Indirect/Passive Ownership Options
Investing in Turnkey Properties
Turnkey real estate investing is a loosely defined investment strategy in which the investor buys a property with the rehab cost build in and complete by a third party, or more frequently a property already rehabbed that is ready to place a tenant in place. These properties are normally bought at a distance when the barrier to entry in ones own market is too rich for their blood. Their goal is to make the entire real estate investment process as simple as possible, so all you need to do it “turn the key.” When it comes to acquiring properties, doing renovations, and managing the property, there’s peace of mind knowing your investing experience is in good hands with a solid turnkey company. A career professional can trust that a turnkey investing strategy will essentially take care of itself, but also provide the flexibility, freedom, and strong returns that you seek.
Though turnkey real estate investing is mostly passive, it can still be overwhelming and stressful. Biggerpockets.com is a great place to ask questions and learn about the entire process and what others have already learned about it. Turnkey does come with some build in downside for how passive it is, they can be heavily laden with fees and their performance as a property manager can have a huge impact on your investment’s performance. Much of this can be mitigated by doing your due diligence beforehand which will be covered later in my turnkey property buying guide.
Real Estate Partnership
In its simplest form, a real estate partnership is exactly what it sounds like: two or more people working together in the real estate industry to accomplish a single goal. Starting any new business venture (and that includes a real estate investing business) can sometimes require more capital than readily available.
The ability to merge multiple talents to form a better, more refined team is one of the major selling points of a real estate partnership. Teaming up with a partner is advantageous because it allows investors to play to individual strengths and the ideal partnership is one where both people bring something different to the table. Investing in real estate requires a considerable amount of time and energy to be successful. Like any investment, it also comes with a certain amount of risk. Forming a partnership, however, can easily help alleviate the degree of responsibilities associated with investing in real estate, while also splitting the amount of risk involved. A partnership will allow investors to share both the risks and rewards associated with real estate investment. For busy professionals, real estate partnerships represent a unique opportunity to take your business to the next level by focusing on the tasks that best suit you and your skillset. That also means a better chance of turning properties over faster. In the end, forming a business partnership comes down to finding someone with the same goals and visions and someone with attributes that compliment your own. No one said it would be easy — only that it would be worth it.
A very passive way to get into a partnership is to be the money in the deal. You either get financing to secure funding or already have them, this can be a very lucrative way to be in real estate without taking you away from that daily grind.
A negative to real estate partnerships is that instead of getting 100 percent of the equity in any given deal, you only get whatever percentage you negotiated with your partners. There are other ways to raise money for potential deals that allow you to keep the entire deal—such as hard money loans—that you may want to consider. That being said, for larger properties, it is very difficult to get private financing to cover the entire cost of the property. Most would agree some of a good deal is better than no deal at all.