In this week’s episode, I answer a great question from Crystal about Long Distance investing.
I've developed an interest in real estate in the past few months. I haven't made my first investment yet since I'm still educating myself with books/podcasts and developing a strategy that works for me. One thing that has come up a lot particularly as a long distance investor is the idea of turnkey investments. What are your thoughts on turnkey companies?? Any insight would be greatly appreciated.
Turn Key opportunities can be a viable solution but vet them heavily up front. We can’t expect to achieve the highest level of returns from a turnkey because the provider needs to profit also.
Out of all the turn key providers out there, I recommend Terry Kerr and his team at Midsouth Homebuyers. They have been in business for 17 years in Memphis (a town I now know well). I have referred tons of people to them and never once heard a bad word. You can get to them by using the following link: CashFlowGuys.com/TurnKey
When looking into any turnkey operator, take the time to visit their operation in person, attend any training and webinars they host to learn how they run their business.
Additionally, reach out to Local REIA (investment club members) as found on Meetup.com or Facebook investing groups that cater to a specific market. Title Companies are also a great resource to learn about how smoothly their transactions close.
Let’s not forget to do ALL the math, be sure all expenses are accounted for. Be sure that estimated rents are factual estimations, do your own rental analysis. Review the deal as if it was not turn-key, sometimes we put too much value on the fact that a property is turn key and therefore ignore other issues. Don’t fall into that trap. A good turnkey provider should be open and forthcoming with information when you are in the diligence phase. If it is difficult to learn about them and to obtain answers, that situation will only worsen over time, therefore, consider this clue carefully sooner rather than later.
Be sure to thoroughly review all contracts and management agreements, be completely clear on all expectations of both parties. How are repairs handled? Are the agreements too general and allow for you to be nickel and dimed to death? What happens when a tenant has a repair request? How are late rent payments handled? What happens when the rent is not paid? How long does it take to evict a tenant on average?
Fruitful out of town investing means we must be confident in the abilities of the ready-made team that comes with the investment opportunity. Go talk to them, ask about “what if” scenarios and be confident in their ability to handle problems that will crop up (not might) crop up. Remember, turn key does NOT mean trouble free.–Happy Investing