Turn key to financial freedom?

Question

My short term goal for passive income is only $800 per month, eventually I'd like to hit $2k per month.

I'm considering turn key for the lack of risk. Equity isn't as important to me as the passive income I'd receive. Although scalability is a problem.

I have a few questions about the process though.

I hear nothing but good things about Memphis Invest so I would probably go with them first.

This is probably a dumb question but I want to be sure, if I get approved for a mortgage for a property offered by a turnkey company such as Memphis Invest, the monthly mortgage is included in the pre-ROI analysis right? In other words I would not have to pay any fees out of pocket other than the down payment?This would mean the only prohibitive factor for turnkey scalability is the down payment factor?

What are the range of prices I can expect for the rentals they offer? I would aim for a minimum of $200/month ROI.

David Hutson · Answer

@Colin C leamy,Memphis Invest is a great company and as you have heard they are very experienced. I recommend you look at some of their homes and determine the price range you are comfortable with in Memphis. You will need the 20% down plus $4-5k as stated above. That will be good for the first four properties you own and then it will go up to 25% down. It will be difficult to get $200 a door, after management, taxes, insurance, maint and vacancy, in Memphis now for a good home.Starting with turnkey is probably the best for you since you don't appear to have the knowledge or teams in place to rehab homes from local investors/MLS. Down the road, after you learn more and can build teams then I would say you may want to try to to do a non-turnkey home. Message me if you have any questions.

Manish A. · Answer

Colin C leamy - Don’t get disheartened as you can still do it with $20k. Why don’t you start with $80k home in Memphis and you will be fine? Please contact @alcraig70 (Alex Craig) at Turnkey Properties since he has properties in that range and I am sure he will be able to help you.

Caleb Heimsoth · Answer

Colin C leamy let’s connect and I will walk you through the entire turnkey process, especially in Memphis as that’s where I’ve bought mine. I’m a straight shooter and I’ll give you the good, the bad and the ugly of buying turnkey. There’s a lot that could be discussed here but I’ll give you some quick answers. You’ll need 4-5k in closing costs per property after the down payment. So if it costs 100k, that’s 20k down and 4-5 more in closing costs. You can achieve 200 a door put its getting harder. For 800 a month I’d expect that to take 4-5 properties. I believe my email is on my profile if you have any other questions

Tom Ott · Answer

Yes, investing in Turnkey for passive income is a great way to go. It is almost 100% hands-off and can be easy for OOS investors who are not ready to be a full-time Landlord or flipper. Yes, it is more of a long game, so just be prepared for that.Try looking at:5 Things to Consider When Choosing a Turnkey Rental Property LocationandOut-Of-State Turnkey Investing: How to Minimize Your Risks

Scott Kaczmarek · Answer

@Colin C leamy Memphis Invest is a good organization. They buy houses in good areas, they do a solid renovation and their property management and customer service is the best I have experienced. Depending on which market you choose, as they offer 5 markets, the purchase points can vary. In Memphis they will tell you the price range is $100K - $150k, but plan the minimum to be $115K. The conventional lenders I have used all require a minimum down payment of 20%. The only way that I know of with conventional lenders to get a lower down payment is to live in the house for a year as an owner occupant (aka house hacking) which is not realistic when buying from a turnkey provider. In addition to the down payment, you need to consider the closing costs in your capital requirements to get the deal done. This can range from 4-5% of the purchase price. You will receive a proforma from them and it includes their estimate of the cost of conventional financing, management fees, taxes and insurance, but you really need to do your own analysis. Their proforma is based on assumptions they have made concerning interest rates and your actual interest rate may be different. I hope this helps answer your original questions.

Colin C leamy · Answer

I don't understand, how do you get forced appreciation out of a turnkey property? The turnkey companies flip the property before selling it to you.

Lane Kawaoka · Answer

Colin C leamy I have not personally done Memphis for turnkey but did a few other states. Let me know if have any specific questions or looking for input.

Mike D'Arrigo · Answer

@Colin C leamy If you're going to invest in Memphis and want to do turn key, Memphis Invest is a great way to go. I understand why you might want to force equity by doing it yourself however, I think you'll have difficulty doing that if you're cash strapped. You'll not only need the 20% down, but you'll need cash for the renovations and repairs upfront. You don't pay for that upfront with a turn key. Personally, for your situation, I think turn key is the better way to go.

Larry Fried · Answer

@Colin C leamy When buying with a conventional loan (turnkey or not) don't forget to include in the cash needed two items in addition to the down payment:closing costsreserves(held by you) for soft costs - maintenance, vacancy, turnover. You have to be prepared if things go south - such as unpaid rent, eviction, turnover costs, etc.

Rob Hakes · Answer

@Colin C leamyI am a 'turnkey to financial freedom' investor. The advise above looks pretty good. Its definitely a long game and may create the ability to retire early if you are young enough. Real estate offers a lot better returns if you are willing to get your hands dirty and get out there to create your own deals. This is why i like turnkey because it hardly impacts my everyday life if at all. It is just a side hustle to increase the chance of escaping the rat race early.If you are scraping just to get the first down payment (20-25k) then you may be wise to try the house-hack approach to get started. Put 3.5% down on a duplex/triplex and live in the other half. You will need to stay there at least a year but this is the only 'conventional' way to get in with a low downpayment.I started with renting out half of my house. the income on that alone is about the same as my 3 turnkey deals combined. Its a good way to start, and i think there is more potential of gaining equity on your househack deal rather than in turnkey.Good Luck