What Property Owners Should Know About Turnkey Property Management

[Cathy Fontana]

If you’re at the point in your investment decision where you’re considering a property management firm, then it’s likely you’ve researched or may have even been contacted by firms offering turnkey services. While the business has its merit, it also has a very specific place, which may not be appropriate for every investor.

 

What is it?

A turnkey real estate vendor is an investment firm that typically specializes in a particular market, and they have several properties they have researched and purchased to hold in their arsenal of investment options. Many also have tenants already in place in these properties. Some of these firms serve as the physical property management company, while most instead work with a third-party provider for this service.

 

There are two benefits that typically tend to attract the most investors to this type of service. The first is that it appears to be very hands-off. Once the decision has been made about which turnkey investment firm to use, the property ownership equation almost instantaneously stops including the investor/property owner except when the time comes for payout. So, many like it because it is such a passive investment. The second benefit is that there are some firms offering rental assurance, which quite simply means they offer a period of assured rental income after the purchase of the property.

 

Don’t be Fooled

Despite these attractive benefits, there are reasons to be wary.

1. Research is still a must. Even though the involvement on the back-end becomes negligible, every savvy investor knows the majority of the work is completed during the investing decision. Identifying the right company to work with and checking their work to ensure your investment dollars are used to your liking is a significant portion of the work in itself.
2. Pricing should be considered. To get turnkey services, you are going to pay a premium. Paying a traditional property management firm to manage a property you own is going to cost you considerably less in fees than what a turnkey investment firm charges.
3. Assurance is limited. While rental assurance may come for a limited period of time after the purchase, there will come a time in the not-too-distant future that the assurance disappears and you’re left with an under-performing asset from which you are too far removed to really make a difference in.

 

Stay in Control

If you want to really experience the benefit of property ownership with the help of a property manager, then the traditional management company is the way to go.  These companies will assist you in getting the most from your investment, while allowing you to stayed an involved in the process as you want, however little or much that may be. Just make sure that regardless of the direction in which you are leaning, you always perform your due diligence before deciding to entrust your valuable assets.