How to Choose a Turnkey Rental Company

July 2nd, 2019

Not all turnkey companies are alike. Although many companies call themselves “turnkey,” they vary widely in terms of services offered, the quality of the properties for sale, how clients are treated and much more.

You need to conduct due diligence and use discretion when shopping for the turnkey rental company where you’ll buy rental properties. If you choose well, you’ll be able to rely on that company repeatedly throughout the years to supply you with quality, fresh inventory for your real estate portfolio. You can think of choosing a turnkey real estate company as entering into a long-term relationship that will serve you well over and over again.

 

How Turnkey Rental Companies Work

 

Generally speaking, turnkey rental companies find properties, rehab them and then offer them as rental properties for investors looking for positive cash flow. The turnkey rental company profits on the sale, and the investor profits from the positive cash flow.

 

The Differences Among Turnkey Real Estate Companies

 

Between the lines, a lot more goes on that distinguishes turnkey rental companies from one another. There are important differences in how turnkey rentals operate that matter to you as an investor.

 

The differences start to show up from where the properties are located. Some turnkey rental companies might not care where their properties are located, as long as they can turn a profit when they sell to an unwitting investor. Cheap properties can be found all over the place if you know where to look. A turnkey rental company may not be picky about where the property is located; they may not care if there are jobs in the area or if there are local amenities. In short, they may not care if the property will be a desirable rental for a prospective tenant.

 

Turnkey rental companies have no third-party standards they must adhere to regarding the rehab. There’s no oversight or governing board; except for the town regulations and building inspector, who determines if the property meets the building code and qualifies for an occupancy permit. The quality of the rehab itself is self-regulated, which is why investors need to do their own due diligence when choosing a turnkey rental company. Too often, turnkey rental companies cut corners on rehab costs to pad their profit margin at the expense of quality work. This can leave the investor with substantial repair or replacement costs just a short while after they take ownership.

 

Another big way in which turnkey rental companies differ is how they present real estate investment opportunities to investors. Some turnkey rental companies publish a list of available turnkey rental properties online so that any interested party can view them, in a similar way to trusted real estate sites like Trulia and Zillow. However, some turnkey rental companies choose to keep their available properties a closely guarded secret; only available once an investor privately requests a list or prequalifies in some way. This practice makes it impossible for an investor to know whether they’re getting access to the same real estate investment opportunities as other investors. Who can tell if the investor is even seeing the same prices as everyone else when each prospective investor is kept in the dark?

 

Yet a third way that turnkey rental companies differ is in the way they turn over their properties to the investor. For example, some turnkey rental companies have contingencies written into their contracts that require the investor to use a certain property management company – for which the turnkey rental company gets a kickback that may or may not be disclosed. Others don’t fully rehab the properties at all – they may omit larger needed repairs in favor of offloading the property quickly. Even if the investor is aware of needed work, having the work done on the investor’s time often results in a vacant rental while the work is completed, thereby reducing the investor’s cash flow.

 

These are all important differences that sometimes indicate nefarious or less than honorable practices among turnkey rental companies.

 

What to Look For in a Turnkey Rental Company

 

Now that you know some of the ways in which turnkey rental companies can differ, here are some helpful guidelines as to what you should look for in any turnkey rental property that you choose.

 

Substantiated Property Listings

 

The turnkey rental properties offered for sale by the turnkey rental company should be substantiated by facts showing they are good investment opportunities. This may include ROI and cash flow, but it should also include information about why a particular city or neighborhood was chosen. Also, look for a turnkey rental company that itself invests in the same areas as their turnkey properties for sale. This proves that the turnkey rental property truly believes in the economic viability of the area.

 

Operational Transparency

 

The investor should be assured they are seeing the exact same turnkey rental properties as everyone else. The list of available properties should be readily available for perusal for anyone who’s interested. In addition, the operations of the company should be transparent. Investors should have access to frequently asked questions that explain—at least in general—the process of working with that company.

 

Easily Accessible

 

Investors should be able to easily connect with owners or representatives of the turnkey rental company. Contact information, either in the form of an email address or phone number, should be easy to find. Response times for inquiries should be immediate or at least within 24-hours.

 

No Contingencies After Purchase

 

Once an investor purchases a turnkey rental property, there should be no restrictions placed on them about how to manage their property. An investor shouldn’t be forced into using a certain property management property or using a property manager at all. The investor should be fully autonomous regarding decisions about the rental property.

 

Experienced Operators

 

The turnkey rental company should be operated by people with experience investing in real estate and finance. The investor should be dealing with professionals who understand the real estate investment space and who will be able to help guide the investor in making smart choices. Working with experienced turnkey rental companies operators also ensures that the properties are sound investments.

 

Access to Funding

 

Quality turnkey rental companies have established relationships with lenders. In turn, investors should choose a turnkey rental company that’s able to connect the investor with potential, trustworthy lenders in the event of non-standard financing needs, such as 1099 income qualification. In other words, the turnkey rental company should be of assistance in helping the investor to acquire the property, not just provide access to property listings.

 

The turnkey rental company you choose will hopefully be your investment partner for many years to come. Take your time so you can pick the one that will best serve your investment needs. At MartelTurnkey, we take great pride in the fact that we hit all the marks for the best turnkey rental companies. If you’d like more information about our company, our properties or anything else about turnkey rental investments, please feel free to contact us. We look forward to answering your questions and hopefully working with you.

 

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