Turnkey real estate investment has become a popular choice for real estate investors over the past decade. What is it? How does it compare with other investment options? What should we be looking for in sound and profitable turnkey opportunities?
Turnkey Real Estate Investment 101: What is it?
Turnkey real estate investing has been the norm, or even go to investment strategy for investors in Europe and Asia for decades. It really woke up in America after 2008.
This term is typically used to describe investing in fully managed single family rental homes. Instead of doing it all yourself, a turnkey real estate provider like Memphis Invest will find and screen the properties for you, help with tenant placement, and connect you with ongoing full time property management. All you do is invest and reap the rewards in your bank account, fund or self-directed IRA.
The Benefits of Turnkey Real Estate Investing: Why Do it?
There are several obvious advantages of going turnkey, including:
- Eliminating or at least shortening the learning curve
- Fast tracking getting started in real estate investment
- Ability to benefit from real estate without quitting your job
- Minimal to no time needed to acquire and scale an income producing portfolio
- Truly passive income
- Leveraging the best experts at every part of the process
- Long term wealth building
- Tax saving and deferring benefits of real estate
Essentially, if you are busy, you want to get going quickly to avoid missing out any longer, and you want to minimize risk as low as you can, and make expert moves, all without sacrificing your precious time, turnkey really stands out as an attractive option.
Turnkey Investing Vs. Other Real Estate Strategies
There are many great real estate investment strategies. You can use more than one, and probably should at some point. Different vehicles may be a better fit for your circumstances and needs at different phases of your life as well.
For example; real estate wholesaling is highly regarded as one of the fastest and lowest risk ways to get into real estate and get paid. Especially, if you are limited on funds and credit. It can produce sizable paydays fast. You don’t even have to get your hands dirty. Wholesaling can also be used long term at create scale as a very profitable business. On the other hand, unless you have automated this business it is very intensive. Meaning, if you aren’t out there buying and selling deals this month, you aren’t getting paid. You have to keep putting the work in, to get the money out.
The same goes for house flipping. Flipping houses is very intensive and time consuming. There are many variables and skills required. It can give you a bigger paycheck in one deal, in one month, than most people make all year. Yet, if you love your career or the foundation you are working for, you might just not have the time or desire to get dirty rehabbing abandoned homes.
You can do it all yourself as a landlord as well. Many love this. Though, you will have to deal with tenants and maintenance, and find the deals yourself. It’s just not passive like turnkey investing. Though great if you are living next door to a duplex you own and love talking to your renters all day long.
There are also turnkey style commercial real estate investments. These can be good too. Though with the exception of multifamily apartment buildings, investors do need to keep on the technology risk and how new tech is impacting these properties.
What to Look for in a Turnkey Property Investment
- Strength of the location and future outlook
- Pricing of the properties and what value is based on
- Likelihood of return of capital
- Likely return on investment made
- Experience of the property management team
- Plans for sustainability of the investment, income and company
- Spread between any debt, expenses and rents
- Potential for rental rate growth
- Tax saving and deferring opportunities
- Risk versus reward balance
- Ease of staying on top of your investments (i.e. real-time online vs. quarterly paper statements)
Turnkey real estate investment has grown in popularity in the United States. It is a strategy that has proven to work for decades. It may be especially appealing to those with capital to invest, who are busy professionals, or have accumulated wealth through other forms of real estate investment. It’s quick to get started with. Just make sure you know how to take advantage of all the benefits, and what to look for in the best opportunities.