Wanting to Invest in TurnKey Properties. Need Advice However

[Abdul R.]

Hello All,

 I am 30 year old male, trying to eventually buy in the CA Bay Area in about 4 years but will need a massive down payment (looking at roughly 160k)). I ran my numbers, my household saves roughly 3,300 a month. so technically in 4 years we can do it. Having said this, is turnkey properties something I should pursue? I say 4 years because eventually we want to start a family and schools in my area are not exactly up to our standards and don't want to rent at that point. 

I found the following deal via buymemphisnow in the 38116 area code at Memphis and ran the following numbers: 

• Purchase price: 75,000
• Down payment (25%): 18,750
• Rent: 850.00
• Monthly Expenses: -268 (mortgage) - 106 (taxes) - 85 (property management fee) – 85 (vacancy, 10% of rent)) – 42 (repairs, 5% of rent) – 50 (insurance) = -636
• Net income: 850 Rent – 636 expenses =
  • i.   214.00 monthly
  • ii.  2,568 yearly
• Cap rate: 5784 (yearly net without mortgage)  / 75000 = 7.7%
• .2568/ 18750 = 13.7% cash on cash return. 

1. Looking at the numbers, I can potentially keep investing in properties such as this yearly until year 4 and net 20,640.00 (1,720.00 monthly), excluding any rent increases. Having said that, should I then do a FHA loan, and use the extra income to pay off the PMI for 800k home (650.00)? Or would it be better to do the "traditional" way and save for down payment via saving from our salaries.

2. With a 214.00 monthly net, I feel like one major repair issue can destroy a year of revenue even with setting aside 5% for expenses. Whats everyone's experience on this? Do I need to add a warranty as well  with the 5%. 

thank you

[Derrick Craig]

@Abdul R.

I think that's a great idea if you are purchasing 4 homes or more to get a bigger discount on purchase price 10-15% discounts is awesome.. But what are we basing the 10-15% discount on List Price or actual appraised price by an appraiser that you FIND/ contact and hire not one the turnkey operator refers/contacts and hires.... I am not sure why BUT for some strange reason those appraisals always come back for more or at list price.... LOL How STRANGE!!! 

ALSO I don't know who wouldn't give you a discount if you purchase 4 homes from them at one time even 2 or 3 homes is enough to give a discount in my eyes.. Because I DEFINITELY would do the same thing that Fshomes is doing it's a no brainer in my eyes!!!