Whether you’re pursuing remote real estate investing or simply looking for a team to take the heavy lifting off your hands, a turnkey company can be a great option. We want to lay it all on the line…what do turnkey companies do? What do they not do? Understanding the fundamental role turnkey companies play will help you identify worthwhile partners…and potential scams.
While we will say that not every turnkey company operates in the same way – and that’s okay – we will let you know what services they should provide to truly offer a stress-free, experience-leveraged, and truly passive investing experience.
6 Things True Turnkey Companies Do
1. They identify profitable investment markets and properties
One of the best things turnkey providers do for investors is remove the need to extensively research and narrow down potential investment markets and properties. They’ve already done this for you. Many turnkey providers will start in a single, local market before expanding where there’s a good balance of opportunity and demand. They establish themselves in these markets and quickly become experts in the area.
2. They own the properties they are selling
Turnkey companies should actively put their money where their mouths are. This is why, in many cases, the properties turnkey companies sell to investors are already occupied by residents and under an active lease. They’re investing, too. It’s not just about selling the investor a property and saying, “Good luck!” but proving, from the very beginning, that their model is worthwhile.
They’re making money by investing, and when you continue to use their services and structure, you should, too.
3. They handle property renovations and ongoing maintenance
Ideally, turnkey companies have their own teams that handle renovations and property management. The best companies don’t outsource. This allows everyone to be on the same page – delivering consistent quality, reno work, services, and attention to detail under a unified banner. Not only does this allow for better quality control, but it centralizes and simplifies communication channels for investors.
4. They provide accurate analytics and projections
Turnkey companies need the numbers to back up their claims. How are they getting their prices for properties and for rental rates? Accurate analytics and projections allow investors to build a solid, informed portfolio. It also demonstrates transparency. Turnkey companies, because they’re investors, too, know how important it is to have accurate numbers. This helps them pivot and strategize as much as it prevents misinformation.
5. They encourage ongoing investor education
Educated investors ask better questions and make better decisions. A reputable turnkey company has nothing to lose from educating its partners. They should be more than happy to explain the minutiae of this industry and provide valuable resources for their investors.
6. They centralize and initiate communication
Every turnkey company should prioritize transparency and communication. There should be regular check-ins, reports, and conversations that ensure investors are satisfied and informed. A lack of communication should raise all of your red flags!
6 Things True Turnkey Companies Don't Do
In this case, things turnkey real estate companies don’t do also include what they shouldn’t do. We’re looking at issues beyond a turnkey company’s purview and what could be considered red flags!
1. They don't offer guaranteed returns
Guaranteed profits obscure subpar properties. Companies offer guarantees not as a way to mitigate your risk but as an incentive for investors to buy properties without looking too closely at their income-generating potential. If they’re prepared to cover the difference, they don’t have properties that can stand on their own merits.
2. They don't handle your inspections
Turnkey companies have no doubt already performed their due diligence when acquiring the properties they sell. That doesn’t mean you, the investor, can forgo a proper inspection. Get your own guy to go through any property you intend to buy. This is just an essential part of due diligence.
3. They don't prepare legal documents
While a turnkey company may or may not employ legal experts, putting together offers, closing agreements, and other legal documents is your responsibility. Consult with your lawyer to ensure you’re covering all your legal bases. This also includes estate planning once you invest. While the advisor from your turnkey company may be able to present you with options, they’re not necessarily qualified to give legal advice.
4. They don't play middleman
Turnkey companies should own the properties they’re selling. You don’t want the salesman making a commission – you want the owners and operators.
5. They shouldn't push you to buy at any cost
Reputable turnkey companies aren’t going to try to sell you something that won’t facilitate your success. If it’s out of your reasonable price range or not what you’re looking for in a real estate investment, they won’t try to push for a sale anyway. They should be invested in your success – and a long-term, amiable working relationship – rather than a single transaction.
They want to know this is the right move for you, not just their bottom line.
6. They don't handle financing
While turnkey providers can often point you to preferred lenders with experience working with investors, they don’t provide the financing. You won’t be paying your mortgage to the turnkey lender! It’s up to the individual investor to choose the lender they’re comfortable with and negotiate the terms of their mortgage agreement.
Understanding what to expect from your turnkey company will set you up for a successful investing experience.
