With so many people out there ready to invest in real estate, it would be worth discussing why investing in turnkey real estate is not the good idea. There are some reasons that back this concept. Let’s discuss those reasons in a bit of detail.
It may be your property but profit goes to someone else
The main procedure involved in turnkey real estate investment is about finding a turkey property management company, which does the entire task of property management, from finding the property to renovating to selling or renting it out. The problem is that you wouldn’t be able to save a lot of money with this investment procedure as huge chunk of the profit will be taken by the company. It would have been more profitable if there was a possibility to find a distressed property, renovating it and selling or renting out; all on your own.
Bad property at bad location
Another reason that may serve as the most likely factor in turning a turnkey investment into a bad business practice is that you might end up buying bad property in the bad neighborhood. What makes it worse is that turnkey real estate management companies often try to only conceal the worse state of the property. In other words, you might be buying a property which could be much worse than how it looks like. In some instances, the real estate companies have been noticed to send the picture of a nearby good looking house and, instead, sold the property which was in awful condition.
You may end up paying more
The scarier thing about buying these distressed properties is that they may be more expensive than their worth. The sellers usually justify higher prices by putting forward the excuses of liability and the cost overheads. The only way to negotiate over the price is to avoid any negotiation. Just don’t buy the property by finding your way out of the negotiation trap. Remember, buying any property for more than what it is worth is going to leave you with no or very little option to develop a viable exit strategy. You may be able to sell this kind of property at good rate but you will have to hold this property for very long time. During that time, you will have to work on the renovations and repairs.
Property management companies might not care
The above mentioned reasons would definitely be enough to trap you in an inescapable situation, but there is a cherry on top that is going to make your story an absolutely sad one. It is related to the real estate company that doesn’t care about you, your property and the turnkey company. What they would really be caring about is the money which goes into their pockets.