How To Do Turnkey Rental Deals Step By S...

You’re looking to invest in rental properties, and you’ve come across the term turnkey real estate investing.

On the one hand, it sounds inviting; on the other hand, it comes across as confusing.

What exactly does turnkey mean? And how are you supposed to know?

Hey Moguls, Chris Clothier back with you for Part 2 of this series where I clarify what the term turnkey rental deals means and how it can affect your business.

In How to Do Turnkey Rental Deals Step by Step - Part I, we looked at several foundational criteria that you should consider before selecting your investment market. This might include such things as industries located in the area as well as population growth.

Once you’ve done your research and made that selection, now it’s time to find a qualified provider to serve up that turnkey experience for you. Here’s where things can get sticky.

Where do you look? What questions should you ask before joining up with that provider?

Those are some of the questions I’m answering in this lesson.

Don’t Go it Alone

Let’s take a city like Memphis—in a city of this size, you might have 5 or 6 provider companies to choose from. This will be true in several similar markets around the country. And, in most cases, each of these companies will be offering a service that they call turnkey.

So, what do you do?

You may have a market that you really like, but you can’t find a good provider in that market. It will be tempting to say, “I’m going to invest there anyway. I’ll just build my own. I’m going to do it all on my own.”

There are many investors in the past who may have been successful at that. But that’s no longer passive. You are now an active investor. You are actively managing your group of people that you have put together.

You’ve passed the point where you can be the Lone Ranger.

What You’re Looking For

A better strategy is to find a great market, and then find a great provider in that market. This will be a provider who will give you the kind of passive investment that you want. They’ll do things the way you expect them to be done.

Here’s are 4 things you should look for:

First of all, you want someone who’s a local investor. They’ve had experience in that town.

A good, reliable turnkey investor will have a lot of properties, as well as a lot of experience buying and selling.

Don’t get caught with someone who says they own properties, but they’re all located in another part of the country. They may tell you that now they’ve decided to set up shop in this new market. This is not what you’re looking for.

You want someone who has good local knowledge. Preferably, you want someone who’s been doing this for over 10 years. That means they’ve been through multiple cycles—the booms and the busts. They have weathered the storms and have emerged on the other side, still successful.

You want to be sure this provider owns the properties they are selling.

Are they just rehashing the MLS? Or are they selling someone else’s properties because they don’t have the money or funding or ability to sell their own?

This is a shortcut that many investors use to get started. It’s neither right nor wrong, but it’s not what you’re looking for. You want someone who’s stable and experienced; someone who has been investing for a long time. They own their own houses, and they use their own money to buy, renovate and hold the property.

You want a company that has structure in place and runs like a well-oiled machine. They have the people, finances and systems. They’ll be able to communicate with you because of those systems.

They’ll keep you up-to-date on the properties you buy. This includes the rent, maintenance, collections and so on. And when you build a portfolio of 5 or 6 houses, you’ll know that they are constantly aware of the status of your property. Because they have systems in place, they will get that information to you in a timely fashion.

You’re looking for a company that gives a total customer experience.

You should be kept up-to-date on all aspects of your rental property. This includes when a tenant renews a lease, or when they move out, and if there are any maintenance issues.

Questions to Ask

Once you’ve found the company that fills these requirements, the next step is to interview them and make sure they will be accountable for doing what they say they are going to do. Using the list above, find out if they meet any or all of that criteria.

One great question to ask that could become a game-changer: What’s the biggest mistake you’ve made as a real estate investor?

If they’re a successful local investor, chances are they’ve been through the wringer a time or two. If they are not candid and forthright, it should be a red flag.

They should be open and transparent in giving their answer. And their next statement should be— “and here’s how I’ll help you avoid making the same mistakes.”

Coming Up in Part 3

In How to Do Turnkey Rental Deals Step by Step - Part 3, we’re going to dig even deeper in to what you can, and should, expect from a turnkey rental provider.

This has to do with your financial future, and the success of your business. That’s why there’s no reason to settle for second best, especially when your portfolio is at stake. I encourage you to go to great lengths to do your research first. And I’m going to show you exactly how to do that.

Your Take

How do these criteria mesh with your past experience(s) with providers? Do you have other questions an investor needs to ask before hooking up with a turnkey provider? Let us know in the comments below.