Turnkey Diligence: Evaluating a Turnkey Provider
Turnkey real estate investing is an appealing option for self-directed IRA investors. The ability to place IRA capital into a rental property that is ready-to-rent makes a lot of sense and aligns well with the needs of busy investors.
For investors who live in high-cost coastal metros, the ability to purchase affordable properties that cash flow in out-of-state markets is a plus. There are many advantages of turnkey investing, to be sure.
Finding a quality provider can be a challenge, however.
The horror stories are out there. You need to beware of shady operators who over-promise and under-deliver or just flat-out lie about the condition of properties. If property management is not done well, you can end up with the liability risks of neglected property on the one hand or getting nickeled and dimed for unnecessary repairs on the other. Poorly vetted tenants can also cause all kinds of problems and kill the hopes of a profitable investment.
With the right operator, you can truly experience a turn-key investment and watch the monthly checks land in your self-directed IRA or Solo 401(k) plan.
Fortunately, there are plenty of quality operators out there. Your job is to find them.
Know What you Want
Turnkey property investing covers a broad range of services. Do you simply want a ready-to-rent property and plan to put your own management in place? Would you prefer that the property team also provide full-service property management? Are you more interested in acquiring a property in need of work and having a team bring it into serviceable condition first?
Different firms offer different levels of service. You want to start by finding a provider who offers what you are looking for.
Know Your Target Market
It helps to know the market you want to invest in. If you spent time in a city growing up or while in school, you may know the neighborhoods that are better to invest in and what drives the local economy.
If you have family or a trusted friend who lives nearby, they can be a valuable resource to help you understand the current pulse of the city and perhaps help you oversee a property and your property management team in the future.
You are much better off selecting a city to invest in based on your own research and connections than being “sold” on a city by a turnkey provider who operates in that city.
Trusted Referrals
Perhaps the best way to find a quality provider is via the referral of someone you know and trust who has had success working with them.
Network in your local real estate investor community or other social circles. Ask questions. Not everyone will simply volunteer that they own investment property out of town, so it can take a little digging. Mention that you are considering such an investment and see what someone says.
Ask your CPA or attorney if they know anyone having success with turnkey investing.
Avoid Too-Good-To-Be-True
Properties that are too cheap, promises of excessive returns, and rosy financial projections that don’t allow adequate amounts for vacancies and repair costs are all red flags. Bargain basement property management fees could also be a concern.
If you are planning to invest in B class neighborhoods and the pictures of properties look like they came out of a design magazine, something may not be right.
Before you can invest in a market, you need to know what the numbers “should” look like for a certain type of neighborhood and class of property.
You need to do your own research or get the help of a seasoned real estate agent/investor other than the provider to help you make sure the numbers make sense.
Avoid Too Much “Hustle”
Volume is the name of the game for many turnkey operators. They make money when they sell a house, and want to sell as many as possible with as little work as possible. You just have to know this going in, and work to find an operator who will take the time to work with you and let you do your research.
Your evaluation of a provider may not be directly tied to a property. You can often take a slower pace when looking at projects they have completed or are in process on. When it comes time to look at a specific property, time may be of the essence.
Most any quality provider will have a list of potential buyers and good properties do go fast. Even so, you should never accept being rushed and having to skip crucial aspects of property diligence.
If the process is too fast paced, simply move on.
Check References
Checking references at several levels is a necessity.
You should absolutely speak with more than one person who has invested with the provider. Of course, providers are going to cherry pick someone who loves what they do. Sometimes you may want to verify the person is actually an investor and may be able to do so with a property title search.
If you can find non-investor references, that can also be helpful. Speaking with a 3rd party contractor, appraiser, lender, etc. who the team works with is a good idea and can give you a sense of character. While some folks who may be involved in deals and have a financial interest of their own may give a provider a little benefit of the doubt, it is pretty easy to tell when someone really likes working with someone as opposed to just doing business with them.
The internet is also a great resource for checking out the reputation of a provider.
Make Sure You Can Get Independent Diligence
When you get to the point of performing diligence on a specific property, you will want to bring in your own resources to supplement and verify what the turnkey provider is offering.
As you get to know a team, make sure you will be able to see the scope of work for property repairs if applicable. You should be able to get a third-party property inspection or appraisal as well.
If a provider is unwilling to let you bring in such outside resources, they either have something to hide or only want to work with investors who make their life easier. Either way, they are probably not a good fit.
An In-Person Visit is Crucial
While the internet allows for investors to purchase properties sight-unseen, that is not always the best approach.
If you can meet the team and view properties they have completed or are in the process of working on, you are more likely to succeed in your investment.
Getting an idea of how they manage their rehab process can be a great indicator of quality. Is there a professional team working off checklists and keeping the jobsite clean and organized, or does the driveway look like the aftermath of a tornado?
Whether the property management team is in-house or outsourced, you will want to make sure to get to know them. Once a property has been purchased, you will be working with the property manager almost exclusively. You need to be able to communicate clearly with them and feel like you can have a good working relationship.
Unfortunately, when your IRA is the investor the travel cost is on you. Your IRA should not pay your travel expenses. And since the IRA is the investor and not creating taxable income, there is no place to deduct those expenses.
Take Your Time and Get it Right
Some investors spend more time researching their next vacation or car purchase than a property investment. When you consider that you are making a long-term decision about where to place your retirement savings, it is important to take time and be diligent.
Turnkey property investing can be a very good way to protect and grow your nest egg. It takes a team to create success, so finding the right team to work with is important.
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Quick answers to common questions
We’ll take you through a simple, step by step process designed to put your investment future into your own hands…immediately. Everything is handled on a turn-key basis. You take 100% control of your Retirement funds legally and without a taxable distribution.
YES! In 1974, Congress passed the Employee Retirement Income Security Act (ERISA) making IRA, 401(k) and other retirement plans possible. Only two types of investments are excluded under ERISA and IRS Codes: Life Insurance Contracts and Collectibles (art, jewelry, etc.). Everything else is fair game. IRS CodeSec. 401 IRC 408(a) (3)
It’s actually pretty simple. Early on, regulators let the securities industry take the lead in educating the public about retirement accounts. Naturally, brokers and banks promoted stocks, bonds, and mutual funds—giving the impression that those were the only allowed investments. That was never true... and still isn’t. You can probably guess why they kept the rest under wraps.
It is possible to use funds from most types of retirement accounts:
- Traditional IRA
- Roth IRA
- SEP IRA
- SIMPLE IRA
- Keogh
- 401(k)
- 403(b)
- Profit Sharing Plans
- Qualified Annuities
- Money Purchase Plans
- and many more.
It must be noted that most employer sponsored plans such as a 401(k) will not allow you to roll youraccount into a new Self-Directed IRA plan while you are still employed. However, some employers will allow you to roll a portion of your funds. The only way to be completely sure whether your funds are eligible for a rollover is by contacting your current 401(k) provider.
A Solo 401(k) requires a sponsoring employer in the format of an owner-only business. If you have a for-profit business activity – whether as your main income or as a side venture – and have no full-time employees other than potentially your spouse, your business may qualify. The business may be a sole-proprietorship, LLC, corporation or other entity type.
A self-directed retirement plan is a type of IRA or 401(k) that gives you greater control over how your retirement funds are invested. Unlike traditional accounts held at banks or brokerage firms that limit you to stocks, bonds, and mutual funds, self-directed plans allow you to invest in a wide range of alternative assets including real estate, private businesses, precious metals, cryptocurrency, and more.
These plans still follow the same IRS rules and maintain the same tax-deferred or tax-free benefits as conventional retirement accounts. The difference is simply in how and where you choose to invest.
No. Moving to a self-directed IRA or Solo 401(k) does not trigger any taxes, as long as your funds are eligible for rollover.
Self-directed retirement plans maintain the same tax-advantaged status as traditional plans offered by banks or brokerage firms. The key difference is flexibility—our plans are designed to give you greater control and allow for a wider range of alternative investments beyond stocks, bonds, and mutual funds.
A prohibited transaction is any action between your retirement plan and a disqualified person that violates IRS rules and can lead to serious tax consequences. Under IRS Code 4975(c)(1), prohibited transactions include:
- Selling or leasing property between your plan and a disqualified person Example: Your IRA cannot purchase a property you already own.
- Lending money or extending credit between the plan and a disqualified person Example: You cannot personally guarantee a loan your IRA uses to buy real estate.
- Providing goods or services between your plan and a disqualified person Example: You can’t use your personal furniture to furnish a rental property owned by your IRA.
- Using plan income or assets for the benefit of a disqualified person Example: Your IRA cannot buy a vacation home that you or your family use.
- Self-dealing by a fiduciary (using plan assets for their own benefit) Example: Your CPA shouldn't loan your IRA money if they’re advising the plan.
- Receiving personal benefit from a deal involving your IRA's assets Example: You can’t pay yourself from profits your IRA earns on a rental.
If a transaction doesn’t clearly fall within the allowed guidelines, the IRS or Department of Labor may review the situation to determine if it qualifies as a prohibited transaction.
Disqualified persons are individuals or entities that are prohibited from engaging in certain transactions with your IRA or 401(k). Doing so could trigger a prohibited transaction, which may result in taxes and penalties.
Here’s who is considered a disqualified person:
- You (the account holder)
- Your spouse
- Your parents, grandparents, and other ancestors
- Your children, grandchildren, and their spouses
- Any advisor or fiduciary to the plan
- Any business or entity owned 50% or more by you or another disqualified person, or where you have decision-making authority
These rules exist to prevent self-dealing and ensure your retirement plan remains in compliance with IRS regulations.
(Reference: IRC 4975)
Understanding and following these rules can be tricky, but it’s very doable. The best way to stay compliant is to work with professionals who specialize in self-directed retirement plans. They can help you navigate IRS guidelines and avoid prohibited transactions.
If an IRA holder is found to have engaged in a prohibited transaction with IRA funds, it will result in a distribution of the IRA. The taxes and penalties are severe and are applicable to all of the IRA’s assets on the first day of the year in which the prohibited transaction occurred.
Yes. While self-directed retirement plans allow for a wide range of investments, there are a few important restrictions.
You cannot invest in collectibles or life insurance contracts, and you must avoid prohibited transactions—activities that benefit you personally rather than the retirement plan. These include things like buying or selling property to yourself or family members, using plan assets for personal gain, or self-dealing in any way.
Violating these rules could cause your entire IRA to lose its tax-advantaged status. To protect your account, it’s essential to work with professionals who understand IRS regulations and can help you stay compliant.
This is a common misconception. In many cases, professionals may simply be unfamiliar with self-directed retirement plans, as they fall outside their usual scope of work. CPAs and tax preparers are trained to file taxes, not necessarily to advise on alternative retirement strategies. Financial advisors and brokers often work for firms that focus on traditional investments like stocks and mutual funds—and may not benefit from or support alternative options like real estate or private lending.
Self-directed retirement investing is legal under IRS rules—but like any specialized area, it requires working with professionals who understand how it works.
The IRS has rules in place to make sure your IRA is used only for the exclusive benefit of the retirement account—not for personal gain or to help family members. These rules can get complicated because there are many ways a conflict of interest can occur, even unintentionally.
For example, if your IRA buys a house and rents it to your mother, you might be reluctant to evict her if she stops paying rent. That emotional connection creates a conflict between what’s best for your IRA and your personal relationships, something the IRS aims to prevent.
These rules help ensure your retirement account stays compliant and protected. (See IRC 408)
Yes. Most tax-deferred retirement accounts—such as Traditional IRAs, old 401(k)s, 403(b)s, and TSPs—can be rolled over into a self-directed IRA or Solo 401(k), depending on your eligibility. Roth IRAs cannot be rolled into these accounts.
You can contribute directly from earned income, subject to annual IRS contribution limits. The method and amount depend on the type of plan you have (e.g., Solo 401(k) vs. IRA).
To take a distribution, you'll request funds through your custodian or plan administrator. Distributions may be taxable depending on your account type and age. Early withdrawals may be subject to penalties.
For 2025, the Solo 401(k) max contribution limit is $81,250 if age 60-63, $77,500 if age 50-59 or 69+, and $70,000 if under 50. Traditional and Roth IRAs have a limit of $7,000 ($8,000 if age 50+). Limits are subject to IRS adjustments.
Yes. IRA contributions are typically due by your personal tax filing deadline (e.g., April 15). Solo 401(k) contributions follow your business tax filing deadline, including extensions.
IRS reporting requirements vary depending on the type of self-directed retirement plan you have. Here’s a quick breakdown of what you need to know
Please note: Our team can help you understand what’s required for your specific account, but we don’t provide tax or legal advice. We always recommend working with a qualified tax professional to ensure full IRS compliance.
Self-Directed IRA (Traditional or Roth)
- Form 5498 – Filed by your custodian each year to report contributions, rollovers, and the fair market value (FMV) of your account.
- Form 1099-R – Issued if you take a distribution or move funds out of your IRA.
- Annual Valuation – You'll need to provide updated FMV for any alternative assets held in the account, such as real estate or private placements.
Solo 401(k)
- Form 5500-EZ – Required if your plan assets exceed $250,000 as of year-end. Must be filed annually by the plan participant.
- Form 1099-R – Required if you take a distribution or roll funds out of the plan.
- Contribution Tracking – Keep records of employee and employer contributions. These are not filed with the IRS but may be needed for tax reporting or audits.
SEP IRA
- Form 5498 – Filed by your custodian to report contributions and FMV.
- Form 1099-R – Filed by your custodian. Issued for any distributions.
- Employer Contributions – Must be reported on your business tax return (and on employee W-2s, if applicable).
Health Savings Account (HSA)
- Form 5498-SA – Filed by your HSA custodian to report contributions.
- Form 1099-SA – Filed by your HAS custodian. Issued for any distributions.
- Form 8889 – Must be included with your personal tax return to report contributions, distributions, and how funds were used.
