Investing In Turnkey Rental Properties
A little over a year ago I retired from my Corporate job. My wife and I always had an interest in Real Estate. We, therefore, decided that we wanted to invest in rental properties. We did our research on the best way to invest in rental property and soon learned there are many different ways to purchase rental property. My wife and I could buy existing rental properties in our local area. We can buy property that has deteriorated due to the aging process and lack of maintenance, fix them up and then rent them out. We can also buy Turnkey Rental properties. These are just a few of the ways to purchase rental properties
Before I go any further, I believe I need to explain what Turnkey Rental properties are. A Turnkey Rental property is a rental property that you buy from another company. That company takes care of finding the property, rehabbing the property, getting the tenants for the property and managing the property. Basically, all the investor does is pay for the property, work with the management company (about 1 hour/month) and collect rent checks.
There are advantages to working with a Turnkey Property company. The investor does not have to be skilled in finding and rehabbing properties. Does not have to be skilled in leasing properties, working with tenants, and managing tenant concerns. The investor does not have to be skilled in making property repairs. The investor can purchase properties anywhere and not have to worry about how the property will be managed.
There are also disadvantages of investing in Turnkey Rental properties. The major disadvantage is that you are relying on the turnkey property company for everything. If that company is a performing poorly, it is likely your rental property investment will perform poorly.
If you are going to invest in Turnkey Rental properties, then the most important thing is picking the right Turnkey Rental Property company. This is more important than the property itself. Do they have a good track record? How many properties do they manage? How long have they been managing properties? What are their current customers saying about them (this includes investors and tenants)? What are their vacancy rates? What is the average length a tenant stays in a unit?
The second most important factor to consider is the economy in the area you are considering buying a property. Is there diversity of major employers in the area? Are available jobs increasing or decreasing? Is there a large number of renters as compared to the national average? Is the economic output of the area increasing and has a history of increasing? All of this information can be obtained on the internet with a little research effort.
You can argue that the economy of the area you are investing in should be the most important. However, if the Turnkey Property company is poorly run, your investment will still do poorly even in a good economic area.
The expected economic returns that the property will produce is important. The economy of the area you are buying the property in will affect this. However, each individual property has to show that it will produce the return on investment that the investor wants. If not, don’t buy the property.
The property the investor actually buys is down the list of priorities. The Turnkey Property company will help guide the investor as to what types of properties are popular in the area of interest. They will also know the local area. They will guide the investor as to which parts of the area to invest in and which parts of the area to not invest in.
From our experience, my wife and I knew that we wanted to invest in single family homes that had three bedrooms, two bathrooms, and at least a two-car garage. We wanted to invest in the middle to slightly lower than middle-income family type homes. We also wanted to find a great Turnkey Investment property company that was located in a great economic environment.
We had considerable training on property investment, numerous hours of research, and face to face meetings with company representatives. My wife and I then made our choice of Turnkey Property company and the area of the country we would buy properties in.
Buying that first property still took a leap of faith. We did our homework but still had doubts. We bought the property sight unseen. Totally relying on the Turnkey Property Company. It met all the criteria that we had set up and discussed above but still, we were apprehensive. We did hire a property inspector to inspect the house before we purchased. All issues that the inspector found were corrected before purchase.
In summary, we have purchased several single-family properties without visiting any of them before we bought them. All of them have been rented with two-year leases signed before we actually closed on the property. At this point in time, it appears that we made good decisions, worked with a great Turnkey Property company, and bought the correct Turnkey Rental properties. I tend to want a longer track record before I can safely say we made the right decisions. However, as they say…. So far, so good!