Investing in property frequently involves a strong commitment in property care, which might take an inexperienced investor by surprise. At least this is the usual method when buying property individually and reaping the immediate financial benefits. However, if you’re new to property investing, you’re maybe looking for other options beyond the standard.
Perhaps you’ve put off investing in any properties lately because you’re worried about the time commitment. The reality is, when you invest in a house (or houses) and rent them, it’s up to you to keep maintenance going. Potentially, it can become a money drain if you end up with a house needing more fix-up than you planned.
If you don’t want the burden of being hands-on in keeping up a property, turnkey properties may be the better option. But do you really know how turnkey properties drive passive income without having any sideline problems?
It’s time to look at the details and see what to look out for so this process works well for your investing lifestyle.
Before you do anything, you need to understand the realities behind turnkey properties since it’s certainly not for everyone. One of the best analogies came from U.S. News & World Report in 2015 when they described it as buying a “take-and-bake pizza“.
While this is arguably a great description in basic terms, you need to understand what generating passive income means. It’s not a means toward income for paying your monthly bills. Generating passive income from turnkey investing is better for long-term financial goals, just like investing in the stock market. The same goes for creating income to use in future retirement.
The best way to look at this is to look more in-depth at what passive income really is. It’s worth remembering that passive income can always waver, even if it’s over a period of years. Overall, though, it should become just one part of your investment portfolio involving active, passive, and perhaps semi-passive income.
With this in mind, it still involves some work beforehand to find the right turnkey property. Most of your work will come in finding the right turnkey company. After you invest, you can remove the problem of dealing with day-to-day property issues.
Before investing in turnkey properties, you have to look at your lifestyle and whether it makes sense to do this in the first place. It does take more capital to invest in than doing individual investing, or doing house flipping. You’ll need to have significant investment money available to invest in the best turnkey properties.
This could become ideal if you happen to live out-of-state and can’t commit the time to keeping a property maintained. Plus, it’s an excellent opportunity if you’re new to property investing and need something with an easier learning curve.
When you find the right turnkey management company, you’ll learn along the way while letting the management team take care of rehab, and finding tenants.
All turnkey companies should have some sort of management service, whether it’s in-house, or outsourced. Make sure their reputation is pristine in the industry and that they’re not out to just make profits for themselves when deciding to sell their properties.
You’ll also want tenants already in the turnkey properties you invest in. Having them already there helps you start generating passive income quickly. Complete transparency on the operation is key here, including proof of renovations, and recommendations from others.
What’s really important is not investing in a suspiciously cheap turnkey company since it could become a red flag. Paying more now for quality generates more positive passive income far down the road, just like any other smart investment.
Smartland is Northeast Ohio’s largest real estate investment firm. Our team combines financial savvy with expertise in property management to help clients identify and invest in alternative investment vehicles that have strong growth potential.
Do you want to make informed investment decisions? Contact us today!