Is A Turnkey A Good Investment? Time To Take A Look At The Advantages and Disadvantages
Real estate has an unlimited supply of trends. Some trends are a good investment while others do not. One of the popular trends that are mentioned a lot is something called “Turn-key.” For a beginner in the real estate investment world, education is key.
What is “turn-key” Real Estate?
That is a property that has been fixed and ready for a buyer. This kind of property investment has been called other things, including “buy and rehab” or “fix and flip.”
Some of you may be familiar with people in the real estate world called “flippers.” That is when the buy a property, fix it up, and then flip it for a much bigger price tag.
“It is called buy low and sell high.”
That begs the next question: Is it a good idea to turn a profit using a “turn-key method?”
I guess it depends on who you are talking to in real estate. Some argue that investing in a property like that is a bad choice, and others disagree. There are advantage and disadvantage in using the buy and rehab methodology.
The Pros of Using This Type of Investment Strategy
There is an appreciation factor for that type of investment. Many argue that this is the main reason people do it.
You buy a horrible looking property in West Palm Beach, Florida. You fix it up and make it look nice. You sell it at the escalated price and boom, you got a property worth more than what it took to fix it up( the initial price you paid and the cost to fix it).
Some consider this type of investing the “motherload” of real estate. It is sort of like getting a lot of “free money” in the end.
The buyer has three options, then. He or she can hold on the investment, watching the equity increase through the years. The person can also refinance the property. Thirdly, the person can sell it to someone else and get what they want for more money.
The quality that someone places on fixing up the property is going to be a held tp a higher standard. whether they sell it to someone else or keep it for themselves.
There is one downside to that. The person fixing it up could care less about the buyer and more about the numbers. In that case, he or she might not place a lot of value in fixing it up the way it should be.
The only way the quality wins is when you have someone who cares about the work.
You will have greater control over the work, no matter what type of property it is. You have a hand in everything, including the renovation. Now, some people feel stressed out just thinking about taking on a project like a multi-unit home. A multi-unit home does come with more work than a single home.
There is also the sign family home detail. A sign family home is a personalized nameplate that tells people who you are. You have complete control over that during renovation too.
This is an advantage that comes with a hidden due-diligence. You place more effort into something when you know the place is yours.
You care about something that has your name on the wall.
The Disadvantages of Turn-Key Real Estate Investment
You are going to placing a large chunk of time into the project, regardless of whether it is for sale or not. Some agents decide to keep the space, after all, is said and done. Some people fall in love with their creation.
Moreover, the time it takes is not something to discount. Some like to buy something that does not take a lot of time to lessen the stress and anxiety. The only downside to that is you end up forcing things, instead of letting it happen naturally.
You also need skills in areas including management, selling, and other assorted skills. S you have the necessary skills to do the necessary work?
2)Experience and Knowledge
There is something to be said about the experience level. That is why most people hire a professional. They know they do not have what it takes to carry the job through.
One skill you need to have is the ability to find distressed properties. Do you know how to look for them? The first thing you better do is to research how if you are planning on doing this yourself. You will also have to know how to balance the books. You will have to know when and who to speak to in the legal profession.
You will need legal help with this. In other words, “you never hire a pencil-pusher to do a corporate attorney’s job.”
3)What Are the Risks?
There will be risks if you choose to do this by yourself instead of hiring a professional real estate person. What skills do you have right now? What skills do you need to acquire for the work? You are already placing yourself at risk by trying to do something without proper knowledge and experience.
What happens if you get delayed? That is going to be more time and money spent to resolve the problem. What happens if you hire the wrong person? That could mean losing a few hundred more, maybe a few thousand.
The money you invest in the space will sit there until the work is closed. What happens if something goes wrong. You could lose the money sitting in escrow. Escrow is not a done deal until everything is finalized.
You may also be required to invest more cash before the work is complete. An experienced real estate agent knows how to handle that. Do you?
As you can see, a turnkey property does come with its share of advantages and disadvantages. A turnkey option does come with several benefits, but it is up to you to weigh the pros and cons carefully.