How to Get Started in Turnkey Property Investing

If you ever wanted to own income producing real estate without spending time, i.e., turn key properties, but were unsure how to get started, then this article is for you.

By Scott A. Stanfield

Turn key properties are properties that have been newly constructed or renovated, rented out to tenants, and then sold to investors with property management already in place. The name is derived from “turn the key” and is commonly written in articles as turnkey or turn key. When properly executed, a rental business built with turnkey properties can result in significant passive income while working one to two hours per month. For more information about the benefits and pitfalls of turnkey property investing, refer to my recent blog article “Turnkey Real Estate Investing: An Introduction to an Excellent ROI with Little Effort”. Today’s article is all about how to get started with turnkey property investing.

Here’s a comprehensive list to guide you through the initial steps of getting started in turnkey property investing:

1. Educate Yourself: Before diving in, understand what turnkey property investing entails. Read books, attend seminars, or take online courses on real estate investing. References to some excellent resources are at the end of this article.
2. Determine Your Investment Goals: Are you looking for short-term income, long-term appreciation, or a mix of both? Decide what you aim to achieve with your investments. Be specific. Your goals should form the basis for your turnkey property business plan.
3. Assess Your Financial Position: Understand your current financial situation, credit score, and how much you can afford to invest without jeopardizing your financial stability. The properties I prefer to target have a purchase price between $150,000 and $250,000 which requires $35,000 to $55,000 to purchase with a lender.
4. Research Turnkey Providers: Not all turnkey providers are created equal. Investigate their reputation, past projects, and client testimonials.
5. Location, Location, Location: Turnkey rental investing is a strategy that can be done anywhere. The locations are unlimited, so you need to research potential markets. Some turnkey providers might offer properties in multiple areas. Look for locations with steady population growth, strong job growth, stable economies, and potential for property appreciation.
6. Visit Properties: If possible, visit a few properties in person. I no longer visit the properties I purchase but it is a good idea in the beginning.
7. Perform Due Diligence: Always conduct thorough property inspections using an inspector, and check the numbers provided by the turnkey provider. Validate their claims about potential rental income and property values in the area.
8. Secure Financing: If you’re not buying with cash, speak with banks or mortgage lenders familiar with turnkey property investments. Some turnkey providers may also offer or recommend financing options.
9. Build a Relationship: Establish a good working relationship with your turnkey provider. Communication is vital, especially if you’re not located nearby.
10. Understand the Management Agreement: Since turnkey investments typically include property management, ensure you’re clear on the terms, fees, and services provided. Make sure to fully vet the property management team.
11. Stay Updated: Even though turnkey investments are mostly hands-off, always stay informed about your properties, the local market, and any changes that might affect your investment. My preference is to reconcile my turnkey business account once per month. I use this time to also monitor my portfolio.
12. Reevaluate Periodically: Periodically check your plan and whether your properties still align with your investment goals. The real estate market is dynamic, and what worked a few years ago might not be ideal today. There are many trajectories your business route can take. The more familiar you are with the different routes, the better you can adjust your business plan.
13. Network: Join real estate investment groups, forums, or associations to stay updated on trends, get advice, and learn from other investors’ experiences.
14. Consider Tax Implications: Engage with a tax professional familiar with real estate investing to understand potential tax benefits or liabilities.

While the outlined steps might appear daunting in terms of time commitment, they become much more manageable when you implement systematic approaches. In my turnkey rental venture, I rely heavily on comprehensive checklists for each stage. These checklists not only simplify the process but also guarantee consistent outcomes while minimizing the time required to complete the task.

When you first start, it does require more time for the initial set-up and for your first turnkey purchase. The time spent does decrease as you get more comfortable with the processes. I dedicate ~15 hours spread over 2-3 months for new purchases and another 2 hours a month for routine management. On average I spend less time but these numbers are a good conservative estimate. Utilizing checklists is key to minimizing the time you work on your business. You can learn more about the checklists I use by reading this blog or by reading my book Passive Profits: The Turnkey Rental Investor’s Guide.

If you have a topic that you would like to be covered, you can also reach me at scott@scottastanfield.com.

Next Article: How to Make a Business Plan for the Turnkey Rental Business.

Resources

1. The Turnkey Rental Guide Blog (my blog). www.scottastanfield.com
2. Passive Profits: The Turnkey Rental Investor’s Guide by Scott A Stanfield www.scottastanfield.com/book
3. BiggerPockets Forum https://www.biggerpockets.com/forums