Turnkey properties are a great option for real estate investors looking for steady and predictable cash flow and “hands-free” ownership (nearly). But despite what you might think when you hear the word “turnkey,” turnkey properties are not that easy. That’s why I think if you were to read only one article about turnkey properties, this should be the one.

Let’s start with a definition. To put it into nutshell, our friends at Wikipedia define a turnkey property like this:

Turnkey real estate...refers to a type of investment. This process includes the purchase, construction or rehab (of an existing site), the leasing out to tenants, and then the sale of the property to a buyer. The buyer is purchasing an investment property which is producing a stream of income.

In other words, the primary benefit is that the turnkey real estate company is doing all the heavy lifting in order to offer you an opportunity to become a property owner with minimal headaches. (We can walk you through the pros and cons of being a hands-off owner, versus hands-on, in the How-To article, Making it Happen.) The company identifies an area that has strong demand for rental properties, locates the property and renovates it, making it “renter ready,” then finds and screens tenants, and manages the repairs and ongoing upkeep with the goal of providing a safe property for tenants, with minimal vacancies, so as to optimize the potential for steady cash flow to you, the proud owner of said turnkey property.

Sounds easy enough, right? Here’s why it’s not always so easy. There’s no standard by which a turnkey property company has to operate, so finding a solid provider requires insight into what they should provide and the discipline to complete due diligence on their team, their track record and their properties. This is not a lesson you want to learn the hard way.

So how do you know when you’ve found a trustworthy turnkey real estate company and a quality turnkey property?

Just as you would with any other type of investment, you want to know who you’re dealing with and what they offer. You need to ensure you choose the team that has reliable experience and a track record of delivering on their promises. We cover what turnkey property solution should cover in our How-To, Making it Happen, which looks at the pros and cons of working with a turnkey real estate company or managing a property yourself.

The characteristics of a solid turnkey property operation are just as important as the services they provide, and the basics include:

• A long list of successful properties along with owner/investor recommendations and references
• A long-term investor/ownership mindset, demonstrated by their acquisitions, renovations and management practices
• A willingness to share data and insights on the local market
• Openness to an independent inspection of the turnkey property by a certified assessor
• A solid reputation for property management, with a team experienced in collecting rents and making repairs
• A portfolio of turnkey properties producing cash flow, with a long-term lease in place with professionally screened tenants

No less important, make sure you understand how to review the financial projections of a turnkey property. Check out these How-Tos, Measuring Return Cap Rates and Cash on Cash, to make sure you compare “apples to apples.”

Finally, it’s my belief that success requires research into the top US real estate markets for cash flow potential. Turnkey property investments have to minimize risk and maximize cash flow, otherwise, they won’t make sense. There’s a substantial list of requirements, but also a great opportunity to find a smart investment. If you’re a “newbie,” you might be inspired by the example of this Sales Director, who's seen a 15% return on cash invested. And if you’d like to see examples of turnkey properties that meet the expectations we outlined above, check out these turnkey properties on HowManyDoors. Good luck !

So, you’ve read this far - that makes me happy! Why stop now? Here are some more articles worth reading on turnkey properties:

• Learn more about what kind of turn key real estate to buy and where
• Read why you should question everything about turn key rentals
• Figure out how to figure your real estate cash flow
• Know your rent to price ratio and why it’s crucial with cash flow real estate