What To Look For In A Turnkey Provider

By: Alex Craig

Recently a forum was started on Bigger Pockets posted by an individuals just getting started and considering Turnkey Real Estate Investing. For those of you not familiar with Bigger Pockets, it is a fantastic social network website that is 100% dedicated to Real Estate Investing; I high recommend everyone join as the amount of information one can learn is priceless and it’s free (to go http://www.BiggerPockets.com)

The nature of the thread started was basically asking fellow BP members their advice when selecting Turnkey providers. Here are some of the criteria I came up with when selecting a Turnkey Provider that was well-received by the BP community:

• Visit the market that you want to invest in and meet the team. This is a minimal cost to make sure you’re spending your money wisely. For some, their schedule may not permit, if that is the case, talk to other investors they have done business with
• Be comfortable and impressed with the property manager. To be impressed though, would mean talking to a few property managers within the market. That being said, I do advise sticking with the turnkey provider for management on the back end to create accountability. Most Turnkey providers Management business will cater to higher service levels because the connection to the sell
• Leave the properties with abnormally high ROI with rents under $850 (maybe $795 depending on the market) to the local investors. These are very high maintenance, intense hands on management properties, that really should be done by the person that owns the property. These are commonly referred to as C class. Remember, if it is too good to be true, it probably is!
• Order a third-party property inspection
• Make sure the property has been rehabbed to turnkey quality that will maximize your cash flow (roof and HVAC updated, ceramic tile it kitchen and bath, vinyl plank hardwood in high traffics areas, durable carpet installed in bedrooms, external fences and buildings addressed during the rehab, supply hoses replaced under the sinks, etc) otherwise your cash flow will go to maintenance
• Be skeptical of the one-year tenant warranty. That just means the turnkey provider is making an abnormally large profit who uses gimmick marketing to secure investors. Just because a turnkey provider does not guarantee the tenant does not mean they are not standing by their decision to select that tenant. It just means that the TK provider understand that people live in house and things happen to people outside their control such as job loss, illness, death, divorce, job transfer, marriage, mental breakdown, etc (I have seen all of those)
• Verify rent range through other property managers, Craig’s List and Zillow
• Ask if permits were pulled during the rehab
• If a tenant is in place, ask to see the tenant file
• Remember, you can fix the house, you can fix the tenant, you can fix the property manager, but you can’t fix the area. Be very conscientious as to the area that you invest. If it is an area in decline now, imagine what it will be in 10 years

Investing out of state is certainly not for everyone, but it can be done rather easily if you are willing to do some legwork on the front end. The list above is extensive, but if you follow it faithfully then you’ll minimize your risk and dramatically improve your chances of successfully investing out of state.

Please comment below on selecting a Turnkey Provider: