6 Golden Rules to Follow Before You Invest in Turnkey Real Estate
Real estate investing is not for everyone. It requires patience, consistency and persistence and it comes with its share of challenges that must be considered before making the leap.
A lot of new investors are interested in investing in turnkey real estate because they think that they won’t have to do any work. Yes, it’s true to a great extent but this doesn’t mean that you start investing without conducting any research.
With my experience and understanding, I came up with these 6 golden rules that you could follow before you invest in turnkey real estate:
1. Draw up a concrete Written Strategy – The rule here is if it is not written, it does not exist. Very few people stick to the plan that are not in writing. Writing a plan on paper not only ensures compliance but can serve as a motivator when things get tough. Some important questions that your plan should address are:
- How much cash flow do you strive for?
- How many turnkey investment properties you’ll have to buy to achieve this goal?
- How long will it take to buy them on your current savings rate?
2. Research – Before you invest in turnkey real estate, it is important for you to explore different turnkey providers. But before that, you need to figure out where do you want to invest. A lot of investors wish to invest in out of state properties because of different factors including low price or high rental demands.
Therefore, while doing your research, you need to find turnkey providers in that particular state where you want to invest. You should schedule a meeting with the turnkey provider and check the property in person.
3. Stay Active – Investment properties require both a large up-front capital investment ($10,000 at minimum), to cover the down payment and closing costs. Even after the up-front purchase, repairs, vacancies and lawsuits can make large and immediate bills. Turnkey providers can help in minimizing those risks. Some of them like us, provide one year rental guarantee as well but as an investor, you need to stay active. Schedule biweekly or monthly calls with your turnkey provider to stay in the loop.
4. Proper Planning – Real estate investment is a non-liquid asset. Therefore, if you’ll plan to sell it, it may take longer i.e. anywhere from one month to one year. It is a long-term investment and cannot be disposed of easily.
5. Location – The kind of profits you’ll make depends upon the location of your property. You need to ask all these questions before investing in a particular location:
- How stable is the area?
- Is there some alternate part of the town/country more qualified to turnkey investing?
- How old is the property, and when was the last time it was renovated?
- What kind of experience your turnkey provider have?
6. Plan B – Many people believe having a plan B means you plan to fail. But as far as real estate investment planning is concerned, having a plan B simply means diversifying your portfolio. So, if you have started with single family homes, after some years, you can start investing in multiplexes or even commercial properties depending upon your personal preferences and market conditions.