Dave Payerchin goes over the 3 top mistakes that investors make when it comes to turn-key deals, and how to avoid them.
By avoiding these mistakes, you’ll be better able to maximize your success.
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.
Dave: Hey, everybody, this is Dave Payerchin with Columbus Turnkey Houses and I’m your host with the most of the REI Classroom. Today, we’re going to be talking about the top three mistakes turnkey investors make and how to avoid them.
Mike: This show as sponsored by passiverental.com.
Dave: All right, everybody, this is Dave Payerchin, Columbus Turnkey Houses. Many of you know we are the leading provider of turnkey properties here in Columbus, and today we’re going to be talking about the top three mistakes that turnkey investors make.
The number one mistake is not investing in the right marketplace. So just because something looks good on paper, you can see a property that maybe you can acquire for a low dollar amount and rents are relatively high, so it’s going to look great on paper as far as an ROI standpoint, but if it’s a dying market, if people aren’t moving to the marketplace, you’re not really maximizing you investment potential there.
So what makes a good market? You want to look for population growth and job growth. And a lot of people know that the Midwest is a great place to get cash flow. Columbus, Ohio happens to be the fastest growing city in all of the Midwest. It’s a major metropolitan area. What you want to look for in the market as well is are the Fortune 500 companies? Where are people working? Is there industry there? Are people moving there? Are there universities there? So just because the property might look good on paper, if it’s in a very flat or dead market that no one’s really moving to, you may want to consider a different marketplace.
Number two is not verifying the rehab. I can’t tell you enough how many times we’ve had investors come to us and say, “Hey, we want to invest in turnkey properties. We tried this before with a different provider and basically, we bought property and they needed too much work. They were junky properties.”
Here’s the thing, everybody, if you’re investing in a turnkey property, you need to get an inspection report. You need to hire a third-party inspector. Don’t just take the turnkey provider’s word for it that it’s been rehabbed good. What you want to do is actually hire somebody, sounds like common sense, but you’d be surprised how many people don’t do this, to walk through the property and give you a detailed inspection report. And then also get a scope of work from the turkey provider.
Now, let me touch on this real quick, when it comes to working with the turnkey provider, make sure that this provider is actually taking title to the property, and selling it to you. So they’re not just a middleman, they’re not just somebody who is wholesaling you a property because if they’re just a middleman, they have no idea of the rehab that was done to the property, and they have no idea who’s living in this property.
So that leads me into number three is not having effective property management in place. When you’re working with a turnkey provider, they’d better have effective property management because it’s going to be a disaster if you try to manage it all yourself, especially if you’re out of state. So our property management here, we’ve got about 500 doors here under management and we only charge 6%, but we’ve been doing this a long time.
Anyone you work with, though, really vet out the property manager. Interview them, find out what the eviction process is, make sure it’s a landlord-friendly state, not so much a tenant-friendly state, and really make the best decision for you as an investor. This is Dave Payerchin, Columbus Turnkey Houses, and we’ll see you on the next class.
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.
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