Purchasing a Turnkey Property? Evaluate the Property Management First.
Buying turnkey properties can add to your rental property investment portfolio while reducing the amount of work needed to get the house ready for the market. One thing that makes choosing the right turnkey property challenging is come properties have hidden problems with the way they are managed but appear to be turning profits on paper. Researching a potential turnkey property to evaluate the effectiveness of the property management company increases your likelihood of success.
In addition to finding out the purchase price, net operating income, current and potential rental rates, and detailed information about the local market, when choosing a turnkey property to buy, you should also investigate the property’s condition, recent improvements, and current maintenance needs.
Property maintenance and repair numbers can be deceptive. Very low numbers, for example, can either indicate the property has few maintenance repair problems or ineffective property management. If regular maintenance and repairs are not performed, or the property manager delays repairs or ignores problems, that could cause unexpected expenses for you in the future.
An inept or even mediocre property management company can actually create problems for you, the new owner, by failing to complete basic (and necessary) property management tasks. For example, a rental property with relatively new appliances and HVAC unit might sound good, but if those appliances or HVAC unit have never been serviced, they may very well be on the verge of failing. Other small maintenance tasks, if neglected or done poorly, can quickly become a big problem. Blocked gutters or improper water drainage can damage a house’s foundation, roof, and landscaping. Drafty doors and windows can result in high utility bills, clogged furnace filters, and even encourage mold growth. Discovering such problems after buying a property can become an expensive mess, not to mention the hassle of suddenly needing to find a new property management company.
The good news is that you can easily keep yourself out of such situations by thoroughly evaluating the property management company in charge of the turnkey property you want to buy. Gather as much information about the company as you can, and from different sources. For example, check their references and online reviews. If possible, check out some of their current properties and speak to a current tenant or two. This information can help you form an accurate picture of the property management’s processes, practices, and how effectively the property you want to buy has been maintained, helping you make a more informed investment decision. For more information on how to assess the quality of a property’s management, contact The Martin Agency today.
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