Today’s REI Classroom Lesson

Marco Santarelli goes over the main differences to consider when determining is DIY or turnkey makes sense for you.

REI Classroom Summary

DIY can be great for investors who have the time to be a part of the entire process. For investors looking for a more passive approach, turnkey investing can make more sense.

Listen to this REI Classroom Lesson

Real Estate Investing Classroom Show Transcripts:

Mike: Welcome back to the flipnerd.com 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.
Marco: Hi, my name is Marco Santarelli with Norada Real Estate Investments and I’m your host of the REI Classroom. Today, we’re going to talk briefly about do-it-yourself investing versus turnkey investing.
Mike: This show is sponsored by passiverental.com.
Marco: You see, regardless of where you choose to invest, there are two opposite ends of the investing spectrum as I call it, when it comes to your involvement and the required resources. On the one hand, you have do-it-yourself. Do it yourself real estate investing puts all the risks and responsibility squarely on your shoulders. Typically, that involves everything from sourcing the property, acquiring it, funding it, renovating it, managing it, selling it if you’re planning to sell it or flip it and then coordinating every step in between.

Now, it is not likely you will be doing every piece of that process by yourself, but you will be involved to some degree every step of the way and this is the most time consuming and often most stressful option, but for some people, it’s really what they enjoy. Do it yourself investing also requires the largest number of resources. It requires the greatest amount of time and experience, capital both cash and financing, and of course contacts such as realtors and property managers, contractors, inspectors, title companies. The list goes on and on.

Often, but not always, you’ll have a total all in cost lower than investing in let’s say a done for you or turnkey property. That’s really the advantage of going this active route that’s because you’re taking on all the risk, putting up and spending that extra time to search for, acquire, renovate and coordinate everything yourself.

Lastly, I’ll say this, do-it-yourself investing is ideally suited for those people who like to buy and renovate their own properties. They’re active real estate investors. There are few shades of gray within this category but it certainly is the most resource intensive option.
Now, if we go to the other end of that spectrum, we have what I call turnkey real estate investing and that term is being used quite a bit today. First of all, let me say, the word “turnkey” has been thrown around by real estate investors for many, many years now without a formal definition of what it really means. Our company here was one of the first to really start marketing the term back in 2004 and then since 2009, we’ve actually seen a plethora of local sellers and competitors pop up using that term turn-key in their marketing. That’s kind of unfortunate.

So what is turnkey real estate investing? Really, all it means is most often these are rent ready or tenant occupied properties, but that’s really an unfortunate definition. It’s misleading in my opinion. It’s a very narrow definition of the term. Just because a property is rent ready or tenant occupied, does not make it a turnkey investment but at least not by our definition.

Often, there is little to no reference to the market, the neighborhood and the complete condition of the property, the tenant’s qualification, and property management, etc. So these are all very important considerations and there are factors that must be included in a truly turnkey investment and again, this is how we feel about it here at our company.

So back in 2004, in an effort to “raise the bar” in this niche industry, we sort of redefined what turnkey real estate investments should be and this is our simple definition.

It’s a property that’s in a stable or growth market, it’s in a desirable neighborhood because you can’t separate the neighborhood from the property nor can you separate the market from that property. It’s either a new condition or like new condition or is a new property. It is cash-flow positive even when it’s fully leveraged, and fully leveraged means 20% down, it’s leased or in the process of being leased, is under professional property management and last but not the least, it’s been carefully selected with renters in mind. I refer to that as an investment grade property.

So we quantify these in greater detail internally but this should give you a good idea of what to expect and what to look for if you’re actually considering a turnkey investment for yourself.
So according to this expanded definition, what you’ll want to do is look beyond the property alone. You must consider the bigger picture of the property’s neighborhood and its market. Remember, you’re either a passive investor or a real estate investor. I hope this has helped you and if you want some more detailed and free information, be sure to visit our website at noradarealestate.com, thank you.
Mike: Passiverental.com is your source for turnkey, done-for-you rental properties. If you’d like to be an investor and not a landlord, please visit passiverental.com to learn how to purchase cash flowing, professionally managed rental properties in the hottest rental markets across the country. We can also help connect you with financing for your next property. Invest the easy way today and get started by visiting passiverental.com.
Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of flipnerd.com or any of its partners, advertisers, or affiliates. Please consult professionals before making any investment or tax decisions, as real estate investing can be risky.
Are you a member yet of flipnerd.com, the hottest real estate investing social community online? If not, you can join for free in less than 30 seconds and get access to hundreds of off-market deals, vendors in your market to help you in your business, and you can start networking with thousands of other investors just like you. Get your free account now at flipnerd.com.
Please check out the FlipNerd family of real estate investing shows where you can access hundreds of expert interviews, quick tips and lessons from leaders across the real estate investing industry. They’re available at flipnerd.com/shows or simply search for FlipNerd in the iTunes store.

 


 

Marco Santarelli
Marco Santarelli is an investor, author and the founder of Norada Real Estate Investments -- a nationwide provider of turnkey cash-flow rental properties. Since 2004, they’ve helped over 1,000 real estate investors create wealth and cash-flow through real estate. He’s also the host of the Passive Real Estate Investing podcast.