3 Turnkey Challenges You CAN Overcome
As much I love turnkey real estate investing and will tout its benefits to anyone who will listen, I’m not an idiot. I recognize that, like any other investment strategy, turnkey has its risks. There are also some challenges that are unique to this style of investing, and unfortunately, it’s those challenges that make many people hesitate before adopting a turnkey strategy.
Fortunately, most of these obstacles can be overcome with a little planning and hard work. Here are 3 of the common challenges you may encounter, as well as how to beat them:
One of the great things about turnkey investments is that the turnkey provider has already found the perfect tenants for your property….or so they say. But what happens if the tenants aren’t so perfect? What if they actually suck? I’ve heard about plenty of investors burned by crappy tenants who their turnkey provider has supposedly screened and determined to be “high quality.” My advice for minimizing loss in this situation is to get the tenant out ASAP. If they’re truly terrible, chances are there are grounds for eviction. Start the eviction process pronto, and get them out so you can get a truly high-quality tenant in there paying rent. But what if the tenant is just “regular” bad and not “super” bad, and therefore eviction isn’t an option? In this case, I would say just take your rent payments and suck it up until the lease expires. Money is money, after all.
Crappy Property Management
Property management can make or break your investment. Since most people who buy turnkey properties also use property management services to maintain the home, this is a critical area. Many times, doing just a bit of research on the management company before you sign a contract will clue you in on their level of service. But let’s say you didn’t do that, and now you’re stuck with a subpar company who’s not responsive and isn’t living up to their promises. What do you do? Simple. You fire them! Don’t wait around to see if things will improve. If they’re not doing their job, YOU’RE the one who’s going to feel the pain. Take action quickly to reduce the damage. Meanwhile, you’ve got to get a new property manager on board quickly. Do your research, get referrals, and go with someone who’s experienced and reputable.
The last challenge is that of the crappy property. People new to turnkey often worry that they’re getting swindled by a turnkey provider who’s presented them with a poor quality property. Remember that old saying about putting lipstick on a pig? That rings true here. The place has been rehabbed, but underneath the shine of fresh paint and new flooring is a crap house. Unfortunately, this DOES happen. There are providers out there who will try to scam you. The best way to overcome this is by NOT letting yourself fall victim to this, and this is done by performing your due diligence on the turnkey provider, the market (which you should have already done anyway), and the property itself. Once you’ve vetted the provider and are looking at properties, it’s important that you have an independent inspection done of any property you’re seriously considering, regardless of what the turnkey provider has told you. You want an unbiased opinion so you can be certain you’re not buying a lipstick-wearing pig. If the property checks out, then you’re fine, so long as you’ve verified that the location is good, too – because a great house in a bad neighborhood isn’t going to do you any favors.
So to summarize, DO YOUR HOMEWORK. This step alone can save you time, money, and so many headaches, and it is the key to overcoming many of the challenges you may encounter. If you do notice a problem area, take action quickly and work to remedy it to minimize damage and losses.