When it comes to real estate, you'll find widely divergent opinions about its importance in an investment portfolio of an individual. Investing in a turnkey rental property is among the best investments you could make today in the US real estate market. The value of your turnkey rental property may increase to make it profitable for you to flip it in the future. But having said that, turnkey real estate investing does require a lot of research, planning, and hard work to make the purchase a sound investment.
With turnkey rental property investing you do not buy such properties and hold them until you could sell the properties for profits. You buy them for a passive rental income and expect to get an ROI over the years to come. However, you can always flip a rental property after a few years for a lump sum of profit-making. This article will guide you on how to buy turnkey rental properties.
A turnkey rental property generating positive cash flow can be a great investment to add to your real estate portfolio of income properties. The income is completely passive which means once the deal is over, you get a steady rental income month after month. Contingent upon your location, it may be difficult to locate a rental property that produces month-to-month passive income.
You may likewise find that the most ideal way for finding a decent income-producing rental property is to purchase a fixer-upper, after that do all the rehab needed on your own and lease it out to a qualified tenant. This can be an extremely tedious undertaking and if you have a full-time day job, it will make it much harder to do so. If you are a novice investor, you are bound to make some common mistakes that could lead to a serious downside in the turnkey property investing outcome.
There is a lot of misinformation out there which could lead you to a negative cash flow generation. However, a good aspect concerning purchasing a turnkey property is that it removes a great deal of the diligent work required when needing to get into rental property investment. It will be a rewarding investment if you add turnkey rental properties to your portfolio. Investing in a turnkey rental property can increase your monthly passive income.
Here are some essential tips to help you achieve this investment goal – how to buy turnkey rental properties. These tips have been proven to be productive and rewarding for a passive real estate investment.
CHOOSE THE BEST MARKET FOR TURNKEY RENTAL PROPERTY
If you have your eye on a turnkey rental property investment, it's most common that you live in a place where you can’t find the excellent cash flow meant for rentals. First, you have to locate a city where you can buy in. You must do proper research to pick the perfect market to invest in. For instance, it is not wise to buy a turnkey rental property in a city that has a very low growth rate in population and employment and where property prices have been stagnant for the last few years.
This shows that the real estate is not booming in that city and investing in rental properties entails a serious amount of risk. In the same vein also consider if the city has a diverse economy, has sports and cultural awareness, cheap real estate, and a steadily increasing population. These should all be put into consideration. If the markets are good like the Atlanta Real Estate Market or the Houston Housing Market, you should plan to get about four to five properties in each city.
Read this article for the hottest real estate markets for buying investment properties in 2022.
FINANCE TURNKEY RENTAL PROPERTY PURCHASE
Now, the next step is to get financing. Before you begin your turnkey rental property investment, it is ideal to have a secure means of funding your real estate investment. If you don’t, there is no reason why you should research turnkey rental properties in the first place. If you have all the money needed to buy the properties, then you can skip this.
For most people, this is the most difficult step. You need to find a lender who is licensed in the state you have picked for investment. It is also good to see a lender who is licensed in many states; this is to your benefit if you are seriously considering retiring early with out-of-state turnkey rental properties in your investment portfolio.
For this, you need multiple turnkey properties in your name. Also ensure, you don’t purchase them all in one city, be diverse, and using a multi-licensed lender will make life easier as you will continue to work with them in the future. For more information on things like mortgage options, you must read how to finance turnkey rental properties.
Click on the link if you want to know How To Buy Rental Properties With No Money Down.
FIND TURNKEY RENTAL PROPERTY FOR SALE
Now you that have a perfect market in mind, you also have the right lender; the next step is to find the best turnkey rental properties for sale in that state, and remember to sieve off the craps. You won’t love to work with any turnkey rental property provider that is not reputable, some are bad, some are good or just okay, but some are great.
Find the ones who are looking out for the best for you. Your interest should be your priority here. Find the ones with a lot of positive reviews from recent customers on websites like Yelp, Zillow, Realtor, etc. Look for the best turnkey rental property companies who want to build a long-term relationship with their customers, and not the ones who are just interested in selling whatever is available with them.
If you opt to use the search engine for this then Google, “best turnkey sellers’’, “turnkey properties for sale’’ or “turnkey providers’’. Append your city name to see what will pop up. This will show you the top-ranking turnkey rental property companies like Norada Real Estate Investments. Norada Real Estate Investments helps you by researching top real estate growth markets in the USA and structuring complete turnkey real estate investments, they help you succeed by minimizing risk and maximizing profitability.
You can also go to websites like turnkey-reviews.com. This site lists many turnkey providers and their reviews. Once you have made a choice; ensure you ask the top questions to that turnkey rental property provider. It is essential to know their track record, call their previous clients, and pick investors that have up to 2 to 3 years of experience. In the same vein understand if they offer any rent guarantees and maintenance warranties. These are all critical factors for your investment.
REVIEW TURNKEY RENTAL PROPERTIES FOR SALE
Start checking out all the available turnkey rental properties in their inventories. Make sure the property you want to purchase fits your criteria. You should take the turnkey investment property provider's numbers and calculations for ROI with a grain of salt, and hire your turnkey property investment adviser. Do your research and confirm the rents, taxes, estimated repairs, and vacancies as this is an integral part to avoid later regrets.
You should adequately know if the location is excellent as your research will give you better insights into the price appreciation forecast. Stay away from high crime zones as it will ensure your property doesn’t go to waste. If you can’t find a turnkey rental property for sale which fits this criterion yet, please it will be wise to be patient. Wait for some time or better go to some other market. By any means don’t tie your emotions and love to a single property or market, this is business, and you must stay in a business mode to get the best turnkey rental property deals.
PUT THE TURNKEY RENTAL PROPERTY UNDER CONTRACT
When you have chosen a turnkey rental property that fits your criteria, you will be elated, and the next step is to fan forward and put your rental property under contract. Don’t get your hopes high yet, the journey continues. There are still steps to take, to make your turnkey a grand winner.
At this point, sign the required agreements and addendums you might have with the seller and send off an earnest money check (a warm one). Not all providers or sellers want earnest money, so ensure you inquire before jumping to conclusions. It is wise enough to get a refund on your earnest money if the inspection or appraisal does not meet the requirements. Therefore, your addendum must have this clause in it.
ORDER INSPECTION OF YOUR TURNKEY RENTAL PROPERTY
This is important regardless of what the turnkey rental property provider has told you; you have to do this as soon as the paperwork and agreement have been started. If the property is still in rehab, then you have to wait until it is complete. Many times, the providers put on lip service just to sell their properties, so a complete home inspection will reveal the real facts.
You must hire a licensed general contractor in the state who has in-depth knowledge and specializes in residential home inspections. They will give you a detailed multi-point report describing the condition of the exterior and interior of the property. They will include some specific details (with photos) in the property inspection report. Usually, they will deliver a report to you within 24 hours on rush orders.
TIME FOR NEGOTIATION OF THE PURCHASE PRICE BASED ON THE HOME INSPECTION REPORT
Once the inspection of your turnkey rental property is done, you will have substantial evidence of what is and what is not, at this point don’t break due to the reports. Instead, send out the report to your providers and ask them to fix the issues at hand. In a perfect setting, they should fix this but in some situations, they may not. Even then, try to get them to fix the major issues and if they still refuse then it’s time to back off. It's not the end of the world. It can happen to anyone but hopefully not you. Find a new turnkey rental property deal for yourself and follow the same steps again.
ORDER PROPERTY APPRAISAL AND VISIT THE PROPERTY
Wait and order this after an inspection and repair are done. If the appraisal is not up to the purchase price, then this is also a good time to call it a quit. If all works out well, get acquainted with the city you want to invest in. Visit your turnkey rental property and meet your providers and see what you have in the contract. This can also be done earlier or later. After all these, the other few remaining steps follow suit. These are securing your tenants, closing on your new turnkey rental property, Relaxing, and then waiting for your gains.
FIND TENANTS FOR YOUR TURNKEY RENTAL PROPERTY
A true turnkey rental property provider will find tenants for you before closing the deal. They might also provide you with a Property Management Company. If you choose to use a different turnkey property management company, make sure you interview them properly. You don’t have to use the property management that the turnkey seller provides.
Some of the things you must check before signing an agreement with them:
- Make sure that the turnkey rental property management company you choose has experience in the type of property you have whether it be single family, duplexes, or condos.
- Ask them how long they have been in this business.
- Ask them for the phone numbers of their clientele, and call them for feedback. Do not hesitate in this regard. Their clients will give you a genuine firsthand experience in dealing with them.
- You will also have to check what their management fees are. Usually, it is 10% of the monthly rent.
- How do they screen for qualified tenants? Do they do the background and credit history checks of the tenants?
- How do they calculate the rent value? You can use Zillow to match their rent prices and also see the rent prices of other houses in the neighborhood.
- How do they accept the payments from the tenants? Do they have an online payment system?
- It is better if you ask for it and review their sample contract documents beforehand to confirm they work well for you. You cannot manage your out-of-state turnkey rental properties. Therefore, having efficient and reputable management in place is essential to your investment. It’s in your best interest to interview them and ask all the important questions mentioned above.
CLOSE THE DEAL OF YOUR TURNKEY RENTAL PROPERTY
As you move closer to closing the rental property investing deal, your lender will ask for the final paperwork needed at the request of their underwriters. Make sure to provide all requested information promptly to your lender. A lack of proper documents may lead to the cancellation of your loan. You need to keep your lender happy for future turnkey property investments as well.
You have the clear to close and now an appointment has been set for closing. Now you need a title company that acts as a combined agent of, the buyer, the seller, and any other parties related to a real estate transaction, such as mortgage lenders. The title company reviews the title, issues insurance policies, facilitates closings, and files and records paperwork.
A title company mutually chosen by all the parties will send out a notary to your location to sign all the closing documents. Make sure to review all the final documents very carefully before signing. Now it's time to earn money by collecting your monthly rental income. These are some of the recommended steps you need to take for buying turnkey rental properties.