This short article aims to provide information on turnkey real estate investing. Turnkey properties are a great option for real estate investors looking for steady and predictable cash flow without the headaches of property management. A turnkey property investment means buying real estate that has already been renovated before it's put on the market, is ready to move in, and can be immediately rented out.
It is a passive real estate investment with no leg work required to be done by the buyers. Everything is done and managed for the buyers by a turnkey real estate company, which does all the heavy lifting to offer you an opportunity to become a property owner. As a buyer, you are purchasing a turnkey property that is producing a stream of income.
What Does Turnkey Mean in Real Estate?
There are a lot of different ways to invest in real estate. You can passively invest in REITs, do fixing and flipping or wholesaling your rental properties, and indulge in all sorts of other investment opportunities. The easiest option is to buy and hold a turnkey rental property and get a passive income month over month.
Turnkey refers to something ready for immediate use. A turnkey property is a potential income-producing property because it has already been fully renovated and can be put on rent for a passive income. It does not require any repairs or improvements and is completely move-in or rental ready. 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.
As their names suggest, turnkey properties are often sold and managed by a company that specializes in purchasing and rehabbing under-market value properties on behalf of passive real estate investors. A turnkey real estate company identifies an area that has a strong demand for rental properties, locates the property, and renovates it to make it rental-ready.
It then finds and screens tenants, and will typically offer property management services, taking care of landlord activities such as repairs and addressing maintenance issues. It also ensures minimal vacancies to optimize the potential for steady cash flow to you. Your job is to find a trustworthy turnkey real estate company and a quality turnkey property.
You must understand how to review the financial projections of a turnkey property. Investors usually use the 1% Rule to Calculate Gross Cash Flow. The 1% Rule is a quick and easy way to estimate what the gross rent from a property should be. According to the rule, the gross monthly rent from a home should be at least 1% of the purchase price: Property price = $100,000 x 1% = $1,000 per month gross rent. Check out how to do easy cap rate calculation in real estate.
Turnkey investment properties have become more popular for investors who cannot find affordable properties where they are based, like in the New York real estate market. Such people prefer to buy properties in more affordable markets to generate more cash flow month after month.
If managing your rental properties is not your cup of tea, then you could try hiring a property management company. They would be managing the property for you in exchange for a percentage of your tenants’ monthly payments. Property management companies specialize in providing services to investors like renting out the property and checking up on its maintenance.
You do not want to deal with a 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, those companies also 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:
- The experience of the property management firm
- How long does it take to find the tenants
- If they provide monthly statements and keep track of expenses and income
- Fees of the property management firm on which your net ROI depends.
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 in the U.S. specialize in restoring old properties and also provide services to investors minimizing the efforts of the buyers to convert the property into a rental. Тhіs рrосеss can also hарреn rеmоtеlу if an іnvеstоr chooses to buy out-of-state property by utіlіzing the services of a turnkey real estate company.
Benefits of Turnkey Property Investment
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. Тhеrе аrе immense bеnеfіts of a turnkеу rеаl еstаtе investing, аnd іt саn dеfіnіtеlу bе аn аttrасtіvе саsh flоw strаtеgy for new investors.
1. One of the advantages of buying turnkey rental properties is that the buyers do not need to spend time finding a property, renovating the property, and finding the tenants all by themselves.
2. You start getting Cash flow from day 1.
3. The turnkey properties are fully renovated and are ready to move in and the property management companies look into the maintenance and repair of the properties themselves.
4. These property management firms do maintenance tasks like lawn care, elevator maintenance, and collection of rent from tenants.
5. They also attend to the complaints of the tenants like termites, broken garage doors, broken air conditioners, etc, so the investors do not have to worry about these things at all.
6. The property management companies are responsible for finding new tenants within time to replace them once they leave.
7. It is also an eаsу dіvеrsіfісаtіоn оf уоur іnvеstmеnt роrtfоlіо. A turn-kеу rеаl еstаtе іnvеstmеnt саn bе а wіsе mоvе, іf dоnе соrrесtlу. You can іnvеst wisely іn multірlе growth mаrkеts of the US like Dallas, Houston, Atlanta, Memphis, Orlando, Jacksonville, San Antonio, Birmingham, Little Rock, etc., sоmеthіng thаt іs еаsу tо dо sіnсе іt rеquіrеs lіttlе tо nо tіmе оf уоur оwn.
8. Тhе bеnеfіts оf іnvеstіng іn multірlе mаrkеts are sіmрlе: іt рrоvіdеs уоu wіth рrоtесtіоn frоm аn unехресtеd dоwnturn іn аn есоnоmу.
9. Ѕіnсе turnkеу property іnvеstіng mаkеs іt sо еаsу tо hаvе multірlе income рrореrtіеs, thіs іs а very sіgnіfісаnt аdvаntаgе оf this іnvеstmеnt strаtеgу. Іn оthеr wоrds dоn't рut аll оf уоur еggs іn оnе bаskеt. It can become your solid second income source with ROI ranging from 7 to 12% depending upon where the property is located.
10. 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 the property and also will be responsible to attend to the complaints of the tenants.
11. An 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 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%.
How To Find a Turnkey Property For Investment?
Investing in out-of-state turnkey properties is beneficial 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 market cycles. That means that at any given time there will be markets that offer you better opportunities 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. If you are interested in buying turnkey properties at this time, you can choose Houston Housing Market. Houston has everything: the people, the diversity, the business climate, being world-renowned in energy, medicine, space, and manufacturing, and above all a booming real estate market.
The first thing you need to do is identify what markets you want to get into. If you are a new real estate investor, you must consult a real estate investment counselor. They can guide you in choosing the best possible markets and connect you with the best turnkey property sellers. Be watchful as a few people simply toss the word “turn-key” 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 research the internet to find the best turnkey real estate websites and go through the information they have provided. You should choose only those companies who have been in this business for at least a decade or so and have an ample amount of positive reviews in their kitty. Search for “turnkey investment company reviews” and read them very carefully.
If you find any negative reviews 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 into that investment. Any wrong move in turnkey property investing can result in negative cash flow and you may have to sell the property without making any profit at all.
Most turnkey real estate 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 partners of it. This is because they want to stay in the title to make things easier. Whenever there is a repair to do or 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 company can access while the investor will be the sole owner of the property. The second important thing while selecting a turnkey property seller is to check if they provide:
- Full transparency in the financial reports of their properties and immediate access to your information request.
- A real estate CFO specialized in strategic planning in their staff that will
ensure the profit in your every transaction and your long-term success.
Before going further, talking to the existing clients of that turnkey real estate company who have made a deal with them in the same neighborhood, and knowing their strengths and weaknesses is also important to make “buying a Turnkey Property” a successful investment for yourself.
Best Places For Investing in Turnkey Properties in 2022
Here are some of the best places in the U.S. for investing in turnkey properties. These markets are smart for investment because of affordability, population growth, and job growth. No smart investor puts money into a property without doing some due diligence. Location is the most important factor and each city has its good and bad neighborhoods. Best properties are not only located in major cities. This list combines major and smaller cities that are hot and emerging markets for real estate investment in 2022.
1. Atlanta Turnkey Property Investment
Beautifully rehabbed single-family homes and townhomes in various nice communities in and around Atlanta, Georgia. All these Atlanta investment properties for sale have a 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.
2. Memphis Turnkey Property Investment
Memphis iѕ rеgаrdеd as the ѕесоnd lаrgеѕt metro area in thе region. It has developed into a suburban city of detached single-family homes at prices below the national average of the US. You will get completely renovated Memphis investment properties. Memphis turnkey property hаѕ one оf thе best rеnt to price rаtiо in the country. Fоr example, on a $100,000 рrореrtу, thе rеnt will соmе in right around $1,000 whiсh iѕ a 1% rеnt tо рriсе ratio. Thiѕ means that you mаkе a highеr return оn уоur money.
3. Dallas Turnkey Property Investment
You will find the best neighborhoods to buy a turnkey property in Dallas. Dallas has a mixture of owner-occupied and renter-occupied housing units. Dallas-Fort Worth homebuilders started 33,891 houses in 2017, an increase of 4,488 houses or 15.3 percent above 2016 home starts of 29,403, according to a report from the housing analysis firm Residential Strategies.
Dallas is one of the nation’s largest metropolitan areas. With a population of more than 7 million in the Dallas-Fort Worth CMSA, there has been a tremendous amount of real estate development activity to support this growth over the past 65 years. If you are looking to make a profit, you don’t want to buy the most expensive property on the Dallas real estate market and expect to make a good profit on rents.
Perhaps you are looking for a slightly different hold-over, a turnkey property in Dallas that you might move into or sell at retirement in the future! Either way, knowing your profit potential and purpose is the first thing to consider.
4. Chicago Turnkey Property Investment
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. With its low cost of living, relatively large housing inventory levels, and high affordability, Chicago has a large no. of renters. Therefore, buying turnkey properties in Chicago, and renting them out is an excellent choice for real estate investors.
5. Houston Turnkey Property Investment
Houston has been one of the hottest housing markets in the country for years. You can find fully renovated turnkey properties managed by professional property management companies. The Houston metro area offers great opportunities for investors who are looking for a stable market that offers both cash flow and equity growth at a price that is STILL well below their replacement value. Many of Houston’s neighborhoods are some of the most attractive places to live in the whole of Texas, and it’s not hard to see why it is a favorite among real estate investors.
6. Tampa Turnkey Property Investment
Tampa properties are one of the most affordable in the state. It is one of the hottest real estate markets for turnkey rental properties in the nation. There’s a tremendous amount of pent-up demand for entry-level single-family homes in the region. Since 2015, the median home prices in Tampa have appreciated by roughly 55.2% from $160,000 to $248,257, according to Zillow’s data. You can find fully rehabbed and rental-ready turnkey properties in Tampa. The prices of residential properties in Tampa are growing at a fast pace, though they are still affordable compared to other real estate markets in the country.
7. San Antonio Turnkey Property Investment
For those who want to invest in turnkey real estate, San Antonio is an ideal location because of its outsized military presence. Fort Sam Houston is located inside the city limits. Lackland Air Force Base, Randolph Air Force Base, Camp Bullis, and Camp Stanley are located in the immediate vicinity. This means that there is a large population that will almost always rent because they don’t know where they’ll be sent on their next assignment. San Antonio is a fast-growing city that literally cannot keep up with the population growth, keeping rental rates and property values high.
8. Kansas City Turnkey Property Investment
Kansas City is a large, prosperous, self-sufficient, and culturally rich city located astride the Missouri River. In the metropolitan area, the population is estimated at 2.1 million. The median household income in Kansas City is 45,376 and the median home price is $146,300. The BLS reported that the unemployment rate for Kansas City rose 0.1 percentage points in December 2019 to 3.2%. For the same month, the metro unemployment rate was 0.1 percentage points lower than the Missouri rate. while the average home price is $86,000. The median rent is $993, with an estimated $667 monthly net cash flow. It’s no wonder why one should invest in Kansas City turnkey properties.
9. Charlotte Turnkey Property Investment
Charlotte is a hot market for investors whether they want to renovate and flip, buy to hold and rent or invest in multi-family properties. Charlotte's real estate appreciation rate in the latest quarter was around 1.48% which equates to an annual appreciation rate of 5.92%. You can choose to market your home to potential buyers.
Any homeowner looking to cash out and sell off their property should do it in the current phase. It is better to avoid the price decline phase that will accompany the coming correction. Charlotte investment properties offer an excellent source of passive income. They also have a high rate of return.
10. Palm Bay Turnkey Property Investment
The Palm Bay area has an unemployment rate of less than 4 percent, and it is regularly several tenths of a percent lower than the national average. This area is part of the “Space Coast” because it is so close to Cape Canaveral and the Kennedy Space Center. This is why the city has a large number of high-tech employers. One point in favor of owning Palm Bay investment property is the steady stream of people relocating to the area who want to rent before they buy. You can find great deals on fully renovated Palm Bay Florida Rentals with a solid annual ROI.
Never hesitate to call us for your real estate investment goals. Ask us if we have any properties that are coming on the market that you are interested in. Norada Real Estate Investments is a premier real estate investment firm providing investors with quality new and refurbished turnkey investment properties in growth markets throughout the United States. We offer investors fully refurbished as well as new construction residential properties that might be a great investment to add to your portfolio.