously consider that it is time to “stop being a landlord” and get real serious about investing. You will rarely see seasoned investors doing any sort of land lording, they most often have property management companies do that for them.
It is common for newbie investors to start investing in close proximity to your home so that you can manage it and keep an eye on it. I too started this way. I was proud of the fact that I saved about $100 per month for each property I owned. At the beginning this was putting approximately an extra $1500 in my pocket each month, or so I thought. After a few years of doing this I was frustrated with the time restraints and the inability to rest peacefully. Taking vacations was a challenge as when I was away I had no one to look over my properties should something happen. So I took tenant calls while on vacation. Trust me it is no fun coordinating a tenant and plumber together while you are trying to enjoy a peaceful family vacation.
During one of these so called vacations I realized I was more of a landlord than an investor. Every time I bought another property I bought myself another obligation and eventually this was getting old, I was getting tired and I knew that I could not keep adding more to my plate.
Investing in your back yard is outdated
Investing near your home so that you can manage it may sound like a good idea to save money but is it? You may be one of the few people in the country to coincidently live in a great real estate investing market. Markets however are cyclical and most of the time the best markets are not in your back yard. Just because you can buy a property in your own town does not necessarily mean you should Where is the best place to find investment real estate?
The most important aspect of real estate is something we all know; say it with me Location, Location, Location. For investors the most important aspect is say it with me “Location, Safety and Sustainability.” Investment property that is safe to own with calculated risk management for sustainable returns is what true investing is all about. Seasoned investors have figured out that saving money managing your own properties is not the way to get the best returns from your investments. Focusing your time and resources on growing your portfolio with a long term objective is paramount to being a happy long term investor. Investing in true turnkey properties in the best most sustainable markets will convert you from a landlord to a true investor..
What is turnkey real estate?
As the title suggests, it is an investment 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.
What 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.
How to Buy U.S. Real Estate is pleased to be on the list of preferred representatives for a wide range of these types of Turnkey companies all-round the country. From the transportation belt of Kansas City to the retirement communities of the south. We find the best deals out there with the most reputable companies and match them up with our investor members that we seek quality turnkey
If you wish to meet one of these turn-key locations or companies give us a call and we can make those introductions. Larry 941-718-7761 or visit our unlisted turnkey property list