Today’s REI Classroom Lesson

Robert Syfert shares some of the benefits of turnkey investing, and explains what true turnkey investing is.

REI Classroom Summary

For investors who want a “done for you” product, turnkeys are the way to go. With turnkeys, you don’t have to worry about rehabbing, finding tenants, managing the property, or dealing with maintenance issues.

Listen to this REI Classroom Lesson

Real Estate Investing Classroom Show Transcripts:

Mike: Welcome back to the REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Robert: Hi guys, Robert Syfert from USA Portfolio Real Estate Incorporated. I’m here to teach you in the REI classroom today about the benefits of turnkey investing.
Mike: This REI Classroom real estate lesson is sponsored by, FlipNerd’s private investor coaching program, and your blueprint to investing success.
Robert: And, more importantly, what’s the difference between true turnkey investment, or just doing it yourself in rentals, or buying wholesale rental property? Because I believe in the rental game and buying whole, there are the three different strategies there. And, more importantly when I pointed out at the beginning what are the advantages of true turnkey? Because don’t get misled by the people who use that term out there. It’s very widely misused right now. A lot of people use the term “turnkey” to basically say, “Hey, I have a property that has a potential tenant paying rent in it. So that’s turnkey.”
The reality is most of those aren’t turnkey, and what I mean by that is they weren’t professionally renovated, they weren’t professionally-placed tenants, so the most important benefit there is you’re working with a professional company, who has done potentially hundreds, if not thousands, of properties and has the likelihood of knowing the things that go wrong within rentals.
Not someone who’s done one to ten properties, and says, “I’ve got it all figured out,” because, guess what? I promise you, they don’t. It takes hundreds of properties, potentially thousands to get through the management process of understanding what goes wrong after the tenants start moving in, and what things to look for, so that you can avoid future expenses on the property.
So where are the benefits with turnkey? A real turnkey benefit is it’s been professionally renovated. Why is that important? Because you typically have the warranties on the things that have been done to the property, so your maintenance short term and long term is going to be considerably less on a real turnkey property compared to something where you’ve, in my opinion, cut corners.
Let me give you a simple one there. This one sounds ridiculous because it’s just related to paint, but most landlords just throw a coat of white paint on the house and call it a day, move somebody in to clean out the carpets. Why is that not real turnkey? Well, one, you have less likelihood of a professional presentation for a tenant when they’re moving in. We tend to do two-tone paint wise, more attractive, costs us maybe 50 cents a square foot more, but it makes a long-term difference in maintaining that tenant and the appeal that they have.
Two, instead of just cleaning some floors when you get a property, why not update and put brand new floors in? One, again it gives appeal for a better long-term tenant. Two, you’re not going to have to worry about replacing that down the road, so you’ve already eliminated some costs that may come up in a year or two.
So again true turnkey, that’s just a short description there, but some of the other benefits are typically in a real turnkey house, you have new mechanicals, you have roofs, new windows, all the things that people are planning for on their future expenses, why not take care of those upfront? Because I will tell you that you’re saving a lot of money and time down the road. So when you’re buying turnkey, you may pay a little bit more for the house upfront, but the numbers that you see on paper are going to perform over long time, more often than not, compared to just buying a rental property that someone calls a rental.
So doing it yourself, the difference between turnkey and doing it yourself simply is this. When you’re doing it yourself, you’ve got to go find the properties, you’ve got to evaluate all of them, you’ve got to make multiple offers, you’ve got to inspect every property, and you’ve got to determine if it’s in the right neighborhood. Then you’ve got to find the contractors, you’ve got to renovate it, you’ve got to manage that, you’ve got to deal with the city and all of the inspection processes and all of the things there, and then you’ve got to go through placing a tenant. When you buy a turnkey product, you’re buying all of that time back. So the difference is giving yourself time, and making your money, making money quickly.
So do you want to be an active investor? Or do you want to be a passive investor? Both are okay, just depends on knowing that upfront. If you want to be active, then maybe going down the road of doing it yourself and saving a couple of dollars upfront is the best benefit for you. But if you’re looking at truly being a passive investor, find yourself a great turnkey provider, let them do all of the professional work that they’ve practiced and honed over the thousands of properties that they’ve evaluated and done, and get the professionally-done-for-you product with a low long-term maintenance.
And great tenants already in place, because they’ve done it for you, and you’re cash flowing from day one, instead of going through the nightmares of trying to figure it out on your own. And also, just be wary of the ones that say they have a turnkey when, in fact, it might just be a rental property that you don’t even know where the tenant came from.
So that’s it for today. I’ll see you guys on the next REI Classroom. If you want to learn more about turnkey, you can reach out to our company, or any of the ones that FlipNerd and Passive Rentals recommends to you out there in the country. You guys have a great one. Bye now.
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