Differences Between a Turnkey Provider and a Turnkey Broker

With the economy in an unprecedented free fall, more investors than ever before are flocking to real estate investments. Turnkey rentals in particular are becoming the go-to property type for investors who want to quickly shift liquid assets into something that will a) produce income from day one, and b) hold value throughout any economic shift.

If this is a move you’re preparing to make right now, be careful whom you work with. There is a substantial amount of confusion out there about two basic kinds of turnkey operators; the turnkey provider versus the turnkey broker. If you don’t understand the differences between them, you could end up with a less than ideal situation.

What are the Differences Between a Turnkey Provider and a Turnkey Broker?

Both turnkey providers and turnkey brokers make turnkey properties available to investors. Beyond that, they are completely different. Specifically, the following characteristics make up the differences between the two:

Ownership

Turnkey providers already own the properties they sell. They stock an inventory of properties that they purchased and rehabbed, and on which they retain ownership. The turnkey provider takes care of the properties (or has a property manager take care of the properties) until such time as an investor buys the property from the turnkey provider.

In contrast, a turnkey broker doesn’t own the properties they sell to investors. Turnkey brokers don’t stock inventory, because they have no properties that they’re invested in. Turnkey brokers are selling other company’s properties, not their own.

Vested Interest

Turnkey providers are very careful about the tenants they place in their properties. They or their property management team carefully vet potential tenants to make sure they are of high quality. High quality tenants pay rent on time and take care of the property, and a turnkey provider wants to offer the best possible combination of tenants and properties to its investor clients.

On the other hand, turnkey brokers have no vested interest in making sure the tenants are good. Turnkey brokers typically have no idea who’s living in the properties they’re selling or who’s managing the property, if anyone. In fact, turnkey brokers have little reason to care about those things at all.

Business Model

The business model of the turnkey provider is to produce a value added product and make a reasonable profit when they sell to investors. If the property is bad for any reason, the turnkey provider doesn’t make money, which is a strong incentive to provide the best value possible. The added value comes in the form of passive income for the investor. The turnkey provider takes a property that needs renovations, invests their own money in renovating the property, installs a property manager and places a quality tenant and then hands it over to an investor. The investor then reaps the benefit of a lifetime of passive income.

On the other hand, the turnkey broker makes money solely on commissions. Turnkey brokers don’t have an active hand in anything to do with the properties, except for displaying them to investors. They make money from providers by presenting properties on their behalf. And, turnkey brokers aren’t loyal to one turnkey provider, either. Turnkey brokers work with multiple providers and it rarely makes a difference to them who they work with, as long as they make their commission.

Quality Control

The turnkey provider has control over the property from day one. From the moment, the turnkey provider seeks out a market in which to invest, to the moment they hand over the keys to the investor, the turnkey provider has total control. They control where the investment is, how the rehab is done, what things are renovated, who the property management will be, what the tenant criteria is, how much it’s rented out for, and everything else.

Conversely, the turnkey broker has no control over the final product at any stage. Since they don’t own the properties they represent, they have zero control over any part of it. They don’t even have any control over the closing date. Zero control, zero responsibility.

Why Investors Need to Know This

These are all very important differences to know about for the investor. Why? Because when you are making an investment in a turnkey rental, you want to work with someone who has a vested interest in ensuring that the property renovations are high quality, that the location of the property is a good market, that a high quality tenant is placed in the property. Essentially, you want to work with someone who stands behind the integrity of their own work. If these things are important to you, then you need to make sure you work with a turnkey provider and not a turnkey broker.   

If you’re ready to make the switch from stocks to real estate, we hope you will consider working with us at MartelTurnkey. We are a turnkey provider and we offer quality turnkey rental properties that we stand behind. Please contact us for more information.