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The Most Common Mistakes When Investing in Turnkey Income Properties

If you’re new to the turnkey property scene, then it’s important to know some of the most common mistakes that new investors make and how to avoid them.  Spotting these pitfalls early and learning how to navigate through them will put you lightyears ahead of the competition.

Not Working with the Right Turnkey Investment Provider

Each year turnkey real estate investment grows more popular.  As a result, we’re seeing new turnkey investment groups pop up every day. 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 is working with a turnkey investment group 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. A 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 letting 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 always a great approach because you’re likely to face these three things: lower profit margins, more expenses from fixes, and less favorable tenants.

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 rental price will be lower and growth will be stagnant or minimal.

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.

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.

Remember...

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 real estate investing, it can quickly become overwhelming. 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.

We’re 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.

Focusing Too Hard On Market Conditions 

It's tempting to want to predict the housing market and when the right time is to purchase a turnkey property is. However, the more caught up you get with focusing on the "right" market conditions, the more you'll be driven by fear. In most cases, rookie investors won't purchase at an opportune time because they're too focused on calculating the right time, and then it's gone. 

We absolutely promote doing your research. Be willing to wait for the right property. Then trust your gut once you know as much as you can and you're ready to purchase. 

In all honesty, the right time to invest in the Memphis, Tennessee, real estate market is right now. The market is strong, and prices are only going up. Rehabs are taking place all across the city, and more and more people are looking to invest. So we recommend jumping in while prices are still low but proving to explode exponentially. Now it's time to find the right property to invest in. 

Memphis Cashflow Wants to Help

Memphis Cashflow has been helping investors for over a decade.  Reach out to us today for a consultation and decide if investing in turnkey properties is right for you!

Posted by Katie Eldridge at 1:39 PM