A turnkey business is a business that is ready for use. For those who are curious, it is called thus because "turnkey" is supposed to mean that interested individuals can start using it as soon as they have turned the key to unlock its doors. With that said, it should come as no surprise to learn that turnkey companies specializes in finding, buying, rehabilitating, and selling real estate properties to people who want to become real estate investors. Theoretically, turnkey companies can provide interested individuals with a lot of convenience by minimizing their expenditure of their limited time and effort. In practice, well, suffice to say that turnkey companies aren't meant for everyone, meaning that interested individuals should be careful. Here are five reasons why would-be real estate investors might want to avoid turnkey companies:
1. Higher Cost
Turnkey companies are companies. In other words, they exist for the purpose of making a profit. As such, while they can provide would-be real estate investors with a great deal of convenience, said individuals should expect to have to pay for it. Simply put, real estate investments from turnkey companies are going to be more expensive than the real estate investments that interested individuals can put together on their own. Due to this, interested individuals should make sure to evaluate the numbers for these real estate investments with extreme care and consideration, particularly since the inherent challenges of predicting their profitability means that their numbers can see significant divergences from those of turnkey companies.
2. Strong Preference for Cash
Generally speaking, turnkey companies are very focused on making their money sooner rather than later, which is understandable but nonetheless influences their operations in ways that can be unpleasant for their customers. For example, turnkey companies have a very strong preference for cash, so much so that some of them should be considered cash-only. On the one hand, this is understandable because they want to minimize their potential risks; on the other hand, this is a serious limitation for people who want to get into real estate investing.
3. No Guarantee of Getting the Best Investments
There is no guarantee that a particular turnkey company is going to have real estate investments that are perfectly suited for a particular individual's investing needs and preferences. Since success in investing is very much based on the investor's goals, this can be a serious issue to say the least. On top of this, it should be mentioned that turnkey companies are by no means guaranteed to be selling nothing but the best real estate investments in the best neighborhoods. They are focused on their profit rather than that of their customers, which is why some of them have been known to focus on cheaper real estate properties in less desirable neighborhoods because that provides more of a mark-up for them. Technically, there is nothing wrong with such investments because there is a market for just about everything. However, interested individuals need to be absolutely sure that they know exactly what they are getting into before they proceed further.
4. Less Flexibility
One of the best things about real estate investments is that interested individuals can have a direct impact on their outcomes through their choices. Something that can't be claimed by most kinds of investments out there. Unfortunately, this upside is removed when people choose to buy real estate investments from turnkey companies because they will have to accept whatever interior design styles and other options that are offered to them instead of being able to customize everything to their satisfaction. Granted, said individuals can still make changes once the ownership has changed, but that would just add even more expense to what is already a more expensive than normal purchase.
5. Sales Pressure
Finally, turnkey companies sometimes put enormous pressure on their customers to buy their real estate investments as soon as possible. This is a huge problem for interested individuals because successful investing is reliant on cool, number-based reason, which in turn, needs a fair amount of time to come up with the best choices. Due to this, whenever someone notice that they are being heavily pressured by the representatives of a turnkey company, they might want to look elsewhere.
Written by Garrett Parker
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