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CHOOSE YOUR TURNKEY COMPANY

Jean and Sofia had immigrated to the United States from Europe—and as passive real estate investors, they had been through every turnkey nightmare under the sun. No one they worked with had been reliable, so they had received unexpected cash calls on multiple occasions. They had replaced roofs, plumbing, and appliances, and sometimes they were replacing these items over and over. Tenants had moved out on them in the middle of the night. They’d purchased “super-cheap” properties in multiple cities across the country from different companies and individuals. These properties and the lack of a plan had cost them an arm and a leg to this point.

They made a slight adjustment to their plan and started purchasing more expensive properties, thinking the cheap price point was the issue. There again, they were wrong. It wasn’t the price point that was the issue. It was their choice of teams to work with in the different markets that was causing their nightmare.

Once a property of theirs was damaged by a tornado, and they didn’t know about it for two whole months. By the time their management company sent someone out to collect rent, the tenants were gone and the house was gathering dust. A lack of communication and failure to manage expectations was seriously draining their bank account as well as their enthusiasm for passive real estate investing.

Yet in spite of all that, they knew that turnkey real estate was still the right investment for them. They just had to find a partner responsible enough to make it work the way they knew it should.

As Sofia tells the story, she had attended real estate investor association events and had somehow ended up on the mailing list of a real estate magazine based in California. She had never paid much attention to it, but one particular issue had the words “turnkey real estate” on the cover, and it caught her attention. She read the articles and saw an announcement for a talk I was giving in Los Angeles, where they lived, called “How to Safely Buy Turnkey.”

She attended the event. She liked what she heard.

Two weeks later, she and Jean were sitting in my office in Memphis. We took our time, and I worked through their goals and investments with them. For the first time, the speech they heard wasn’t “buy, buy, buy.” It was “investigate, learn, get to know us, make sure we’re a good fit.”

Jean and Sofia knew that they were finally hearing what they needed to hear, and they didn’t mess around. A week later, they bought five properties from us. Things went so well that, eventually, they sold all their other investments and bought more houses from our company instead. Then they referred other members of their family to do the same thing.

A few years later, several generations of their family were investing in turnkey headache free, and they were well on their way to achieving their visions.

TURNKEY MASTERY TIP

If it feels like a sales pitch, it’s a sales pitch.

I can’t emphasize enough how important it is that whomever you do business with takes the time to get to know you on the front end. Not just what your vision is and how your goals help you get there, but really getting to know if the company is a good fit for you. Pay attention early on to the questions team members ask and the direction they lead the conversation. If it feels like a sales pitch, then it’s a sales pitch.

As we go through this chapter and I show you how to find a great turnkey company to work with, this tip is important. Make the company earn your business by going slow. Be patient as an investor and make the company’s people spend time with you. There are many companies that want to move quick because their business model requires it. If customers took their time getting to know them and their properties, they would never sell a thing. So they have to rely on urgency and scarcity to make you think that you have to move now or you will miss out. Scratch those companies right off your list!

YOUR TEAM: THE “KEY” IN TURNKEY

Before they found us, Jean and Sofia were not investing in turnkey. They were just buying houses from people and companies who didn’t know how to manage them. The properties were in pretty good markets overall, but that may have been more luck than anything. Jean and Sofia had made a big mistake at the beginning. They were investing in cheap properties—cheap by their standards because they lived in California—and not paying enough attention to the market or who they were doing business with.

That’s not turnkey—that’s a headache. And it’s also the reason that the team you choose to work with is what really puts the “key” in turnkey real estate.

A true turnkey partner is a real estate company that purchases an investment property, renovates that property to a high level of quality, places a tenant in the house, manages the occupied property—and only then sells it to you, the investor, as a performing asset. There really is no other definition that works if you are going to buy a turnkey property.

The problem is that turnkey has become a marketing term. It hasn’t been mainstream long enough for people to have clear standards for it. Anybody out there can say, “I’m a turnkey company.” But the reality is that some of these companies may not own their maintenance services. In some instances, they don’t even own the houses they sell you. They just don’t do the things that need to be done to protect the investor.

A quality turnkey company will own everything it sells, and the renovations will be completed on each property before it is marketed to an investor. Anything short of that brings risk. Anything short of that is not really turnkey. You should never be asked to pay for renovations after you purchase a property. That’s not turnkey. That’s a recipe for getting ripped off. And yet there are companies that use the word turnkey to market their properties, and they ask investors to buy the property and then pay for the renovation while it’s being completed. That is simply too much risk.

Don’t let that deter you though. That doesn’t mean you shouldn’t invest in turnkey. What it means is that you need to do a great job choosing an outstanding turnkey partner before you invest.

A bad turnkey company can destroy a great investment. If you don’t take the time to handle this part of the process right, you stand to lose every dollar that you put into your venture. Worse, a bad turnkey experience can derail the vision of where you want to go. However, if you make the effort to sort through the false advertising and find a high-quality turnkey partner, the path to your vision will be much smoother than you thought it would be—and you’ll reach your goals much more quickly.

When you invest in turnkey real estate, you have to be confident in the company you choose to work with. You have researched the city and know the facts, but the company you work with is intimately familiar with the city. Its staff members have a deeper understanding, down to the subtleties of which side of the street to own a property on in a particular neighborhood. Those are the details you don’t need to know—but your turnkey partner does!

Choosing your turnkey partner is a critical part of the turnkey revolution, and the third step in the Turnkey Safely System. This chapter will give you a complete system for how to find and screen top-notch turnkey companies so you can invest in passive real estate with clarity and confidence.

HOW TO CHOOSE YOUR TURNKEY PARTNER

Choosing an ideal turnkey company is a three-part process. You need to identify good options, put your finalists to the Turnkey Test™, and take stock of the investments they offer to see if they’re a match for you.

Identify good options.

The first part of the process is identifying good options. This is where you learn what’s out there and strain the false advertising from the companies with real potential. Start with a simple Google search. Using the target markets you identified in the last chapter, type each city name plus “turnkey real estate” into the search bar. You can also try queries like “best turnkey real estate companies” and “largest turnkey real estate companies” for your target city. Then, take a look at the results that come up.

If nothing pops up at all, that’s not a good sign. It doesn’t necessarily mean that turnkey companies don’t exist in that area, but it does mean that they are probably not big enough to do business with. Companies that have the technology to keep you happy as an investor from 1,500 miles away almost always have a strong Internet presence.

Ideally, you want to see two or three turnkey companies when you do this search. That’s a sign that there’s some traction in the market. There’s a demand for the service in the first place. At that point, you do some basic due diligence.

Your goal here is just to identify the big players and strain out the mosquitoes. Don’t worry about the details of the company itself and how it’s run yet. Figure out who’s big enough to investigate further. Who appears multiple times in the search results? Who has a high-quality website? These are some early warning signs. You know off the bat that you don’t want to do business with a company that has a three-page website with no pictures on it. Forget the companies that use an obvious template with no mention of ownership, leadership team, the structure of the company, or their personal story.

On the other hand, when you find a company that turns up in 80 percent of the search results, has a well-done website, is quoted in major periodicals and newspapers, and is clearly active with things such as articles, videos, and press releases, you’ve hit on an option that has some meat on its bones. These are the companies that go on your short list to do more research on.

This stage of the process is also where you keep whittling down the two or three market options you found in the last chapter. If you get to the end of this step and you don’t see a company with potential in your target city, scratch that city off your list. It doesn’t matter how good the market itself looks. Without good turnkey company options, you don’t want to invest there, plain and simple.

Put your finalists to the Turnkey Test

Online presence is a start, but does it mean a turnkey company is up to scratch? No. Unfortunately, an online presence is not enough to say a company is quality. Many companies today are getting better and better at perfecting their marketing. It is slick, it is smooth, and what with turnkey’s growing popularity, there’s more and more of it out there. Since we know that not having an online presence is a deal killer, how do we separate the good from the bad? After you’ve narrowed your options down to a few finalists, you need to put them through a much more intense screening process to figure out who will be the best partner for you in the end.

I call this screening process the Turnkey Test. This is where you separate the people who have real companies from the people who are just selling houses.

How do you get started?

First, reach out to the company. From this alone, you will probably be able to tell whether you’re dealing with low, mid-level, or high quality. A low-level company will respond to your request for more information with something like “Sign up to get a list of all our houses sent to you.” Sometimes, low-level companies fail to respond at all.

The next step up from that is a company that gives you something closer to “Here’s a free report about how to invest in turnkey safely.” These are usually “stay small, keep it all” kinds of companies. You might get the impression that they’re not bad, when you talk to them, but they’re not quite as sharp and 100 percent on top of things as you’d like them to be.

The worst of the low-tier and middle-tier companies are the ones that have well-oiled sales machines that use the best of the psychological sales techniques to fool an investor. They may tell you that you have to wait for five to six weeks before you can get an appointment to speak with someone because they are “so backlogged with demand.” This gives the impression that the company must be exceptionally good if there is so much demand.

Another technique is to respond that you can have an appointment, but you need to be prepared to move quickly on the call and commit to properties immediately. Even waiting one hour can be enough to cause you to lose a property. This use of urgency and high pressure is a way of social-proofing their company and making you think that everyone else is investing and making fast decisions, so you need to as well.

I’m not saying that companies may not have high demand or packed schedules. I’m not saying that companies may not sell properties very quickly. What I am cautioning you as an investor to watch out for is the companies that are not interested in getting to know you. They are not interested in more than a few minutes of an introductory call and some cursory questions before they get right into selling you properties. Look for companies that make you feel comfortable and are obviously confident in their value. They will spend as much time as you need without any feeling of pressure.

The top-tier companies will offer you a full welcome package explaining how to get started with them. The extra time they spend and the effort they put into educating you as an investor on their company and their process will go a long way in building the trust you need to buy from across the country or world. The difference will be obvious and well worth the effort, and so will the results.

However, just because a company’s team members spend time talking with you and don’t rush straight into trying to sell properties doesn’t necessarily mean it’s the right fit for you. Top-tier companies are more likely to have the manpower and experience to handle your investment with the most service and the lowest risk.

Whatever the case, request a conversation with the turnkey companies you find. Just say, “I need to get some details about your company. Can we spend 30 minutes on the phone?” If they tell you no, that’s a red flag to cross them off your list. If they say yes, you get on the phone and ask them this series of questions—the Turnkey Test:

TURNKEY TEST

Are you an investor?

Very important question. What you want to hear is that the company itself is indeed an investor. If companies are not investors themselves, move on. If they are, find out how long they have been investing. If the answer is that they started investing after the 2007 housing crash, that should raise some concern. That would mean they have been investing while the market has been improving. They have been building a company or their services during a tremendous growing market. They may not have the expertise to know how to protect you during a housing downturn. This is not a deal killer, but certainly the longer the company has been in operation, the better for you as an investor. You would typically like to see a little grey hair on the company!

Do you own in the exact neighborhoods you are selling?

Assuming they say yes, they are an investor, you get to the next question. It is important that they invest alongside their clients. They need to own in the same neighborhoods that they sell. Don’t settle for a simple yes. Really dig in here and ask why they choose the neighborhoods they choose and how invested are they.

How many investors do you work with?

Simple question. You are looking to see how big the company is. You can use this information later in the test to determine how many properties each investor owns on average.

Do you own all facets of the operation?

This is very important. I would caution you to only do business with companies that physically own the properties they are selling and own the renovation company as well as the property management company. If they own all services of your turnkey investment, then there is only one number to call when there is an issue. If a company tells you that it sticks to finding and selling and then introduces you to its partner companies who renovate and manage, move on. This is a disaster scenario. If there is an issue, you will end up with multiple companies pointing the finger at each other and no one taking responsibility to help you as an investor. Stick with one company that offers all the services.

Do you offer rental or maintenance guarantees?

If they answer yes, ask them why. Then ask them if they will put the guarantee on year three. Guarantees are used by some turnkey companies as a sales gimmick and should be a red flag for an investor. (I’ll discuss this more later in the chapter.) They are selling the guarantee rather than a quality service and product. Usually the guarantee is a one-year promise that you will have no maintenance costs and no vacancies. The problem is, if you are working with a quality company, there shouldn’t be maintenance or vacancy in the first year. Instead, companies raise the price of a property and cut back on the work they do. They gamble that in the first year, they can cover whatever maintenance issues come up, and they can keep a tenant in a property long enough to last the guaranteed first year. When year two hits, the costs fall on the owner of the property. If you like the idea of a company guaranteeing to cover maintenance and vacancy for a year, ask them to put the guarantee on year three when you should expect to have some issues. If they are willing to make that kind of guarantee, then you may have found a quality turkey company. That is the only way I would be interested in a guarantee as an investor.

Do you defer maintenance?

Most companies will have no idea what you are talking about. So, clear it up for them by asking if they fix and/or replace everything on the house. Do they protect you as an investor by limiting your maintenance costs? Or do they defer maintenance such as leaving a roof on because it looks like it has a few years left? Do they choose to fix rather than replace a water heater that is on its last legs because an investor can get a year or two out of it? Do they fill up the AC unit with Freon because it is cheaper than replacing the whole unit? Each of these scenarios lowers your entry cost as an investor, but raises your holding costs by raising the amount of money you will spend each year fixing and maintaining your property. It will cost you money in the long run. I estimate that an investor will pay between $2 and $3 for every $1 in renovation that is skipped on the front end.

How many properties do you manage?

Simply put, the larger the portfolio under management, the higher the likelihood companies will have systems in place to provide excellent service. Smaller companies simply do not have the manpower and processes in place that it takes to keep your passive investment portfolio running smoothly. You are not looking for a cheap property management solution here. The larger management companies can sometimes have a larger price tag, but that price should translate to better service and communication.

Do you own the properties you sell?

It should be a given at this point. If companies are simply selling properties from the MLS or representing properties from other investors, they are not the right company. They need to have a vested interest in the property themselves. If they are not willing to put their money on the line and buy the properties first and complete the renovations before selling, then you are taking all the risk in the investment. If they can’t afford to buy the houses, then they haven’t been in business long enough nor been successful enough for you to trust them with your portfolio. Stick with the companies that know how to operate. They buy the properties that they like, that they want to manage. They renovate them and then offer their properties to other investors.

How long have you been in the business?

I’ve already covered why this is so important, but you need to ask the question directly. “How many years have you been in the turnkey real estate business?” So many companies pop up every year. You have to be careful as an investor and look past marketing and smooth sales talk. Experience matters in this business, and this is your money. I often ask audiences if they have ever experienced the holdup in a Jetway while trying to board an airplane. I explain to them that if they are flying with my dad, they are going to experience this delay. He is the type that wants to stop by the cockpit and peek his head inside to say hello. He always says he is looking for a little grey hair up there flying his plane. He likes to know that the pilot has a few years flying under his belt and would have experienced a lot of different scenarios that may come up while in the air. It makes him feel better at 40,000 feet! The same goes for you when investing in real estate. Look for a little experience. In this business, longevity is a good thing.

What is your average vacancy rate?

This is a very typical question to ask a company that manages property—a basic. Remember, if a company does not manage the investments itself and instead chooses to have you work with an outside management company, it is not a true turnkey provider and you are asking for trouble. Make note of the company’s answer and put it off to the side. You are going to ask the same question from the opposite direction in a minute and compare the two answers. Honesty is way more important right now than simply having a good answer.

What percentage of expiring leases will renew their lease each month?

Why does this matter? As an investor, you want to work with a company that values the experience you have owning your portfolio. This is an investment, and you should expect a consistent and reliable experience. Vacancy and turnover are not pleasant experiences, although they are a part of owning real estate. A company that can limit the number of vacancies you have and increase the length of time a property is occupied is a company working in your best interest. A company that doesn’t even bother to track this figure is not worth spending much more time talking with.

What percentage of signed leases fulfill their full term?

Same concept with this question. Is the company focusing on keeping its residents happy? Happy residents are going to stay longer in a property. They are going to treat the property better and have a better relationship with the management company. This number is a sign of how good the management side of the turnkey company is at doing their number one job—keeping your properties occupied and paying rent.

What is the average number of days a property is vacant between tenants, move-out to move-in?

This is another one of the basics—the questions you have to ask and write down their numbers. Good companies are going to track this kind of data. They will be on top of their numbers. Great companies are going to track this data and explain to you in detail how their systems, team, and operations work to improve these numbers. Pay attention to the details, and don’t hesitate to ask them how their performance stacks up to other companies and if they are satisfied that their performance is as good as it can be.

What percentage of billed rent do you collect each month?

This is a tricky question, and you may not find many companies in your search who track this data accurately. That does not mean they won’t have an answer, but if you hear 100 percent, then you need to move on. They are either not big enough, haven’t been in business long enough, or are lying with that answer. Contrast the answer with the answer they gave on how many signed leases reach full term, and you can see if they are giving you accurate information. Late payments are a part of a business and make up a percentage of rent payments each month. So are nonpayments and move-outs. Those things happen in this business. It is unlikely that you will ever find a company that collects 100 percent of every rent bill each month.

What is the cost of an average repair bill after move-out?

Another basic question. However, what you are really listening for here is how well the company renovates its homes and treats the residents. A home without deferred maintenance will not require high repair costs after move-out. Residents that are treated with respect will treat the property with respect. Will there be repair costs at every move-out? Absolutely. But a well-run management company that really understands how to manage both the property and relationships will help hold down your costs.

What are your management fees?

Another fairly straightforward and basic question. You are looking for a company with a simple, easy-to-understand pricing structure. It makes money when you make money. It should be easy to understand and a handful of charges at the most. That means two to four revenue streams that you pay for as an investor. What you want to avoid is a company with a whole buffet of charges where you are paying for every single thing the company does. That is a recipe for confusion, and as an investor, you should expect better from a management company.

What percentage of collected rent goes to yearly maintenance on average?

With this question, you’re trying to find out how good the company is at holding down maintenance costs while the property is occupied. The lower the percentage the better, obviously, but don’t just write this down and move on. This is an important question, and it is going to help us later on. We will use it in our final analysis and when we interview current clients.

What is your average number of months occupancy per property?

What you are looking for here is how long a resident stays in a property. If a company says it has a high number of completed leases and a high number of leases that extend and resign for an extended period, then this number too should reflect that. As an example, the company should be able to tell you that the average length of occupancy is 33 months or something to that effect. Just write down the answer, and I promise that you will have enough to build a clear picture of whether this a company you would want to partner with or not.

We are not quite done with our Turnkey Test yet. The following three questions are critical. Beyond our first list, here are the three most important questions you can ask to learn a little about your potential company’s mindset as business owners and how they are going to treat your investments:

What programs do you have in place to keep residents happy?

Remember when you asked the average number of leases that go to completion? Remember when you asked how many months a property stays occupied? Remember the question about maintenance and move-out costs? This is where you hold a company accountable to its answers. What is the company doing to keep residents happy? Does it have financial literacy or education classes? Does it offer services to help residents qualify to purchase a property? Does it get involved with community service that directly affects its residents? Those would all be excellent answers, but listen for the basics. This is where so many turnkey companies fail. Do team members answer the phone when their residents have a problem? Do they call their residents back after a maintenance issue to make sure they are completely satisfied with the work? Are they tracking the number of maintenance issues a resident has within 30 days of move-in to assess how good their renovation teams are performing before they hand over the keys? The real test to see if a company is top-notch is how it treats its residents. These are the people after all who will directly determine the success of your investment.

What customer service programs do you have in place? Will you call me every month with an update on my portfolio? How many team members are dedicated solely to providing service to your clients?

How about you as a client—would you like to feel special as an investor and receive outstanding customer service? The days of accepting poor property management are over. If you are buying a turnkey property, it should be a must, or you should move on! Do not accept mediocre management and being made to feel like you are a passive investor only who should sit back and collect checks. That is not how this works. The best of the best will have programs in place to contact you as an investor monthly or at a minimum on a very regular basis. Team members should be dedicated to staying in constant contact so you feel updated and comfortable with your investment. Ask how they provide these services and if they have team members solely dedicated to your communication and satisfaction.

What has been your biggest mistake as an investor? How do you protect your clients from making the same mistakes?

Way back in the opening of the book I told you that I had made just about every mistake you can make as a real estate investor. I have made some pretty dumb decisions. I don’t say that as something I am proud of, but I’m not embarrassed, either. It is part of my journey as a real estate investor and ultimately as an entrepreneur helping other investors. If someone can’t come up with a really good mistake he has made, not a mistake that costs a few bucks here or there, but something that could be catastrophic for other investors, then I’m not sure I would trust that person as a turnkey provider. Why? It goes back to the whole grey hair thing and how long a company has been in business. Investors who came through the last housing crash came out bruised and a little bloody. Those were the lucky ones. Most came out beaten up and barely moving if they survived the crash to begin with.

I cannot stress enough that you want to do business with people who understand what it feels like to lose. They know what it feels like to have evictions and maintenance and no communication from your management company. They know exactly how they don’t want you to feel. More importantly, they are willing to own up to it and explain how they design their company, team, and processes to protect you from the same mistakes.

If the company’s answers to the Turnkey Test are satisfactory, that’s a great sign that you’re dealing with trustworthy, responsible people who know what they’re doing. But you still have one more thing to discuss with them before you sign on: the housing itself.

Take stock of their stock.

Just because a company passes the Turnkey Test doesn’t mean it will have the right kinds of investments for you. This is where you communicate your vision and goals to your potential turnkey partner and see if they match what the company has to offer.

At this stage, a good turnkey team will turn the tables and begin to interview you instead. Team members will ask what you’re looking for specifically, and why you want what you want. Then they’ll help you find a way to meet your goals if they can.

For example, you could say, “I love duplexes, and I only want to invest in those.” A good company might reply, “You know, we don’t do duplexes because they’re in the wrong part of town. But tell me why you only want duplexes.” If you can achieve your goal with single-family homes just as well as duplexes in that particular city, the company will let you know, and you might keep that company on your list as a possible company to move forward with after all.

What is more likely to happen at this point is a discussion about age of the houses and types of neighborhoods. A common way to score properties is to assign them a letter grade. Homes may be assigned a grade of “A,” which implies that these are excellent assets where most if not all of the homes are of high retail quality and the homes in the neighborhood will be mostly filled with owner-occupants.

There will not be a lot of rental properties in these neighborhoods, and those that do exist will tend to be more expensive. While that may sound like a negative since the higher they are priced, the more it costs to invest and the harder it is to see a positive return, these properties also tend to have the best opportunity for appreciation and fewer turnovers. Residents tend to stay longer.

Next come the “B” properties, which tend to be nicer homes, newer neighborhoods, above median home value for an area, and while there are rental properties in these neighborhoods, most homes will tend to be owned by owner-occupants. These make really good turnkey rental properties.

Properties that are rated “C” and “D” you want be cautious with as a turnkey investor, and to be direct, stay away from the “D” properties altogether. Houses that are rated so poorly are in bad neighborhoods and work best for active investors managing their own portfolios.

I am not a fan of labeling properties with the “A, B, C, D” method, but it is a common practice. You will run into it as you are interviewing turnkey companies. As an investor, remember that the method is very subjective, and what rates as a “B” property in a “B” neighborhood to a company selling a property may be very different from what an investor trying to add a property to her portfolio would consider a “B” property.

If in the discussion it becomes apparent that a company is not able to offer what you need for your portfolio, then you’re looking for a good referral or a point in the right direction. It could be that the company’s price points are too high. Possibly it specializes in one type of property and you are comfortable with another. It could be the company simply doesn’t spend enough time and attention on the renovation. Either way, this is your portfolio, and the properties themselves need to match your needs.

If you can’t afford an investment with the company you like, but you can afford a less expensive one with a questionable company, don’t buy either one of them. The former costs too much, but the latter delivers no value. Just keep looking for another place to do business. This alone can save you thousands of dollars in bad decisions.

When a high-quality company’s properties match your needs, then it’s safe to sign on with your new turnkey partner. You don’t need to meet the team in person first, though you can do that later for confirmation if you want to. As long as you follow this process correctly, by the time you reach this point, you shouldn’t have anything to worry about.

You’re in good hands.

DON’T BUY CHEAP HOUSES

Yes, I am back to this point. Why? Because it is the one rule you should never break when investing in turnkey: don’t buy cheap houses.

Turnkey is not the kind of investment you should ever make by searching for the cheapest option. When you choose a turnkey vendor, the price point of the homes it sells reflects the value of what you’re getting.

Why?

Because there’s a lot more to good property management than putting up a sign in a yard, taking a phone call, showing a house to somebody, and collecting the rent. Turnkey companies that stop there are giving you a lower level of service, connectivity, and satisfaction. These are companies that often sell houses for less than $50,000 and charge a 5 or 6 percent fee on the rent collected. They tend to cut corners that put you at risk as an investor.

Meanwhile, good turnkey companies have a high level of two things: service and renovation work. They don’t sell bad properties that have issues. They don’t delay work that needs to be done right away, and they don’t go cheap on their value. You can expect a good turnkey company to charge between 9 and 10 percent of the rent, and you can expect it to be able to tell you why.

The reality is that your property manager is the factor that makes or breaks your success. When you’re looking at potential turnkey companies, remember: more expensive doesn’t always mean better, but cheaper almost always means worse.

SHINY OBJECT SYNDROME (S.O.S.)

The biggest trap that investors fall into when searching for turnkey companies is what I like to call Shiny Object Syndrome. Shiny Object Syndrome refers to the marketing gimmicks companies throw at you that don’t have any added value—in particular, guarantees.

I’m a big opponent of guarantees. In my years of experience, guarantees are offered for only one reason: to attract the buyer. It doesn’t matter how a company frames it. Luring you in is the bottom line. Two of the most common guarantees are that you will not miss rent or pay any maintenance costs for the first 12 months.

But if you’re working with a quality turnkey company, you shouldn’t have to deal with vacancy or maintenance in the first year, period. That should never happen. And if it does, the company shouldn’t charge it to the investor anyway, because that company failed. A really high-quality turnkey company that knows it’s the best can prove it to you without gimmicks such as guarantees.

If the idea of a guarantee appeals to you, I suggest you tell that company that you want the guarantee the third year instead of the first 12 months. See if it’s good enough to stand by its product that far down the road as much as it will in years one and two. The last thing you want is to buy a bunch of properties in year one under the protection of a guarantee and then be stuck with investments that perform terribly every year after that.

Shiny Object Syndrome doesn’t stay shiny for long. It will have you sending out an S.O.S. before you know it.

THE VALUE OF GOOD PEOPLE

Benjamin Graham, investor and mentor to Warren Buffet, once said, “Price is what you pay. Value is what you get.” This is absolutely true of turnkey companies.

What matters at the end of the day is the value you’re getting for every dollar that you put into your investment. That’s where the payoff comes from. That’s where the ability to achieve your vision really comes into play. And that’s why the team you choose is so much more important than everything else in the turnkey revolution.

The value of a good turnkey company is immeasurable. It will give you a level of comfort and peace in an investment that you’re making thousands of miles away. Once you’ve found a partner that’s a good fit for you, you’re ready to move forward to the next step in the Turnkey Safely System.

Now it’s time to create your plan.

Choosing Your Turnkey Company

Images Are there any turnkey companies available in my target city?

Images Does my potential turnkey company have a strong online presence?

Images Am I satisfied with my potential company’s answers to the Turnkey Test?

Images Does my potential company offer stock that meets my investing needs?

Images Am I signing on with my company based on value instead of price?

 

TURNKEY MASTERY TIPS

Avoid Shiny Object Syndrome.

Shiny Object Syndrome is best described as that pit in your stomach that seems to almost always form right after making a big buying decision. It asks if we got the best deal or if we negotiated hard enough. It is the nagging thought that there is always something better than the deal I got or a price lower than the one I am paying. Fight the urge! If you have done your homework and know exactly how an investment fits into your goals and drives you toward your vision, then make the investment.

How do I define value?

I measure the value of my investments by how much money they make relative to how convenient they are for me, and how relatively secure. The return I get has very little to do with the actual value equation I use. It’s a reflection of the value I attribute to convenience and security.

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