How can you tell whether or not your turnkey investment company is working to the best of their ability? How can you be sure you are getting what you really need from the company that is managing your rental portfolio?
Turnkey real estate investing is gaining a lot of traction in the U.S., but how do you differentiate the sustainable companies from the ones just trying to make a quick buck?
Turnkey property investing relationships are a little different than the ones you’ll have with other real estate sellers and agents. It is generally a longer relationship, or at least it should be. It is also dependent on how serious they are about the long game, and how experienced they are at maintaining a sustainable business. Very few fall into this category.
Find out what factors real estate investors should be looking at when evaluating turnkey investing companies and opportunities:
First things first: you need to make sure your management company works within the boundaries of the law. Do some background work so you know who you are working with. We are not implying that most property management companies are illegal, just that there are a few bad eggs you should be on the lookout for.
How does their process and business model work? Is it a smooth process? Do they have inventory? Is the system sustainable? What will it look like in 10 years? Some of these things can be hard to identify upfront. Some tells may be response times, how fast they can answer questions, and what others say. If in doubt; start small with one deal, and scale as they prove their worth.
What is the Value of Properties?
How do their prices compare to other listings? Where is the value in the product being offered? What is the potential for growth? What are advertised ‘discounts’ based on? You might expect to pay a little more for to have someone deliver a freshly renovated property, complete with a tenant and cash flow from day one. Don’t start off in a negative equity or cash flow situation.
How are their Business Relationships?
How does this turnkey real estate company treat suppliers, vendors, and workers? Do they treat them respectfully? Do they pay their accounts on time? Are they respected by the vendors they use? This can provide great insight into a company you know little about. You won’t have to pry too hard to find out. If they’ve been burning vendors for months, that company will have plenty of pent up opinions to share.
What is the Owner’s Character Like?
This is perhaps the most overlooked aspect of evaluating any business partner or real estate firm. An owner’s character and behavior can be a great predictor of how they’ll handle your money, how solid the product is underneath the glossy coating, and how long they’ll be in business. Do they pay their bills? What about taxes? What do they Tweet about? Do they care about healthy and sustainable housing? Do they care about helping others? Who are they?