Turn-Key rental properties are a great option for investors looking to get more cash flow with less work. They are also a great option for investors who can’t find cash flowing properties in their state and must invest from a long-distance. Turn-key rentals are properties that are fully repaired, rented and managed by a property manager. Buying a turn-key property allows a long-distance investor to buy a property that cash flows with minimal work.
What is a turn-key rental property?
Some consider a turn-key property to be a house that is remodeled and needs no repairs, but it may not be rented. I consider turn-key to mean the home needs no repairs, has a tenant in place and has property management in place. Make sure you and whomever you are talking to about turn-key properties have the same definition of turn-key! If you are investing out-of-state for a turn-key property you want to make sure it is already rented and has property management in place.
What are the advantages of turn-key rental properties?
Here are a few advantages of buying turn-key rentals and why I am buying a turn-key rental. I go into much more detail on each point throughout the article.
- Easy to find: You can buy a turn-key property very quickly from a turn-key provider, because they have a stock of turn-key properties available to purchase. Turn-key companies can have a large inventory of turn-keys because they are providing cash flow and making them money while they own the properties. You do have to know the right turn-key companies to work with.
- Less work than a normal rental: Turn-key properties are already rented, already managed and repaired. You don’t have to find contractors, property managers or real estate agents.
- Provide cash flow from day one: The first day you buy a turn-key it will have a tenant in place paying rent. You don’t have to worry how long the repairs will take or how long it will take to get a tenant.
- Provide a great return: Most turn-key rentals provide returns from 10 to 15 percent. That return begins right away and takes little work to maintain, because a property manager takes care of the house for you.
- Provide diversification: Buying turn-key rentals in different markets of the country gives you diversification.
- Can be bought for cash: Many foreign investors have trouble buying properties, because they cannot get financing. Turn-key rentals can be as cheap as $30,000 making it easier to buy with cash.
- You can invest your retirement savings: You can invest a self-directed IRA or 401k into turn-key rentals.
How can you find turn-key rental properties?
There are many turn-key rental property providers throughout the United States. Some companies are local to specific markets like Memphis, Ohio, Missouri, Florida, Texas, Chicago, Wisconsin and other companies have properties all over the country. Some companies market others properties and are not the actual seller but do help the investor by way of consulting, API owns all that we sell. The properties vary in price, rents, financing options and returns, but a good turn-key property will cash flow. Even with cash flow I would advise investors to spend time researching the area they want to invest in and the property manager, before buying any turn-key property.
How much money do turn-key rental properties cost?
Every turnkey property is different and every location for turn-key properties is different. I have seen turn-key rentals that are repaired, rented and managed range from $35,000 to $100,000 in price. I have not seen turn-key properties in higher price ranges, because it is much harder to cash flow on a higher priced rental property than a lower priced rental property. The lower priced turn-key rental properties usually provide better cash flow and may be a good option for foreign investors who have a hard time getting a loan on properties in the United States.
When would investing in a long-distance, turn-key property be a good idea?
I have many people reach out to me about investing in rental properties, but they do not know how to start because their market is too expensive. When starter homes are $300,000 or more in an area, it is almost impossible to cash flow on a rental property unless you pay cash. When you pay cash your returns are not nearly as good as if you can get a loan (as long as the property cash flows). Rents are almost never high enough on a $300,000 home to cash flow no matter where you live.
The down payments on a $300,000 property are going to be at least $60,000 unless you use a technique to buy with less money down. Then you have to add closing costs, reserves, repairs and other costs associated with buying a rental property. I can buy two or three cash flowing rental properties in my market, where someone in a more expensive area could only buy one rental property that may not cash flow at all. I never invest for appreciation, which is what many people are forced to do in these areas.
If you are in an area with very expensive homes or very low rents compared to home prices, you may want to consider long-distance investing and possibly long distance, turn-key investing.
Diversification with turn-key rental properties
Many people like to spread out their risk when investing and rental properties are no different. If you own all of your properties in one place, it could be riskier if something were to happen to that area. If you have all of your rental properties in one place then the idea of an out-of-state property would provide diversification.
What is the difference between long-distance and long-distance, turn-key investing?
Long-distance investing is simply investing in real estate outside of your local market area. You are still in control of the purchase, the renovation and finding a property manager. If you have a great team that can handle all of these aspects for you, or you are able to travel to handle them yourself this can be a great way to invest. But it takes a lot of time and work to buy a rental property in another state when you have to control the entire process of finding the property, repairing it, renting it and finding a property manager.
Are turn-key rental properties a good option for foreign investors?
Foreign investors can buy homes in the United States, but it is hard for many foreigners to get financing. Traveling to the US, researching markets, finding real estate agents, closing on properties and then repairing and renting properties is very difficult when you live in another country. Turn-key rental properties make it much easier for foreigners or any long-distance investor to invest in rental properties. If you buy a turn-key rental property you might not make as much money as if you did all the work yourself, but the time and money saved will be worth it.
Are turn-key rental properties a good option for self-directed IRAs?
You can invest money from an IRA into real estate, if you have a self-directed IRA. When you use an IRA to buy real estate, the IRA is buying the property and all income and expenses must go through the IRA.
Conclusion
Turn-key rental properties are a great way to invest for cash flow when cash flow is hard to find in your market. Turn-key rental properties are also a way to invest in rental properties without having to repair a house, rent a house or find a property manager.
