Last November, I was asked to be a panelist at the IMN Single Family Rental Investment Forum in Scottsdale, Arizona. The conference attendee list was impressive. There were important men and women walking around in suits with lanyards that said Goldman Sachs, Colony Financial and American Residential Properties.
Each of these executives took the stage as panelists to discuss the latest industry news, strategies and trends. And let me tell you, their vocabulary was as remarkable as their credentials. I learned some fantastic new terms like granular, aggregation, stabilized portfolio, valuation and pooling assets.
However, among all the buzzwords I heard that week the most popular was turnkey. It seems as though just about every investor, small and large, is looking for turnkey investment properties for their real estate portfolios. After all, purchased correctly turnkey investment properties provide a consistent source of cash flow, above average yields, an inflation hedge, a tax shelter and, in the right market, appreciation.
But what exactly is a turnkey investment property?
Before I began writing this post I looked it up and here’s the dictionary definition of the word:
of or involving the provision of a complete product or service that is ready for immediate use.
There you have it – a complete product or service. So if someone is trying to sell you a turnkey investment property it should be:
- Fully remodeled with little to no deferred maintenance required for at least 5-7 years.
- Leased by a qualified tenant.
- Professionally managed.
The seller should also be able to provide you with construction documentation and financial data for the property otherwise the service you’re purchasing is not complete and ready for immediate use.