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Turnkey Rentals Don’t Help You Achieve Fast FIRE

turnkey rentals

Summary: We often get the question from our readers, should I buy turnkey rentals? Will it help me achieve financial freedom quickly (Fast FIRE)? In this post, we provide a brief background on turnkey rentals and the companies that sell these properties to the general public. We then cover the downsides of turnkey properties and whether or not they will help you achieve financial freedom quickly. (Hint: they won’t.) 

 

If you’ve been following us, you know that our blog is dedicated to helping YOU achieve financial freedom quickly through cashflowing rentals, something we call Fast FIRE. 

We’ve even created a System and a Course to teach you the exact methods we used to achieve financial freedom in less than four years. 

The speed is what separates The Fast FIRE system from all other approaches out there. 

When your properties generate greater than 25% returns (and in many cases far greater than 25%), you can understand how you can achieve financial freedom so quickly.

This leads us to the topic of this article. We are often asked by our readers whether turnkey rentals are a good option for achieving Fast FIRE or not. 

While there is nothing inherently wrong with turnkey rentals, they aren’t going to help you achieve FIRE any time soon. Instead, you’ll be on the Slow FIRE train. 

 

What are turnkey rentals?

Before explaining why turnkey rentals are your ticket to Slow FIRE, let’s start out by understanding what they are.

According to Investopedia, a turnkey rental is “a fully renovated home or apartment building that an investor can purchase and immediately rent out.” 

Many of the turnkey properties that are available on the market are provided by turnkey companies. While there are many variations of the service these companies provide, they generally buy the property, fix it up, get it rented, and then sell it to you, the end consumer.

There are literally hundreds of turnkey companies out there and they vary in size from large companies with hundreds of employees to small mom and pop operations. Some of the biggest names are Roofstock, Buildium, Memphis Invest, and Morris Invest.

 

What is the allure of turnkey rentals?

Turnkey rentals solve a problem. People want to invest in real estate but feel they are too busy to deal with the hassles. Turnkey companies know this, so they sell convenience, ease, and simplicity. Here are some of the quotes pulled randomly from several turnkey companies:

“Rental real estate – done for you.”

“[Company] makes investing in single family rental properties radically simple.”

“Real estate investing made easy.”

“What’s your return on life?” (This suggests that they deal with all of the hassles of rental property ownership while you kick back and collect a check.)

“We Find Real Estate Investments So You Don’t Have To Search!”

An uneducated buyer would read this and say to themselves, “Problem solved! They do everything and I’ll achieve generational wealth! What’s not to like?”

 

What are the hidden downsides of turnkey rentals?

It’s important to note again that there is nothing inherently wrong with turnkey rentals. It certainly fills a need in the market. The problem really arises when the expectations of the buyers don’t match reality. I call these hidden downsides because most buyers aren’t aware of their own expectations when they buy a turnkey property. These come to light when they become educated about real estate and oftentimes in the form of buyer’s remorse. 

 

1. You’re paying retail

Do you like paying retail prices? Didn’t think so. Most people like a bargain. The bargain comes from buying a property the right way, which means buying it at a significant discount. There are a number of ways to buy properties at a discount. Most people assume they don’t have access to such properties and this simply isn’t true. It’s only after the fact that people find out how much the turnkey company made on the deal or how much they could have made had they learned how to acquire properties for themselves instead of relying on somebody else to do it for them.

 

2. The cashflow is chump change

When most people think about cashflowing rentals, they don’t see past the cashflow. They get excited about the 7-10% cash-on-cash return and sleep well at night. What if I told you that the turnkey company is making in some cases as much as 50 to 150% return? Some might say that it’s worth it because they didn’t have to do any of the work, but that’s one helluva convenience fee! Experienced investors know better. They want a piece or all of that 50-150% return for themselves. 

 

3. You don’t learn a thing

If you think of rental properties as a mini-business, imagine being handed a business that you know nothing about and then having to run the company as the CEO. Do you think the business would operate well without a deep understanding of the ins and outs of the operations? Hint, it won’t. This is where people get into trouble. They don’t know what they don’t know. They don’t realize that a rental business doesn’t operate very well on its own. The upfront work that a turnkey company does for you is when you learn about your property and any potential problems. Anticipating problems is part of being a good owner. As Tony Robbins likes to say, “Leaders anticipate, losers react.” 

 

Then there’s the risk that turnkey companies don’t deliver…

Turnkey rentals are a product just like anything you might buy in the store. And just like products you might find in the store, sometimes companies sell you faulty products or sometimes they sell you something that’s not what was advertised. 

This is what came to light recently with one of the biggest names out there: Morris Invest. If you have time, just google the terms “Morris Invest” and “Nightmare” or “Horror Stories” and you’ll be shocked. 

You’ll see stories of people having rentals that are vacant months after they bought the property. Stories of properties having never been renovated as promised, properties being rented at rates that were far below what was advertised, and properties that have one problem after another. 

For those who thought their property was going to be “turnkey,” it turned out to be far from it.

 

Turnkey rentals do not help you achieve Fast FIRE

When we talk about Fast FIRE, as we mentioned above, we aren’t talking about just the cashflow from the rentals. This is actually a relatively small part of the overall return from cashflowing rentals.  

Fast FIRE is not only about buying properties at a discount. It’s also about increasing the income that it generates. When you do that, you make a lot of money in appreciation.

That’s what you can get if you actually do the work yourself and what you are giving up by buying through a turnkey company.

So it’s a matter of what’s important to you, higher returns for yourself or pay a huge premium for convenience. 

You decide.

 

Interested in learning more about how to achieve financial freedom through real estate investing the Fast FIRE way? Check out our Zero to Freedom Through Cashflowing Rentals Course! Registration will open again in a few months, so click here to be put on our waiting list so you can be the first to be notified when course registration opens. Who knows, maybe there will be a bonus for those who sign up for the course through our waiting list?

Also, be sure to join our Facebook community to connect with like minds!

 

Do you want to learn how to creatively fund your real estate portfolio and achieve financial freedom? Join the conversation! Follow our Semi-Retired MD  Facebook page and join our Doctors or Professionals  group!

Semi-Retired M.D. and its owners, presenters, and employees are not in the business of providing personal, financial, tax, legal or investment advice and specifically disclaims any liability, loss or risk, which is incurred as a consequence, either directly or indirectly, by the use of any of the information contained in this blog. Semi-Retired M.D., its website, this blog and any online tools, if any, do NOT provide ANY legal, accounting, securities, investment, tax or other professional services advice and are not intended to be a substitute for meeting with professional advisors. If legal advice or other expert assistance is required, the services of competent, licensed and certified professionals should be sought. In addition, Semi-Retired M.D. does not endorse ANY specific investments, investment strategies, advisors, or financial service firms.

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Hi, we’re Kenji and Leti

we provide coaching and mentorship for doctors and high-income earners

Several years ago, we were newlyweds working as full-time hospitalists. On paper, it looked like we had everything: the prestigious careers, the happy marriage, the luxurious rental home, the cars, etc.

But in reality? Despite having worked for several years, we had very little savings. Despite our high income, we had very little freedom in terms of time or money.

One thing was clear: we had to do something.

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