Using Turnkey Companies

[Vivek Shah]

Hello everyone, I'm new to the REI world and also BP. I had a question about Turnkey companies. Do they allow you to finance it through a broker or do they want cash up front usually? One of my family members told me that i'll need to have funds available to deploy because most purchases are from auctions that require cash payment. Is that how the turnkey process works? I was under the impression that they actually buy the house for a good deal and then sell it to us. Then we are able to get a mortgage for the home.

Glad to be apart of BP and any advice would help. Im currently deployed and have lots of time to read books, listen to podcasts and research how I want to begin my REI future. Thanks!

[James Wise]

The only times you should be forced to buy a property in cash is if it's so distressed that it won't qualify for traditional financing or if the competition is so intense that your competing with other buyers who are already bidding in cash.

Outside of those two very unique times you should aim to use a lender to buy your properties. Using leverage is the best part of Real Estate Investments. It is something unique to Real Estate. You buy a property using someone else's money (The bank) You then pay off your loan with someone else's money (Tenants Rent) best business in the world. You can't do that with the stock market. You essentially buy 1/4 of the property and someone else pays for the other 3/4's thus you can quadruple your net worth with every purchase if you hold it long enough.

On top of the benefits you receive from being able to use someone else's money to quadruple your net worth buying with financing provides you another safe guard with the appraisal. You see the bank isn't going to let you over pay for a property using their money! This is especially important when you are buying property out of state and may not be that familiar with the market. 

You don't know how many times I assist other investors in liquidating properties that went south. Often times they paid cash for them a few years ago the investment didn't go well & they now want to sell. When it comes time to sell they are shocked to realize that the home they bought for $40,000 cash is really only worth $20,000. <----Don't let yourself get in that situation. Check comps, get an inspection, use a loan & get an appraisal.