First, let’s define turn key investment properties and turn key property management. Turn key properties are investment properties 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).
Turn key property management builds upon the former. Management comes in for clients that don’t wish to directly manage renting the property. Some clients don’t want to manage the rental process because they are either located in another state or they don’t have the time. A turn key property management group provides these services, or partners with a management company, to guarantee these services are provided for clients.
How Does Turn Key Property Investment Work?
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 Cash Flow, 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 Cash Flow’s properties, he already has tenants so he starts receiving his stream of cash flow, and he leaves the property/rental management to Memphis Cash Flow and its partners.
Turn Key Property Investment Versus Investing On Your Own:
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. Turn key 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.
If you have more questions, please refer to our turn key FAQs page where we answer more questions you might have.
How Can I Get Started with Turn Key Property Investment?
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.
Biggest Turnkey Property Mistakes in the Beginning
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!