What is a Turnkey Rental Property?
A turnkey rental property is a defined differently depending on who you ask. It can be a property that is selling that is basically move in ready. You will find many wholesale investors and agents advertising “turn key rental” properties for these vacant properties in strong rental markets. I think of a true turn key rental as a property that has been made move in ready, has a tenant and property management in place. When you buy a property that meets this standard of turnkey you bypass several obstacles to making your desired Returns including: finding a tenant or vacancy, passing occupancy inspections, having systems in place to manage tenants and collect rent. A true Turnkey rental should quickly be an income producing asset.
10 Reasons to buy Turnkey Rental property
You should be buying Turnkeys in your backyard and Across the Country. You need to know the market in which you live and the market you plan to invest. If you live in an area that is prone to cyclical market swings with big ups and sudden crashes it is very easy get drawn into the idea that you can make a quick profit by buying low and riding the waves up and selling or timing the market. I advise individuals drawn to this type of investing buy in these areas with caution and invest a chunk of profits in linear cash flow markets to build long term wealth. If you identify your market as a linear market with more steady appreciation in real estate prices buying turn key rental property locally may make sense.
- Turnkey Rental Properties Provide cash flow from the day you buy them: The first day you buy a turn-key it will have a tenant in place paying rent. You don’t have to plan a rehab or find a tenant.
- It is less work than a normal rental: Turn-key properties are already rented, already managed and repaired. You don’t have to find contractors, property managers, inspectors, agents, or tenants.
- Turnkey Rentals are Easy to find: You can find and buy a turn-key property very quickly from a turn-key provider. Turn-key companies can have a large inventory of turn-keys because they are providing cash flow and providing them a steady return on their money while they own the properties. It is important to select a trustworthy provider. To purchase turn key rentals in St. Louis Click Here.
- They Provide an above average return: Most turn-key rentals provide returns from 10 to 15 percent or more. That return begins right away and usually takes very little work to maintain, because a property manager takes care of the house for you.
- Provide diversification: Buying turn-key rentals gives you diversification in your portfolio.
- Provide diversification: This is not a typo or repeat, after you build a portfolio in one city we suggest you invest in another to add even more diversification to your portfolio and to your real estate. Even if you started in your backyard, we suggest expanding your portfolio to 2-3 markets depending on the number of properties you own. Don’t spread your resources too thin, around 5-100 properties per market would be ideal. As in your own backyard, the key to your success will be a reliable property manager.
- Can be bought for cash: It is often difficult for foreign investors buying properties, to get financing. Turn-key rentals can be as cheap as $30,000 making it easier to buy with cash.
- You can invest your existing retirement savings: You can invest a self-directed IRA or 401k into turn-key rentals. I discuss this with Patrick Hagen of the Entrust Group on the Plan Prepare Invest Podcast. Listen Here (https://bit.ly/SelfDirectedIRAPodcast) for more details
- You maintain control over your Investments: An often overlooked benefit of owning turnkey rental property is you have a great deal of control over them which increases over time. You choose the location of the properties, the actual properties, the property manager, how much rent to be charged. Unlike the investing in the stock market where you have no control over the company you are invested in or the price the shares of stock will trade for.
- They can help Decrease your tax bill: By owning rental real estate you are opening up a large variety of tax deductions. Rental properties can decrease your taxable income while increasing your actual income. (Please consult with your CPA before making any investment decisions.)
Where should you buy Turnkey Rentals?
The best place for a new investor to start looking for turnkey rentals in in their own backyard. One must do some research and decide if good rental properties are available near you. There are two things that weigh most heavily on determining if an area is a good rental area. First, the type of market the city is in, mentioned earlier we suggest looking for linear markets. Second, you must determine your desired return for your rentals. If you are searching for property in your area and find the average prices around $250-300K and will generate $1200-1500 in rent you are looking at around a 6% (return before expenses on the upper end). In this case it would make sense to invest for cash flow in a more cost effective market like Memphis or St. Louis. Here in St. Louis we can expect to purchase a turnkey rental in a decent area for around 35-65K which will generate $900-1200 in monthly rent or a 22% return (before expenses on the higher end).
The bottom line is turnkey rental properties are a necessary addition to your rental portfolio. First, determine an area that makes sense for your portfolio and find a reliable provider. If you are looking for a provider in the Midwest please complete the form HERE (https://bit.ly/DiscountProperty) or call us at : 314-492-3833 Ext 007.
Discount Property Investor is focused on providing bargain priced investment property to Real Estate Investors. As well as top notch advice on managing rental property and rehab or fix and flip projects. If you're looking to buy rental property deals below market value. Or income property for sale at a discount check out our current selection in the properties tab. Buy property the Discount Property Investor way!