A Written Cash Flow Plan Is Also Known As 6 Golden Rules to Follow Before You Invest in Turnkey Real Estate

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6 Golden Rules to Follow Before You Invest in Turnkey Real Estate

Real estate investing is not for everyone. It requires patience, consistency and persistence and comes with its share of challenges that must be considered before taking the leap.

Many new investors are interested in investing in turnkey real estate because they think they won’t have to do any work. Yes, this is true to a large extent but that doesn’t mean you should start investing without doing any research.

Based on my experience and understanding, I have come up with these 6 golden rules that you can follow before investing in turnkey real estate:

1. Create a solid written policy – The rule here is that if it is not written, it does not exist. Few people stick to an unwritten plan. Writing a plan down on paper not only ensures compliance, but can act as a motivator when the going gets tough. Some important questions your plan should address are:

  • How much cash flow do you strive for?

  • How many turnkey investment properties would you need to purchase to achieve this goal?

  • How long would it take to buy them at your current savings rate?

2. Research – Before you invest in turnkey real estate, it is important for you to research different turnkey providers. But before that, you need to figure out where you want to invest. Many investors want to invest in out-of-state properties for various reasons, including lower prices or higher rental demands.

So, while doing your research, you need to find turnkey providers in the particular state where you want to invest. You schedule a meeting with the turnkey provider and inspect the property in person.

3. Be proactive – Investment properties require both a down payment and a large up-front capital investment (at least $10,000) to cover closing costs. Even after advance purchases, repairs, vacancies and lawsuits can result in large and immediate bills. Turnkey providers can help mitigate those risks. Some of them, like us, offer a one-year rental guarantee but as an investor you need to be proactive. Schedule biweekly or monthly calls with your turnkey provider to stay in the loop.

4. Proper planning – Real estate investment is an illiquid asset. So, if you are planning to sell it, it may take more time, i.e. from a month to a year. This is a long-term investment and cannot be undone easily.

5. Location – The type of profit you will get depends on the location of your property. Before investing in a particular place you need to ask all these questions:

  • How stable is the field?

  • Is there any alternative part of the city/country more suitable for turnkey investment?

  • How old is the property and when was it last renovated?

  • What kind of experience does your turnkey provider have?

6. Plan B – Many people believe that having a plan B means you plan to fail. But as far as real estate investment planning is concerned, having a Plan B means diversifying your portfolio. So, if you start with single family homes, after a few years, you can start investing in multiplexes or even commercial properties depending on your personal preferences and market conditions.

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