If you are new to real estate, you might not be very familiar with the term turnkey, but it’s a vital tool that any new investor should have in their toolbox. Turnkey investment properties are coveted pieces of real estate as they allow investors to accumulate income and add to their portfolio while not dominating their personal time and financial assets.
These are fantastic properties to add to your portfolio, especially if you want to remain hands-off for the majority of the process. Turnkey properties are referred to as passive income. When you purchase a turnkey property, you’re purchasing a ready-to-go property—one that is ready to be rented immediately, if not already rented. It allows you to skip the headache of vetting construction crews and contractors, organizing and supervising the renovation or rehabbing project, and dealing with the complexity of permits and licenses.
Of course, not everything about purchasing a turnkey property is a complete walk in the park. There are still some areas that are complicated, just with any investment format. However, you can make turnkey property purchasing a little less stressful with these five tips!
Most turnkey properties are hand-selected by property investment companies and fully vetted long before they reach the point of being offered to an investor. While this is good news for an investor, as the hard work seems to have been done for you. It is vital that you take the time to familiarize yourself with the industry. Study the area, the neighborhood. Compare those average figures with those of a national average. Compare neighborhoods within the vicinity and compare with surrounding properties. If you are not familiar with the market, if you don’t know the averages and the ups and downs, how are you going to know if you are getting a good deal?
Even after you have made your purchase, it’s important to stay up to date on the market trends. Without keeping an ear to the ground, it’s hard to keep in line with market average rental rates.
Building Industry-based Relationships
Before you even make your first investment purchase, it’s important to have a few contacts in the field. Being the new kid in real estate can often feel like being the new kid in high school—so having a few friends in the hallways is a good way to keep from feeling like you are in it alone.
In addition to not feeling alone, having contacts in the industry is a great tool in making sure you are getting a good deal. It helps to be able to get a secondary opinion, or call in a favor regarding an evaluation or analysis. Having contacts in the industry is also a perk when it comes to shopping for a property. If you have acquaintances in real estate that are aware you’re shopping around, you might just get first grab at the best deals as they enter the market.
These acquaintances can also lend a helping hand in finding viable tenants, booking contractors, or referring property management companies.
Searching the Market
Make sure to understand what type or property you’re looking for before you start your search or you may feel a bit overwhelmed with options. Are you looking for a single-family home or a multifamily property? Commercial or residential turnkey real estate?
Keep your eyes on the market of the area you’re interested in. Take your time… analyze every property with a fine-tooth comb. Most importantly, keep looking frequently.
Learn About Tax Requirements
When it comes to your investment, long before you lay down your deposit or sign any papers, it is important to learn the tax benefits and requirements for the area you will be investing. Do your own research by consulting with real estate investment agents, realtors, lawyers, and accountants. Visit websites and read through forums. Understanding the payable taxes as well as the deductions you’re allowed to take will go a long way in making your rental property a profitable venture.
Treat Your Investment Like a Business
The most important tip anyone can give you in turnkey real estate investing is to treat your investment like a business. When you view the property in this manner—as a business, not a home—you are more likely to be successful in your endeavor than if you think of it as a hobby or a second home.
Treating the property strictly as a business enterprise allows you to be critical of any decisions that need to be made in the process. Without a personal attachment to the property, only an attachment to the profit it can generate, you are more likely to make informed, qualified decisions that are not driven by emotion. Also, when viewing the property as a business, you are more likely to keep diligent records, separated finances, and time specifically devoted to the building of your investment business.
Keeping these tips in mind when getting involved in real estate investment will help point you in the right direction and ease the process considerably. Turnkey properties are a great, simple way to get involved in the real estate investment industry as long as you do your due diligence, understand your market, and keep informed.