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Do-it-Yourself (DIY) vs Turnkey Investing

Do-it-Yourself vs Turnkey Investing

Regardless of where you choose to invest, there are two opposite ends of the investing spectrum when it comes to your involvement and required resources.

DO-IT-YOURSELF (DIY)

Do-it-yourself real estate investing puts all the risk and responsibility squarely on your shoulders. Typically that involves everything from sourcing the property, acquiring it, funding it, renovating it, managing it, selling it, and coordinating every other step in between.

Now, of course, it is not likely you will be the one executing every piece of this process by yourself, but you will be involved to some degree every step of the way.  This is the most time consuming, and often stressful, option but for some it is what they enjoy.

Do-it-yourself investing also requires the largest number of resources.  It requires the greatest amount of time, experience, capital (cash and financing), and contacts such as realtors, property managers, contractors, inspectors, title companies, escrow companies, attorneys, mortgage brokers and lenders.

Often, but not always, your total “all in” cost will be (or should be) lower than investing in turnkey properties.  That’s because you’re taking on the risk, putting up the capital, and spending the extra time to search for, acquire, renovate, coordinate, and manage the investment yourself.

Do-it-yourself investing is ideally suited for those who like to buy-and-renovate their own properties.  There are a few shades of gray within this category but it is certainly the most resource-intensive option.

TURNKEY INVESTING

First of all, the word “turnkey” has been thrown around by real estate investors for many years without any formal definition of what it really means.  Our company was one of the first to really start marketing the term and concept back in 2003/2004, but over the last few years we’ve seen many local sellers and “competitors” pop up using the term “turnkey” in their marketing.

What is “Turnkey” Investing?

Turnkey real estate investing is most often used to describe properties that are “rent ready” or tenant-occupied.  This is unfortunate and often misleading because it is a very narrow definition of the term!

Just because a property is “rent ready” or tenant-occupied does not make it a turnkey investment by our definition.  Often there is little to no reference to the market, the neighborhood, the complete condition of the property, the tenant’s qualifications, any property management, etc.  These are all very important considerations, and factors that MUST be included in a truly turnkey investment.

So, back in 2004, in an effort to “raise the bar” in this niche industry we (re)defined what a turnkey real estate investment should be.  Our definition of a turnkey investment property is a property:

  • in a stable or growth market.
  • in a desirable neighborhood.
  • is new or has been newly renovated.
  • is cash-flow positive even if fully leveraged.
  • is leased, or in the process of being leased.
  • is under professional property management.
  • has been carefully selected with renters in mind.

We quantify each of these in more detail internally but this should give you a good idea of what to expect and what to look for if you’re considering a turnkey investment for yourself.

Notice that according to this expanded definition you’ll want to look beyond the property alone.  You must consider the bigger picture of the property’s neighborhood and its market.


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