Define turnkey property: a turnkey property is an investment property that a company acquires and rehabs—and in some cases already gets tenants in the house—for a client to then own and receive regular income (cash flow) from renting.
The problem is—you don't have time to find the properties or manage them.
Here's the solution...
We provide the services you need to find, purchase, and invest in Memphis properties, along with property management so you can be elsewhere and know your property has tenants and any fixes are being addressed promptly. There's nothing more bothersome than investing in a property but having to manage every aspect of it. This is why we find and provide turnkey properties in Memphis, and you can start searching here:
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READ MORE ABOUT TURNKEY PROPERTIES
How does turnkey property investment work?
Turnkey property investment versus investing on your own
How can I get started with turnkey property invesment?
How do I know if I'm a good fit for turnkey properties?
Biggest turnkey property mistakes made in the beginning
Is turnkey property investment passive or not?
Is turnkey rental property investment a scam?
A turnkey company finds and rehabs a house for an investor to then own and rent. Many turnkey companies also provide property management for investors, so their property can be easily managed no matter where the investor lives.
To illustrate how this type of property investment works, let’s look at an example. Let’s say we have man named Joe who lives in California. Joe has some extra money set aside for investments and he wants to diversify his portfolio. He decides the Memphis real estate market is strong because growth is consistent and median house prices are relatively cheap.
Joe could either search for a property on his own, purchase and rehab the property all by himself. Then he could try to get tenants in the house and keep it rented. However, Joe doesn’t have time to search intensively for a house, go through the purchasing process or get tenants in the house.
Instead, Joe would like to own a piece of property, develop a new stream of cash flow and diversify his investments without having to spend too much of his time managing everything.
Joe finds Memphis CashFlow, which specializes in turn key property investment and management. Joe can easily select a property from Memphis CashFlow, even one that already has tenants, and he can even receive rental assistance for the tenants so he doesn’t have to manage it.
Joe decides to move forward. He invests in one of Memphis CashFlow’s properties, he already has tenants so he starts receiving his stream of cash flow, and he leaves the property/rental management to Memphis CashFlow and its partners.
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We understand some people want to invest in real estate on their own. That’s understandable if you have the time and resources to do so. Turnkey property investment is positioned more for people who either don’t have the time and/or don’t live in the Memphis area.
Our process is “turn key” because we find the homes, rehab them, work to find tenants, and then offer them up to investors like you. We provide value by saving you time searching, rehabbing and actively finding tenants.
Local Memphians might try to invest on their own because they know the market, are familiar with neighborhoods and can actively manage their properties locally. However, we work with many investors outside of Memphis and they need experts on the ground to help them find, select, purchase and manage their properties. We specialize in that exact way. Instead of you trying to invest on your own and likely experiencing major headaches, we do a lot of the heavy lifting for you so you can come and invest in a way that makes sense for your portfolio.
If you have more questions, please refer to our turn key FAQs page where we answer more questions you might have.
If you’re interested in this type of real estate investing, then you can certainly start in two directions: you can start searching our properties first or you can contact us directly to learn more about our process and properties.
We recommend creating a plan for your investment goals and strategy, especially if this is your first step into real estate investing. You don't need anything "formal" but we would like to know more about your goals so we can align our services with your needs. Again, we are here to assist you in the investment process. Please don't hesitate to reach out and ask us questions.
Turnkey property investment certainly isn’t for everyone. More people can make a go at it than believe, but there are certain types of people who particularly succeed in real estate investment. Just like any investment, there are risks. And real estate is also more risky than investing in a 401k or IRA, but the returns are high and value is actualized sooner.
Here are the types of people that succeed in turnkey property investment:
- People who are willing to take calculated risks
- People who are engaged and research
- People who are for the long game, not short game
- People who understand real estate
People Willing to Take Calculated Risks:
No investment is a sure bet. We all saw this during the financial crisis a decade ago and around 9/11. Retirement accounts like 401Ks and IRAs saw tremendous losses. What were supposed to be sure fire investments proved to have their own downs.
Investing in turnkey properties are risky. You need to be willing to take calculated risks. Owning a property comes with the risk of reduced property value, property damage, a lag in tenants renting, or higher than expected rehabs. You need to calculate whether you have the buffer to take the risks of owning a turnkey property.
However, working with a turnkey property company like Memphis Cashflow will absolutely cut some of the risk you would experience on your own or with a sub-par investment company.
Memphis Cashflow knows the Memphis market, trends, neighborhoods, local contractors, rental landscape, and more. If you don’t know anything about the Memphis market you’re buying into then you’re elevating your risk tremendously.
You could potentially buy a property over its value in a poor neighborhood and never know it until you’re too deep. And then struggle to rent it for the amount you need to make any cash flow.
So again, there are risks in real estate investing, but investing with a company like Memphis Cashflow will allow you to cut many risks and help you calculate other risks.
People Who Engage & Research:
You don’t stumble into remarkable investments. People who make great returns may get lucky at some point, but they set themselves up for that luck to occur because they researched and were engaged.
The people who make the most from turnkey property investing are ones who are engaged in the process and doing research on their own. We can help anyone have a great investing experience here in Memphis, but the people who make the most of it are ones who have a plan and are engaged.
But what about “passive income” from turnkey properties?
Passive income comes after being engaged. Again, you don’t just stumble into passive income. People who have passive income build it. And to build passive income from turnkey property investing you must be engaged in the beginning.
People Who Are for the Long Game, Not Short Game:
Remember, we’re investing in turnkey properties as a source of income in the future. Sure, you can make some income now from your properties, but we’re investing in real estate now so we can have more in retirement.
Thus, real estate investing is a long game, just like other retirement investments.
This means we stay focused on the long-term plan and don’t get swayed by the short term ups and downs. There are certainly decisions we can make in the short term that will help us in the long term, but people who succeed here are the ones who are focused on years, even decades down the road.
People Who Understand Real Estate:
If you don’t own property of your own, how are you going to know what to do when it comes to investment properties?
You don’t have to be a real estate agent or professional, but you do need to know something about real estate in order to take a swing at turnkey property investing. If you think you don’t have the knowledge or experience, then you might want to consult with someone in your network who sells property or owns multiple properties. They probably have a wealth of knowledge and experience they’d gladly share with you. You just need to ask.
If you already know how real estate works and own a property or multiple properties, then you’re not new to this at all. You just may not be new to the Memphis real estate market, which is completely okay. We’re here to partner with you in Memphis because we’re the experts when it comes to Memphis turnkey properties.
Bring your real estate knowledge and goals here, and we’ll partner with you to make them a reality.
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Not Working with the Right Turnkey Investment Provider
As we’ve bounced back from the recession and real estate investment grows more popular there are more investment providers. Some are claiming to be turnkey property providers when they don’t have the experience or team to back it up. So one of the biggest mistakes you can make at first is working with a turnkey property provider that doesn’t really provide turnkey service.
While we certainly recommend teaming up with a group of investors who know the area and market, if you’re looking for true turnkey investment then you need a team with proven success and a great property management team. Turnkey investment is only as good as the property management team. If that team does a poor job, then this type of investment is not passive in any way.
Many of our investors are located outside of the Memphis area, which means they do not have the time or additional resources to find properties, oversee rehabs, and manage tenants. Instead, they’re looking to partner with us by investing in properties that we’ve remodeled and then let us assist in property management. Without a team like that, it’s a shot in the dark and you’re likely to face major headaches if your turnkey provider is not who they say they are.
Investing in Cheap Memphis Properties
If you’re just starting in real estate investing then you may look for cheaper properties first. We understand finances are a major concern, however, going the cheap route isn’t a great approach because you’re likely to face these three things: lower profit margins, more expenses from fixes, and less favorable tenants.
Why lower profit margins? You’re likely to see lower margins because cheap properties aren’t in the best rental markets. Remember, your cash flow comes from solid rent margins and growth of rent prices over time. However, if you select a cheap property in a less desirable neighborhood, then your rent price will be lower and growth will be stagnant or minimal.
Why are there more expenses? A cheaper property is likely an older property. If you don’t have the money to rehab a property then you’re not going to be able to rent it for more money and more things are likely to break. If the property is remodeled, you’re still likely to incur expenses from fixes. Older homes are typically built well, but over time things break and need to be replaced, it’s just part of owning an older home.
Why could I have less favorable tenants? Remember, cheaper properties typically come with cheaper rental prices. When someone pays less in rent, there is less value attached to the property and you’re likely to have someone who doesn’t respect the property as much as someone paying a higher price. Although we wish it wasn’t so, this is just the trend we see.
It all comes back to working with the right turnkey property provider who truly has your best interest in mind. If there is a cheap property available and your provider believes it is a great deal, then it may be worth pursuing. However, here at Memphis Cashflow we’re always going to do our best to steer you toward properties that fit your investment goals and are NOT going to give you trouble. Sure, there’s risk involved in any property, but we’re going to help you minimize as many risks as possible.
Biting Off More Than You Can Chew
As you begin to invest you may see some ripe opportunities and get big eyes. It is tempting to snatch what you can when you can. However, if you’re new to real estate investing you can easily bite off more than you can chew, so to speak.
Our encouragement to you is to NOT spread yourself too thin when it comes to real estate investing. While investing through a turnkey approach is much more manageable, you can still get in over your head.
If you’re not familiar with Memphis and you’re not familiar with real estate investing, it can become overwhelming quick. We try to minimize as many stressors as possible, but any time we’re working with your hard-earned money and there are bumps along the way, you may feel some angst.
That’s why we are here—to help you either create an investment plan or evaluate your current plan to make sure we’re always aligned with your goals and help you take on what you can handle.
We are your partners in your real estate investment journey!
Turnkey properties can become a more passive stream of income, but for the first few years they aren't "passive." Many will try to sell you on a passive investment, but that's not how this works. If you want a passive investment, get an IRA or 401k.
Why isn't turnkey property investing passive?
- Need goals - you need appropriate investment goals from the beginning, which requires thinking, planning and strategize.
- Need an investment group - to make turnkey work for you, you need a group that will work for you. If you select a subpar property investment group, then your investment will be more of a headache than anything.
- Beginning time investment - in the beginning you will need to spend more time establishing relationships, selecting the best property and getting your property rented. Of course, we assist you with all of this but we cannot do it for you. So you will need to commit more time when you start so your end result can be profitable.
- Seasons - you will go through ups and downs of the real estate market and times when your property isn't rented. Of course, we will work as hard as we can to keep your property rented and keep the cash flowing. However, it's never guaranteed as these seasons are a fact of life. So you may experiences some years that are more passive than others and some years you spend more time on your investment.
Why you should avoid the "passive" sales pitch?
You will absolutely come across other turnkey property investment companies that offer "passive" approaches. If it sounds too good to be true, then it is, especially in this form of investment. Some companies say it's "passive" because that marketing tactic works, but it never ends well for those investing. Always read reviews on the turnkey companies you're considering. It's as easy as going to Google, typing in the name of the company, and see what the reviews say on Google and other third-party websites.
If you see anything less than 4 stars, then you should avoid them because they're likely promising more than they can deliver.
There are companies that claim the same turnkey approach as us that are a scam. How so? They promise zero risk, don’t want you to visit, poorly rehab properties and poorly manage properties, if they manage the properties at all.
Their sales pitch sounds great, but if it sounds too good to be true then it probably is. As real estate investing continues to prosper in areas like Memphis, there will always be scammers looking to take advantage of you if you let them.
How can you tell if a turnkey company is a scam?
- Zero risk - if a company claims no risk to investing with them then they are lying to you. All investments carry some amount of risk, and real estate can often carry more risk, but also greater rewards. Legitimate turnkey companies do everything they can to minimize risk for investors, but they cannot eliminate it. So if you see any claim like this, it’s a scam.
- No need to visit Memphis - if a company discourages you from visiting the area you’re investing in, then it’s likely a scam. Turnkey investment does require some research and knowledge up front. Sure, you’re partnering with a company that knows the housing market and neighborhoods, but legitimate companies want you to come see for yourself and meet in person. Scam companies don’t want you to see their lousy or fake operations because it’s part of the scam.
- Poor property rehabs - for a company to truly offer you cash flow through this type of investment, the property rehab must be new or close to new. A scam company is going to cut corners and not fully rehab a property because they don’t want to invest too much into it. Legitimate turnkey companies want you to succeed with them, so they put in the money and effort to rehab a property well because that results in real cash flow later.
- Poor property management - realizing cash flow in real estate investing comes from great property management. If you go through tenant after tenant and you’re constantly having to fix issues with the property, you will not see the cash flow you expected. Scam companies either poorly manage properties for investors or they don’t manage them at all.
- Completely passive investment - real estate investing is never passive. Great turnkey companies like ours do everything to make the process less involved, but there are still decisions to be made and times when you need to do your homework and meet with our management team. Some investors will be more passive than others. Some investors like to be more involved in the whole process. But 100% passive investing is impossible.
Guard Yourself Against Turnkey Scams:
Consider all of those points above as you choose a turnkey company to work with. Thoroughly vet the company and read reviews. You can easily do a Google search for companies in the area you’re looking to invest and instantly read reviews on Google and third-party websites. See what others say. Select a few companies to meet with and take time to go meet in person.
Read what others are saying about turnkey scams and legitimate turnkey investment opportunities.
Financing Turnkey Properties
Since turnkey properties are move-in ready, it’s easier to finance than homes than need substantial repair. Of course, you can certainly purchase a turnkey property with cash, and some established investors do so. However, you can finance a turnkey property through conforming and non-conforming loans.
Here’s what you need to know about getting a conforming loan for a turnkey property:
- Expect interest rates to be between 4% and 7%
- Maximum loan amount in most areas is $424,100
- Loan term of 15-30 years
There are also certain qualifications for getting a conforming loan, as with any loan you get from a lender. What are the qualifications in this case?
- 600+ credit score
- Down payment more than 5% in most cases
- Mortgage insurance for loans above 80% loan to value
- Reserves of three or more months
You can get a conforming loan at most banks and credit unions, along with other lenders across the nation that might have more competitive terms and flexibility.
Other Loan Types for Turnkey Properties:
There are a few other types of loans for turnkey properties: multifamily loans, portfolio loans, and apartment loans.
Most of our turnkey properties here in Memphis are not multifamily or apartments, so you wouldn’t be searching for those types of loans. Those are best suited for those scenarios where you’ll have multiple units or multiple families occupying the property.
How To Start Your Financing:
- Check you credit score - before you do anything else, make sure you have a credit score above 600. If you don’t, then you’re likely to not qualify for a loan in this case.
- Funds for down payment - make sure you have a minimum of 5% of the property value to offer as a down payment. Ideally, you should have more than 5% to really make the investment worth it. You won’t have to pay mortgage insurance if you have a down payment around 20%.
- Reserves and liquidity - you need to have at least three months worth of reserves in case anything goes wrong. You need liquid assets proven to the lender, otherwise they are likely to deny you because you’re too much of a risk.
- Choose a bank or lender you know - if you’re looking to invest in turnkey properties, then you probably already have some experience in owning a property and know of a lender. We recommend choosing a lender you trust and a lender that offers you the best rate.