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Avoiding Turnkey Investment Scams

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.  And if a company is offering a completely passive investment experience, the chances are:  It’s a scam.

IS TURNKEY RENTAL PROPERTY INVESTMENT A SCAM?

There are companies that claim to offer the same turnkey approach as Memphis Cash Flow, but they are a scam. They promise zero risks, 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 turnkey 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 upfront. 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. 100% passive investing is impossible.

Why isn't turnkey property investing passive? 

  • Need goals - You need appropriate investment goals from the beginning, which requires thinking, planning, and strategy. 
  • 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 it's up to you to pull the trigger. So you will need to commit more time when you start so your end result can be profitable. 
  • Seasons - You will go through the 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 experience 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 groups 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 seeing 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.

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 their Google reviews. 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.

Memphis Cashflow Is Ready To Help

Avoid scams and fraud by choosing a well-established turnkey investment group to guide you through the process.  Memphis Cashflow has over a decade of experience with helping clients just like you make smart real estate investment decisions and to grow their wealth.

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Posted by Katie Eldridge at 1:54 PM