This is a simple concept in which the
investor buys, rehabilitates, and then resells a property at a profit. This is
also known as "flipping" a home. This process usually happens
remotely, because the investor remains in his or her own home, sometimes in a
locale where flipping doesn't make sense, and utilizes the Internet to find and
invest in opportunities. The goal here is to make the process of investing in
real estate as easy as possible, so all the investor has to do is flip a switch
or "turn the key."
Typically, then, you're purchasing a
single-family home, fixing it up, in order to bring it in line with current
codes as well as make it more appealing to buyers. Here's how it works:
A turnkey retailer or company purchases the
property.
One or more investors purchase a share in
or all of the shares in the house.
The retailer or company "fixes
up," or rehabilitates, the property to make it current and appealing to
buyers.
Once the property is rehabbed, it's put
back on the market for resale.
As soon as a sale is closed, the investor
gets his or her money back plus whatever profit was earned, according to what
share of the investment he or she owned.
If done properly, this can be a very sound
investment strategy. You, as the investor, have earn a profit from flipping the
home, and you can have as little or as much involvement as you wish. You can be
as involved or uninvolved in the flipping process as you desire, helping to
oversee the contractors rehabilitating the home or leaving the entire process
up to the turnkey retailer.
Why not just buy a house myself and
flip/rent it?
You might be thinking you can just
eliminate the middleman, the turnkey retailer or company, and do all of the
legwork yourself. While many investors do just that and succeed at it, there
are some drawbacks. In most cases, you'll end up undertaking much more work than
you would as an investor. Here is what you would have to do if you became a
flipper, rather than utilizing a turn-key solution and having the turnkey
retailer handle the process for you.
Finding the property: First, you would have
to locate a suitable property, which means knowing which neighborhoods are
going to appeal to buyers or tenants.
Rehabilitating the property: Next, you
would have to renovate and rehabilitate the property, making it adhere to
current codes and also be an excellent single-family property. This requires
proper budgeting and attention to contractors and laborers, something that
requires an on-site presence.
Marketing the property for sale or rent:
Once the house is move-in ready, you would have to find a buyer or a paying
tenant to move into the location.
Should you decide to rent out the property,
you would be entering a whole new dimension. For more information on turn-key
real estate investment where you rent instead of resell, check out our outline
of that investment strategy.
If this sounds like a lot of work, that's
because it is. With turn-key real estate investing, as little or as much of
that work can be taken off your shoulders and put on someone else's. Let's look
at the advantages of turn-key real estate investment.
The advantages of turn-key real estate
investment
In a full-fledged turn-key real estate
investment situation, you are an investor, not a flipper or landlord. You're
hiring someone else to manage the property for you, so all you have to do is
collect on the profit. Here are some of the primary advantages of turn-key real
estate investment.
Does not require your presence locally
With turn-key real estate investment, you
acquire single-family properties in remote locations. This allows you the
freedom to remain living where you want, while still maintaining a cash flow
from a location that has excellent real estate values. You can continue living
in your gated community in Florida, for example, where flipping houses might
not make sense, while investing in flippable or rentable properties in Seattle
or anywhere else that has a strong demand for such properties.
Easy diversification of your investment
portfolio
turn-key real estate investment can be a
wise move, if done correctly. One aspect of correctly executing a turn-key real
estate investment strategy is investing properly in multiple markets, something
that is easy to do since it requires little to no time of your own. The
benefits of investing in multiple markets is simple: it provides you with
protection from an unexpected downturn in an economy. For example, an
investment in single-family properties in Seattle might seem like a guaranteed
cash flow scenario, but what happens if Boeing announces major layoffs? If that
were to happen, home prices would fall and properties would be more difficult
to sell, negatively affecting your profit.
Since turn-key real estate investing makes
it so easy to have multiple properties, this is a significant advantage of the
investment strategy if you do it right. In other words, don't put all of your
eggs in one basket.
You don't have to be a real estate expert
When you deal with a reputable turn-key
real estate retailer or company, that provider knows the real estate markets
with much more precision than an outsider would. Sure, you could do some basic
research on an area, checking out the local school ratings, crime reports, and
price ranges, but a turn-key provider will know all of that and more; they'll
know the heart of an area, such as why people prefer one neighborhood over
another.
The disadvantages of turn-key real estate
investment
If turn-key real estate investing sounds
like a sure-fire way to make money, you should be aware that there are
disadvantages to the strategy. First and foremost, you will come across turnkey
retailers that try to maximize their own returns at the expense of cutting
corners, but beyond that there are other drawbacks.
The "middle man" needs to make
money
The turn-key company is a business, and
that business needs to make money. This means buying property at a discount and
then selling it to you at a higher amount, of "flipping" the
property, often for a hefty profit margin. Following that, the turn-key company
can make an additional profit by managing the sale or rental of the
single-property property for you. One thing to remember about this drawback,
though, is that turn-key companies often have a marketing machine running at
all times and can find incredible deals in their market, allowing them to give
you a great deal even as the company makes its profit.
You gotta trust someone
There are "shady" turn-key
companies out there. These companies will encourage an out-of-state investor to
buy a bad property in a bad location, meaning more money leaking out of the
investor's pockets than coming in. You have to rely on the turn-key operator's
knowledge, expertise, and credibility to actually make you a good deal. This
means you have to be dealing with someone you can truly trust.Visit https://www.garrisonpropertysolutions.com/
Conclusion
There are serious benefits to turn-key real
estate investment, and it can definitely be an attractive cash flow strategy.
However, there are also drawbacks to take into account before you proceed with
any deals. You will need to investigate the turn-key provider and make sure
they are both reputable and profitable, and ensure that the cash flow
opportunity they are offering you is actually feasible and realistic. turn-key
real estate investment is a fantastic way to make money, as long as you are
smart about it and take care of your own due diligence throughout the process.
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