APPENDIX B
TURNKEY MASTERY TIPS
How long a company has been in business is very important.
A company that came through the real estate market crash and survived shows you that it has good systems and processes in place. A company that started after the crash and was built during the recovery may not have the experience necessary to protect you if and when a market takes a downturn. Keep that in mind!
Creative financing is not a good option when you buy turnkey real estate.
If you are not ready financially to invest passively, spend time building your cash. This is not a short-term, quick investment, so do not use creative financing such as money partners, hard money lenders, or borrowing from credit cards. These strategies can work for short-term investments, but not for long-term passive investments such as turnkey.
Follow the steps!
If you are stuck after setting your vision and worried that it may be too big or even not big enough and don’t know where to start, follow the steps! Taking the simple action of picking a market to research can be enough to push past your fear and get the ball rolling!
Look for a partner that takes the time to listen and learn.
If you want to build a portfolio of turnkey properties and do it safely, you want to do business with a trustworthy company, right? Right off the bat, pay attention to how urgent the company’s people are to get you into buying mode. Pay attention to how quickly they are trying to get you warmed up and writing checks for properties. You want to find a company that is going to be your partner. The best thing your partner can do is go slow and spend some time getting to know you as an investor. There is no way a turnkey company can build a portfolio that fits your needs perfectly if they are not taking time to listen and learn!
Take steady, patient action in the direction of your vision.
Never confuse simply making changes with making progress. Change is not necessarily a sign of making progress.
Cheap properties are not good turnkey investments.
Take a moment and underline the next sentence. Do not buy “cheap” properties! Cheap means less expensive, smaller properties in more impoverished areas of the city. These properties are better left to local, active investors able to put their time into the management and operation of these low-cost, cheap houses. A quality turnkey property will never be priced less than $60,000. Don’t be fooled by promises of low prices and high returns. If it sounds easy to make a double-digit return, then don’t even consider it for your turnkey portfolio. It is never easy, and quality turnkey investments are not “cheap properties.”
Understand the importance of positive cash flow.
There are two ways that real estate investors receive income on a property, but only one that puts dollars in your pocket. Rental income and appreciation are both very important. However, when you start building your portfolio, make sure you are buying properties that will produce a yearly, positive cash flow. Appreciation comes over time, but making a positive cash flow from the beginning is a powerful motivator to keep building.
Don’t forget to include your retirement accounts or a retirement account strategy as part of your plan for reaching your vision.
Most real estate investors that I work with build their vision around using their cash and finding a way to leverage into multiple properties. It is only after a little digging on my part that they realize they have an IRA account that they can use as well. A big part of every investor’s vision is retirement. How great would it be to own your portfolio inside your IRA and receive the rent payments during retirement tax-deferred or even tax-free?
Make decisions based on facts—not feelings.
Just being familiar with a market is not what I consider “digging deep” in your market research. Make sure you don’t decide to invest in a market because you are already familiar with it and really like the market. That is not enough. Always do thorough research, and follow the facts!
You do not have to visit a market before you choose to invest.
I get asked quite often if I think visiting markets is important. You do not have to visit a market before you choose to invest. Visiting the market is a step you take to build your rapport with your chosen turnkey partner, and that may happen before or after you have chosen to get started investing, depending upon the circumstances.
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 representatives ask and the direction they lead the conversation. If it feels like a sales pitch, then it’s a sales pitch.
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.
Review your plan often to make sure you stay on target.
One of the best tips I can give you is to keep your plan close by and make a habit of reviewing it monthly. For most of you, there will be other investments, savings accounts, or income streams that all play a role in your plan. Keeping an eye on your progress will build your enthusiasm, and celebrating even the small wins will keep you inspired to stay on track.
Celebrate small wins.
“When was the last time I celebrated a small win on the path to my long-term financial goals?” Write this question down as part of your plan. Each time you review your plan you’ll be looking for the small wins and making sure you celebrate your steady path toward reaching your goals.
Harness the power of multiple properties.
I always recommend that investors build a portfolio and take advantage of the power of scaling to multiple properties all providing income at the same time. Buying multiple properties lets you take advantage of scale and negotiate better pricing on some of the services if you close more than one property at a time, and having multiple properties lowers risk.
As an investor, you will be on a roller coaster. When your property is occupied and paying you a return, you are 100 percent occupied and happy. When your property is vacant or behind in the rent, you are 100 percent vacant and unhappy. Who needs the aggravation of everything hanging on a single property? If your vision requires you to set a goal of just one property, don’t buy turnkey. Figure out another vision with a bigger goal!
Turnkey is great launching pad for future investments.
There are literally thousands of different ways to make money in real estate. Most require a lot of active participation on the part of the investor, but there are also ways to build an active business around passive real estate investing. If you are passionate about real estate and looking for a place to start, turnkey real estate is a great jumping-off point. It allows you to learn many of the ins and outs of real estate while safely building a portfolio. I have worked with many real estate investors who have used their turnkey experience as a launching pad for other real estate investments.
In the end, it’s about what’s right for you.
Don’t make investments just because they look good on paper or based on slick marketing material. Make investments because they fit your plan.
You cannot be passive about your passive investments.
There may not be a more important tip in this book. Buying a turnkey property and building your portfolio passively does not mean that you completely abdicate your role to some company in a remote city. It does the heavy lifting, but you still have to keep track of your portfolio’s performance. As noted in the Turnkey Safely Checklist questions above, the best way to avoid mistakes is by checking your statements each month and consistently talking with your management company. These are the habits of a successful turnkey investor.
A great partner understands your goals for the long term.
Turnkey is a people business. Your turnkey partner should be a partner in your success. If it is not willing to forgo a few dollars on a deal here or there to make sure you succeed, then keep looking. This is your partner for the lifetime of your portfolio. For some that is going to be a very long time. A great partner is one that understands that your dreams, plans, goals, and vision are all very real things, and is willing to work hand in hand with you to make them come true.