What States to invest 100K to 200K?

Question

Hi all,

So, I have been having a discussion with a couple who are looking to invest 100k to 200k.  They haven't been in real estate investing before, so I thought I would suggest the following to them:

-Find a turn-key company that already has homes rented out with tenants and buy those, and just pay the turn key company management fees.

To me, the above seems the easiest way to go about it.  This way, they can have some income and rent a place for themselves to live in.  I don't know it is something feasible though or what State they should go with.  They will probably need 2k to 3k (guessing here) for rent, food, car, shopping, insurance, etc a month.  They are a older couple, and they do have relatives in NJ, MN, and MA so I said that it would be good to get the turn key rental home(s) in the state they are moving in or the one that has relatives already there, but they are open to other states.

What do you all think?  Is the above a good suggestion or am I way off? I don't think they want to be very involved in the management, rehab, tenants and such so the above sounded good to me.  If there are other ways you would go about maximizing income from 200k or maybe even 100k for them in real estate that will yield a income that they can live on monthly, let me know please.

Grant Diggles · Answer

You have several options Jim. Turnkey is a great solution for people looking to build passive income and, if done long enough, to create financial freedom. You can buy Turnkey Real Estate through a couple different options:

1. Buy directly from a Turnkey Operator/Company

2. Buy from a wholesale representative of many Turnkey Operators/Companies

Both options are viable and come with their own pros and cons. Turnkey Companies only have access to the properties they're trying to sell, so your inventory is going to be somewhat limited and only in those areas that the Turnkey Company does business. Wholesalers tend to work in multiple states allowing you to diversify and expand into unrelated markets (spread risk), offer more properties and give creative financial solutions that a single operator may not offer.

Outside of that, you also have strategies to acquire the properties. Your flexibility there depends on how much the investor wants to spend, time frames and goals. You can go with traditional turnkey purchasing (20% upfront), BRRRR method investing (my favorite), or a hybrid of each. There are some very creative ways to stretch 100k-200k to buy several quality properties in a responsible and expedited fashion

Finally, you'll want to consider what each Turnkey Company can offer you. Does the property come with a warranty? How long and what does it cover? Who is managing the property? Them or a third party? What is their process for finding tenants? Etc.

All in all, the business for buying Turnkey has become much better than in the past and has helped many people get into the real estate game, who otherwise may never have.

Hope this helps.

Larry Fried · Answer

I wasn't quite sure if you were saying this couple is, or about to retire or if retirement is a ways off? Turnkey can be a good investment strategy for those who want to remain relatively passive, but it is takes more ongoing managing the manager and other care then people think.  Plus buying at turnkey prices, investors should expect to hold on to the properties for at least 5-10 years, and that simply is not necessarily the best strategy for people already reaching retirement age.

Arpan Patel · Answer

Turnkeys are a good idea and that wasn't a bad suggestion at all. 2-3k a month from 100-200 might be a bit much right away but doable. Key is finding a good company. There are many posts here to help with that. It can be a bit tricky and there is a bit more work in vetting the provider and the asset versus just the asset if you were to do it yourselves. Definitely doable and a solid suggestion

Rolanda Eldridge · Answer

@Lane Kawaoka....Yes!  AL and GA both good options...Looking for good Cash on Cash returns 18-20% ...Good PM companies in the area....

John Woodrich · Answer

For the cash you are looking to invest I think the goals are rather high for someone who wants to be a passive investor.  Remember, you are looking for $2-3k per month in after tax cash flow.  You could lever up, take on a lot of debt and it may work but this may not be a good idea for retirement.

Let's say they don't want debt and can find 3 houses which are rentable for $210,000 ($70,000 each - near impossible in MN right now).  Rental income may be $1100 per month, less insurance of $100, less property taxes of $200, that leaves you at $800 per month or $2400 in cash flow for the 3 houses if you pay no taxes.  That also ignores any vacancy or repairs.  Depending on the market you may also have to pitch in part of the utilities, property manager typically takes 10%, etc.  Your goals are very hard to meet.

In MN, $70k is very cheap and not very feasible in this market without leaving the cities where rental income drops off.  Supply is down and prices are up.

Unfortunately I don't think they have enough money to retire on without levering up or taking on more risk.  You could stretch the numbers a bit in trying to get a couple of duplexes or putting the $200k down on a larger complex

Jim Kline · Answer

thanks all for the help!

Jim Kline · Answer

Thanks for the articles link!  Ok, it looks like I am at least on the right track.  Is your company only for Ohio?

Tom Ott · Answer

That sounds like a great plan! Going with a Turnkey can be a great investments, especially if you go with a good provider that actually owns the property and did the work. Make sure it is just not some agent!

With that price range you can easily find a home in the Midwest. There are plenty of markets around here that are seeing a great boom, but prices are still very affordable to invest in. For example, you can get a home in the Cleveland area for below 6 figures and they will perform very well! It all just depends on where you are looking and who you go with.

Please look at:

How to Find the Right Turnkey Real Estate Investment Company for You

and

The Best Types of Markets for Profitable Turnkey Properties

What States to invest 100K to 200K?

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