The Finale: How To Do Turnkey Rental Dea...

Here we are at the last step of my mini-series that’s all about the step-by-step of turnkey rentals.

This is the finale, and I trust that as you have reached this point, many of your questions about turnkey rentals have been answered.

Chris Clothier here and my purpose is to guide you to making the best decision for your business when working with a turnkey provider.

Here’s a brief overview of my 3 previous lessons in this series…

Let’s Review

In Part 1, 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.

In Part 2, I explained that once you locate a great market, 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. The next step will be to interview them and make sure they’ll be accountable for doing what they say they’re going to do.

In Part 3, you were equipped with more tools to ensure that this is a profitable venture for you.

I suggest you go back and breeze through those lessons to get caught up for today.

In this final lesson in the series, you will learn the points that will guide you in finalizing your decision of whether or not to go with a particular company.

Avoid So-Called Guarantees

Let’s say you’ve located a company that seems to meet your criteria. Now you begin to look at their properties and the company itself…

Are they high-quality properties?
What do they look like?
What kind of work do these people do?
Is it high-quality work?
What assurance do they give you that they’ve been in business long enough to know how to operate properly?
Are they saying they will give you a 12-month guarantee of no maintenance? If so, I can guarantee you that in month 13, you’re going to have maintenance.
Are they saying they will give you a 12-month guarantee that you won’t lose rent? Then I can guarantee you that it’s going to go vacant after month 13.

That’s what happens with a guarantee. Realize that these are used as the shiny object to get you into the deal. My advice is to avoid these!

Quality First

Look for companies that put quality first. They are willing to tell you that this is the best property you can find... that it has been renovated to the highest level possible.

They have the best team in place to rent it. And they assure you that they operate with a high level of integrity. They know how to operate in a way that you’ll be happy and satisfied – and that you’re going to love the investment you get.

The investment will be consistent and reliable.

Neighborhood Normal

A huge mistake that many investors make is that they project what they see themselves.

normal This is especially true if you happen to live in an expensive part of the country where it might cost $100k just to build a garage. And you’re trying to figure out how you can buy a 3-bedroom, 2-bath, 2-car garage home…

It doesn’t always make sense.

But when you hear that you can buy those properties in different parts of the country, it becomes very enticing. It becomes that shiny object that you have to get started because the properties are so affordable; this is an unbelievable deal.

The reality is, that you want to buy what I call neighborhood normal. You want to buy within the path of progress. You don’t want to buy in the oldest rebuilt part of town where there’s nothing new coming in; nothing new is being built; nothing new is being revitalized.

Additionally, you don’t want to buy a 2-bedroom, 1-bath home in the middle of a 3-bedroom, 2-bath neighborhood. You don’t want to buy the only house within a square mile that doesn’t have an attached garage. Make sure you are buying what’s normal for the neighborhood.

Not Just About Cash Flow

Next, look at the pricing of the property itself. The big thing you want to do as an investor—especially with turnkey—is make sure it’s not just about cash flow. Too often investors buy just to make a certain cash-flow number each month.

I’m a big advocate that while cash flow is important (as long as I have an income), my main goal is the assets. I’m looking to control as many assets as I can that will give me a higher return later on.

cashflow I want to control assets now.

I’m not as interested in the cash flow as I am in the property itself…

Is it in an up-and-coming area?
Is it in the path of progress?
Is it built well?
Have they taken care of most of the deferred maintenance?
Can I rely on this property to perform the way I expect it to perform in the next 7 to 10 years?

What I want to do is knock out any leverage that I may have put on that property as soon as possible. I want to own that property outright as fast as I can.

So, I’m not looking so much at cash flow as I am asking:

“Is this a good property?”
“Does it provide the return I’m looking for?”
“Is it going to perform the way I expect it to perform?”

I’m not as interested in the numbers as I am in the property itself, and the way the company I’m buying from can deliver that service to me.

Final Notes

This brings me to the final point and how it all wraps in together...

It’s not rocket science. You’re looking for a good, solid market. This is much more than choosing the town where your wife grew up, or where your family’s from, or your college roommate lives there, or you visited on vacation and loved it.

Those are not good reasons to buy in a market. You need to have something more solid. You want it to be a good market for a long time.

Remember, if you’re going to buy turnkey, it should be a long-term investment. At least 7 to 10 years.

Services in Place?

Now you know more about how you are going to go about finding a good turnkey company… a company that’s going to put your experience first. They care about the experience you have.

They have the systems; they have the services in place to make you happy. They’re not selling junk; they’re not deferring maintenance to hold costs down to help you get in. They’re not giving you fake numbers, saying they’re going to give you 13%, 15%, 17% cash-on-cash. (Which by the way, is almost impossible to attain, and they come with super high risk.)

If things line up the way they’re supposed to line up—the numbers, the house, the system, the answers you’re getting from them as a company, then you might be ready to move forward.

Should You Visit the Company?

Investors often ask, “Should I go visit the company?” and “Should I go see the houses?”

meeting I’m a big believer in knowing who you do business with. There’s nothing wrong with going to visit the company. But it may not be as important to see the house.

I’d prefer to know what they do as a company. See examples of the work they have. I want to speak with other investors and find out if everything matches up with what they told me. Am I going to hear testimonials that are what I want to hear? What I expect to hear?

If everything is all sunshine and roses, then I’m going to ask to talk to someone who wasn’t 100% satisfied with the service. I want to know how they handled someone who had an issue. If that client will share that with me, then I’ll feel much better.

I also want to go see who this company is. See examples of their product, meet the team, and make sure that they have the ability to deliver. Once I know this I’m ready to invest.

At that point, I can return home and when a property comes up, I’ll be ready to build my portfolio.

Are you ready to build yours?

You’ve received a whole boatload of information in this series on turnkey rentals. Got any questions or comments? Leave them in the comments section below.