4 Things to do
Before Buying a Turnkey Rental Property
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If you’re thinking about buying a turnkey rental property, there are a few things you should do before making your purchase. Turnkey real estate has helped many investors reach their passive cash flow goals, but it does come with risks! Failure to do adequate due diligence can result in underperformance or total loss of your investment. In this article we’ll discuss four key steps you must take before buying a turnkey investment property.
Hire an Inspector
First, hire an inspector to look at the turnkey investment property and make sure everything is in good condition. An inspector can point out problems or issues that need to be addressed, and can help you make sure the property’s condition is as advertised by the turnkey provider.
If you’re working with a reputable and ethical turnkey provider then this inspection should not turn up any major issues with the property’s condition. An unethical, unreputable turnkey provider may try to prevent you from getting an inspection. That should be a big red flag!
Research the Market
Second, research the market before investing in a rental property. Look at vacancy rates and rent prices for similar properties in the area. You don’t want to invest in a property that’s already over-priced!
Important Market Factors to look for:
- Rents: Are rents growing, stagnant, or falling in your target area? Where does your property fall in the range of rentals in the area?
- Vacancy: How long do rentals sit vacant in the area? Is the demand for rentals in your area strong?
Recent Home Sales: How quickly do homes sell and where does your property fall in the price range? - Job Growth: Look for areas with growing employment and population numbers. Remember, people pay their bills by working!
- Local Forums (like Reddit): This is the biggest unspoken secret of market research. Reddit. Find out if your city has a local subreddit and spend time on it. Research the local opinions of the different parts of town. As a forewarning, don’t start a thread saying you’re going to buy a rental in the area. The reddit userbase will not react kindly to that.
Look at Reviews
Third, look at reviews for the turnkey property provider to make sure they have a good reputation. Check out online review sites like Google Reviews to see what others have had to say about their experience with the turnkey provider. BiggerPockets’ Forums can also be a great source for this information.
If you don’t have an account on BiggerPockets yet, get started today! Start out by searching by your turnkey provider’s name in the forums. If you don’t find anything, make a post asking for others’ experiences. Be sure to leave yourself open to private discussions with other investors. You may find that people are more willing to be candid and open about your experience in off-the-record one on one conversations.
Travel to the market
Fourth, travel to the market to see the property in person before making your final decision. This is especially important if you’re not familiar with the area. Seeing the market or property in person will help you make sure it fits what the turnkey provider has promised.
There’s only so much you can do by researching online and looking at Google Maps. After all, sometimes that information is terribly out of date! Before you buy a turnkey property in a market, take some time to travel there in person to get to know the area. Meet your service providers in person (like your Property Manager, contractors, turnkey provider, and so on). The more you can accomplish in person, the better!
Conclusion
By doing these things, you’ll be in a much better position to make an informed decision about whether or not purchasing a particular turnkey rental property is right for you! These steps are not fool proof by any means – an investment can still lose money even if you’ve taken these four precautions. Fortunately, however, these steps will improve your odds and help you avoid many bad situations.
[…] Be careful, because not all turnkey providers are equal. There have been incidents of unscrupulous behavior by turnkey providers, so be sure to learn how to evaluate turnkey providers and their deals. […]
[…] Be careful, because not all turnkey providers are equal. There have been incidents of unscrupulous behavior by turnkey providers, so be sure to learn how to evaluate turnkey providers and their deals. […]