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December 3rd, 2017 by Marco Santarelli
Want to become a landlord and enjoy a passive rental income from your investment property but don’t know how, or are unable to invest time in renovating and finding the tenants for your property, then buying a ‘Turnkey Property’ might be the best solution for you.
There are a lot of different ways to invest in the real estate market. You can passively invest in REITs, do fixing and flipping or wholesaling, own rental properties, and indulge in all sorts of other investment opportunities in the passive real estate investing sector. Like any other real estate asset, a turnkey property can be easily acquired, and the process is similar to purchasing your own single family house or a condominium.
What is a Turnkey Property | Turnkey Property Definition
A turnkey property is a term often used for a real estate investment property, which has already been renovated before it’s put on the market, is ready to move in and can be immediately rented out. The definition of a turnkey investment property can be simply put as a potential income producing property because it has already been fully rehabbed, usually by a specialized turnkey real estate company, and can be put on a rent for a passive monthly income.
Investing in a Turnkey Real Estate іs а sіmрlе соnсерt іn whісh thе іnvеstоr buуs, rеhаbіlіtаtеs, аnd thеn rеsеlls а рrореrtу аt а рrоfіt. Тhіs іs аlsо knоwn аs “flірріng” а hоmе. However, you can also buy and hold a turnkey rental property and enjoy a passive rental income from it. Тhіs рrосеss can also hарреn rеmоtеlу, if thе іnvеstоr rеmаіns іn hіs оr hеr оwn hоmе, sоmеtіmеs іn а lосаlе whеrе flірріng dоеsn’t mаkе sеnsе, аnd utіlіzеs the services of a real estate investment company like “Norada Real Estate Investments” tо fіnd аnd іnvеst іn turnkey real estate investing орроrtunіtіеs. Тhе gоаl hеrе іs tо mаkе thе рrосеss оf іnvеstіng іn rеаl еstаtе аs еаsу аs роssіblе, sо аll thе іnvеstоr hаs tо dо іs flір а swіtсh оr “turn thе kеу.” Many real estate investment companies are there in the US that specialize into restoring the old properties and also provide services to investors minimizing the efforts of the buyers to convert the property into a rental one.
What are the Benefits of Investing in a Turnkey property
Real estate always shows the prices getting higher, but the stats have shown that in U.S., for a long-term period, buying a property has been cheaper than a renting one, that is where the opportunity has generated for the investors, who have been thinking about stepping into the real estate investment in the form of Turnkey Property. In recent years in the U.S., the Turnkey Property Investing has become a trend in the passive real estate investing sector.
How Investing in “Turnkey Property” Helps Real Estate Investors
Turnkey properties have become more popular in the investors who cannot find the affordable properties where they are based, like New York City. Such people prefer to buy the properties in more affordable markets in order to generate more cash flow month after month. As good as it sounds, you should know if the property is of a good value. Before sealing the deal, as real estate investment experts’ advice, you should always visit the turnkey property personally, even if you have to fly to another city. Property management companies would dazzle you about how spacious the living room is and the house or an apartment is fully renovated, but you should check the property for its modest features like the roof and furnace and make sure they are in the good shape.
How to Buy a Turnkey property
A turnkey property investment will provide you a passive rental income which would require you to look into houses or properties that could house a number of families as tenants. These houses could be rented out. However, this kind of investment may have drawbacks since the property may end up with bad tenant or without any tenant at all. If managing your turnkey rental properties is not your cup of tea, then you could try getting a turnkey real estate investment company. They would be managing the property for you in exchange of a percentage of your tenants’ monthly payments. Many turnkey real estate investment companies specialize in restoring old properties and may provide other services to investors like renting out the property and checking up for its maintenance, so you should be really careful while deciding to go with any property management firms.
You do not want a turnkey investment company, which is slow at handling any maintenance and repair problems that would occur and cannot find the tenants to replace the tenants, who leave, in which case the vacancy rate would drastically affect your annual ROI. Usually turnkey property management companies provide maintenance and repair services for the properties like lawn care, frozen pipes, elevator breakdown, broken garage doors and the investor need not worry about these daily operations. Before sealing the contract with any property management firm, you should know:
Why Invest in Out of State Turnkey Properties?
You should invest in out of state turnkey properties because of the simple fact that the best real estate opportunities are not always found in your neighborhood or local market. With over 400 markets around the United States, some markets become more favorable than others as they transition through their individual market cycles. That means that at any given time there will be markets that offer you better opportunity in terms of cash-flow and/or appreciation potential. You could find an out of state turnkey property investing opportunity with lower prices, higher and better returns and better cash flow.
Where to Find Out of State Turnkey Properties?
The first thing you need to do is identify what markets you want to get into. If you are novice real estate investor, you must consult a turnkey real estate investing adviser. They can guide you in choosing the best possible markets and connect you with the best turnkey property sellers there. Be watchful as a few people simply toss the word “turnkey” around. Some are simply rookie agents who would tell you that the property does not need any repair work and is move in ready, and then will dump you on to a property management firm when they profit off of the deal.
Therefore, you must do a research on the internet to find the best turnkey real estate investment companies like Norada Real Estate Investments. You can bookmark the top rated turnkey real estate websites and go through the information they have provided.
You should choose only those companies who have been in the turnkey property selling business for at least one decade or so and have ample amount of positive reviews in their kitty. Search for “turnkey investment company reviews” and read them very carefully. If you find any negative review about a company, you should try to contact the reviewer as well as the company and find out what went wrong in that deal. Be very upfront in this regard as you are putting your hard earned money in that investment. Any wrong move in turnkey real estate investing can result into negative cash flow and you may have to sell the property without making any profit at all.
10 Hottest Real Estate Markets For Investment Properties in 2018
Read on to learn about the 10 hottest U.S. real estate markets for 2018. Here you will find the best turnkey rental properties for sale in America’s 10 Hottest Real Estate Markets for 2018. You will get the real estate marketing trends for 2018. Information about the current US housing market statistics. Existing home sales historical data for major US cities. An in-depth real estate market analysis report for top cities in the US. A 5-year forecast of property evaluation, pricing, growth and employment rate for the 10 hottest and emerging real estate markets.
For these 10 hottest and emerging real estate markets, Norada Real Estate Investments is the pioneer company which sells fully rehabbed turnkey properties at 20% less than the market price.
Atlanta Investment Properties For Sale
Beautifully rehabbed single family homes and townhomes in various and nice communities in and around Atlanta, Georgia. All these Atlanta investment properties for sale have new roof, A/C, paint interior and exterior, flooring, appliances, fixtures, and major yard clean-up. The Atlanta turnkey properties are pre-analyzed with solid ROI. Atlanta is home to one of the most highly sought after turnkey real estate investment markets in the U.S. Buy Properties 20-50% Off Retail. The best source for Atlanta real estate investors to find great discounted off-market properties.
Memphis Investment Properties
The best place to go for real estate investing in Memphis, Tennessee. You will get completely renovated turn key Memphis investment properties. Norada Real Estate Investments provides real estate investors with opportunities to maximize their return on investment with the best Memphis investment properties. You will get fully renovated single and multi-family tunrkey properties in Memphis, TN.
Dallas Investment Properties
You will find the best neighborhoods to buy an investment property in Dallas. Norada Real Estate Investments provides rental Income Protection for Dallas Investment Properties. They provide highlights such as Market Overview, Market Analysis and Economic Analysis with a forecast of 5 years.
Chicago Investment Properties
The best source to search for the hottest investment properties in Chicago. Chicago is the United State’s third most populous city and home to about 3 million residents. There are a lot of benefits to owning Chicago Investment Properties. All turnkey properties are off-market, pre-analyzed and rental ready.
Houston Investment Properties
Norada Real Estate Investments gets you the best Houston Investment Properties at 20% discounts. Houston is one of the nation’s strongest housing markets. You will get fully rehabbed turnkey properties managed by professional property management companies.
Tampa Investment Properties
Fully rehabbed and rental ready Tampa investment properties. Norada Real Estate Investments provides you the best market of rental ready and tenant-occupied and single-family rental homes in Tampa, FL.
Investment Property For Sale San Antonio TX
Your exclusive access to the best investment properties for sale in San Antonio TX. The turnkey investment properties are fully renovated and located in the areas with a strong & steady real estate market.
Kansas City Investment Properties
Norada is the Kansas City`s leader in the turnkey real estate investing and a premier provider of fully rehabbed investment properties in Kansas City. They specialize in finding and offering deeply discounted turnkey properties for a passive real estate investing.
Charlotte Investment Properties
Charlotte properties have a high rate of return. Investment properties in Charlotte that you can use as rental properties offer an excellent source of cash flow for your passive real estate income.
Palm Bay Florida Rentals
Great deals on recently listed investment properties in Palm Bay. Pre-analyzed and fully renovated Palm Bay Florida Rentals with a solid annual ROI.
How To Finance Turnkey Investment Properties
Though it sounds like a great way to generate extra revenue, financing for the turnkey property can be an expensive affair and often it would be difficult to get enough cash flow from the turnkey property itself. In real estate trying to buy a turnkey property with less than 20 percent of the value as a down payment can be a difficult situation. Raising that kind of liquid cash can be difficult if your assets are either already tied up in your home (mortgage), or if you don’t have any assets at all.
So before buying a turnkey property and renting it out, the investor should be prepared for the surprises like a natural calamity, moving out of tenants, sudden hikes in property taxes and accidents like fire, falling of a tree. Investor should always have an extra cash to deal with these sudden changes.
Investor can take a loan from the moneylenders or the banks to finance a Turnkey Property. If your credit rating is very good, you can take the full advantage of getting a loan amount equal to 100% of the value of the house from your bank. However, if you pay down less than 20% of the home’s purchase price, then your lender will require you to pay for private mortgage insurance (PMI). Your lender will often offer you a lower rate if you can make a higher down payment and vice-versa. Typically a down payment ranges from 5% to 20%.
What is Loan-to-Value Ratio
A loan to value (LTV) ratio is a number that describes the size of a loan compared to the purchase price of the property securing the loan. Lenders and others use the ratio to understand how risky a loan is, and it can be used for approving loans or requiring a private mortgage insurance (PMI). Your loan-to-value ratio (LTV) indicates how much you will owe on the property after your down payment. The higher your down payment means lower your loan value and a lower LTV as well. If your down payment is lower than 20%, your loan-to-value ratio for conventional financing will be higher than 80%, and your lender may require you to pay private mortgage insurance.
If $200,000 is the purchase price of the property and you have $40,000 for a down payment, then you need a $160,000 loan amount to meet the $200,000 purchase price. Your LTV = $160,000 ÷ $200,000 = .80 x100 = 80%.
An LTV ratio helps lenders evaluate risk because the more they lend, the more risk they’re taking. A higher LTV ratio suggests more risk because the assets behind the loan are less likely to pay off the loan as the LTV ratio increases. Higher risk for the lender means they will charge you more interest rate and you need to pay private mortgage insurance (PMI) as well.
Why do lender’s lend up to 80% (or less) of the property’s value? Well, it is because they can sell the property at less than top-dollar to recover their funds at an REO auction.
You must remember that you need to payback your loan in EMIs, and for a positive cash flow you should be able to deduct your EMIs as well as property management fees from your monthly rental income and save some amount as well. Otherwise it can be a negative cash flow. It is a simple Mathematics. Right?
According to the figures from the usbank.com in January 2017, for 10-year fixed rate mortgage the interest rate is 3.625%, for 20-year fixed rate conventional mortgage, average interest rate is 4.125% and for 30-year fixed rate mortgage, the interest rate is 4.25%. Your turnkey real estate investing advisor will help you in getting your property financed through banks or private money lenders.
To analyze a turnkey property and do your calculations, you can use DealCheck: Rentals, a powerful app developed for this tedious task. You can easily calculate cash flow, Cap rate and ROI using this app.
What are the different types of mortgage options available for home buyers
A fixed-rate mortgage means your mortgage interest rate and your total EMI of principal and interest will stay the same for the entire term of the loan. Your EMI will not increase or decrease.
Adjustable-rate mortgages have an interest rate that may change periodically depending on changes in a corresponding financial index that’s associated with the loan. Therefore, your EMI will increase or decrease if the index rate goes up or down.
Alternative mortgage options
Some eligible homebuyers or investors may qualify for a FHA (Federal Housing Administration) or a VA (Department of Veterans Affairs) loan. These loans tend to allow a lower down payment and credit score when compared to conventional loans. These two options are most popular among the homebuyers in the US. FHA loans are government-insured loans and VA loans are offered by VA-approved lenders. For example, Bank of America is both FHA and VA approved lender.
What Are the Benefits of Buying a Turnkey Property
On the other hand, if the investor itself buys an old property, they need to look into everything from finding a team for renovating the house or an apartment, fixing the damaged roof and broken doors, finding the tenants, meeting and bargaining with them and sealing the contract. Not to mention the investor will have to check for the maintenance for the rent out property and also will be responsible to attend to the complaints of the tenants.
Turnkey Property Management | How to Find a Reliable Property Management Company
You must have realized that to buy a turnkey property you need to contact a turnkey property management company, and that is why it is inevitable to find a proper seller to invest in a turnkey property. While we discussed some of the points regarding what you should know about the turnkey property sellers under the section “How to buy a turnkey property” of this article, here we will focus more on the more important aspects like a rental agreement, workmanship, ownership etc.
Most turnkey investment companies sell the house to an investor, and the investor will be the sole owner of the turnkey property, but sometimes turnkey property management firms create a limited liability company and ask the investors to become a general partner of it. This is because they want to stay in title to make things easier. Whenever there is a repair to do or the regular maintenance operations to take care of, they would not need the investor’s permission every time to do so for every small thing. But on the contrary it may cause a big headache for the investor, so one way is to open a separate account for the repair and maintenance of the property that the turnkey property management firm can access while the investor will be the sole owner of the property. Second important thing while selecting a turnkey property seller is to check if they provide:
Before going further, talking to the existing clients of that turnkey property selling company who have made a deal with them in the same neighborhood, and knowing their strengths and weaknesses is also important in order to make “buying a Turnkey Property” a successful investment for yourself. Тhеrе аrе immense bеnеfіts tо a turnkеу rеаl еstаtе investing, аnd іt саn dеfіnіtеlу bе аn аttrасtіvе саsh flоw strаtеgy for novice buyers.
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