Even though turnkey investing is nothing new and lots of experienced investors have found success with this strategy, it’s still something that has a bad rap in some circles. There are lots of myths surrounding this type of investing, and unfortunately, there are plenty of gullible people out there who believe them. Hopefully, I can dispel a few of those falsehoods today.
- Turnkey providers are opportunists running a scam. This one’s my favorite. As a turnkey provider myself, I’ve been called a scam artist once or twice, and it actually really sucks, because I KNOW this is a legit way to invest. Plus, I’m not trying to scam anyone! I’m trying to connect investors with cashflowing properties in a situation that results in a win for us both. I have a property that I’ve researched and know is profitable, and I’ve spent time and money restoring it and getting renters in place. I want to sell it to an investor who’s looking for a nice return. It’s that simple. There’s nothing shady going on, no underhanded stuff. Just two people with similar interests and goals who can help each other out.
- You’ll spend more on a property than necessary. This is another one I hear a lot. The markup on a turnkey property is outrageous…or so they say. Here’s the truth, though. It’s not. Most turnkey properties are actually listed at or very near market value, with no inflated pricing. This is because the properties like the ones in my Kansas City and Dayton inventories have been fully rehabbed and are move-in ready. And when you think about it, it makes perfect sense that a good-as-new property is going to be listed at or near market value. Now, I will say that there are a few turnkey providers who DO impose a markup. It’s not right, but it happens, and it’s why it’s so important for you as the buyer to do your research on the market and prices of homes nearby.
- After I buy the property, I don’t have to do anything. Turnkey is known as a passive form of investing, but this term can be a little misleading. While it’s true that turnkey providers will handle the majority of the work for the investor – market research, property renovation, tenant screening, etc. – this doesn’t mean that the investor doesn’t have to do anything at all. Investors are responsible not only for making good decisions when they’re choosing a property (again, you’ve got to do your due diligence), but they’ll have to be involved with and make choices after they buy the property, too. They have to stay on top of the numbers to make sure a property is performing how they want it to, and decisions will have to be made regarding things like repairs and updates down the road. It’s not completely passive, and operating under the mindset that it is will only lead to trouble. http://blog.memphisinvest.com/exposing-7-turnkey-real-estate-investment-myths
- I’ll make more money if I do it myself. I think this one is pretty funny. Do you know how much money I put into every new property I add to my inventory? Tens of thousands of dollars. And then after that, I spend even more money on things like marketing the property, screening tenants, and taking care of property management. So yeah, you may think you can save more doing it all solo, but I’m betting that’s only because you haven’t considered ALL the expenses that go along with it – to say nothing of the time factor involved. When you use a turnkey strategy to invest, you’re not just buying a property, you’re paying for convenience as well. And that’s pretty tough to put a price tag on.
These are just a few of the myths that people believe about turnkey investing. Let me close by saying that this is a legitimate form of investing, and I’ve worked with hundreds of successful investors who can attest to this. But like any investment strategy or asset type, you must do your homework on it before you dive in. With some background knowledge in place, you can protect yourself and make the best investment decisions possible.