I recently received a notification that a company was coming to the Birmingham, AL market to offer investors “Turn Key Real Estate” opportunities. Since this is where IRA Innovations is based, I was intrigued and wanted to understand Turn-Key Real Estate, and how it applies to IRA investors, myself included. This is what I discovered.
What is Turn Key Real Estate?
Instead of buying a piece of real estate directly, whether in your Self-Directed IRA or personally, there are companies that will do everything for you. They acquire the property, rehab it to make it a flip ready home, rent the property and pay the taxes and insurance on the property. In short, they do all of the work from inception to the resale of the property on your behalf.
Why do Investors like Turn Key Real Estate?
Investors who look for cash flow and dependable income want real estate as part of their portfolio, but may not have the time to go out and find ideal properties directly. They may turn to companies that offer these services. Investors who are looking to capitalize in markets outside of their home area may also utilize these services.
Many Turn Key operators are set up in one state and have “boots on the ground” people doing the finding, flipping, renting and maintaining in the market where they are soliciting investor funds. These operators identify a market they feel has potential and work with out of state investors to acquire property in these up and coming real estate markets for the possibility of higher returns on their investment dollars.
The marketing piece I received about Birmingham talked about a bus tour being put on by summit assets group; www.summitassetsgroup.com. The marketing piece addressed the benefits of working with them and provided information about the local market they believe is up and coming; in this case, Birmingham. Here are the highlights:
- Expert team for out-of-state real estate investors
- Meet the team of rehabbers and property manager
- Learn about the best cash flow/appreciation neighborhoods in Birmingham
- Walk properties and see homes in various stages of renovation
- Network with other investors
- And more
What due diligence should the self-directed IRA Investor do before committing to a Turn Key Company?
1. Understand how the Turn Key Company operates. How long have they been in business? What is the net cost of this investment for the IRA after their fees? Are they well capitalized?
2. Are there additional fees such as the cost of finding tenants, maintenance costs or commissions?
3. Consider ordering your own property inspection as this will give you an independent view of the property.
4. Research and know the marketplace before you commit.
Over 60% of our clients at IRA Innovations have invested in Real Estate with their Self-Directed IRAs.
Turn Key Companies could take some of the work out of doing this on your own. Realize, however, that you the investor are probably paying a premium price and may end up with a smaller return. This should be factored into your decision.
At IRA Innovations we do not give investment advice, but rather educate our clients on what is available out there for the self-directed IRA. Seek advice before you buy.