(To clarify I am NOT talking about getting cheated or bad examples etc. I am talking about a good case where transaction was smooth, house rented without any issues etc)
Hi,
I notice that turnKey properties sell at a premium above the market rate! I looked at TurnKey in markets like PalmBay, Baltimore etc.
1. A TurnKey provider shows a "positive cashflow" with a 225K property that rents for 1500 a month! Based on thumb rules like 1% rule, this is obviously not close. I started wondering how can one openly claim positive cash flow with 0.7% rule!
2. I noticed that few things were slightly upward revised.
a. In a given area, when most houses in less than half a mile radius fetches an average rent say 1400, the turnkey property somehow magically rents for 1700. That changes all the numbers for cashflow calculation.
b. For every 100 dollars additional shown in rent, the property can be charged $10,000 higher to keep the same ratios.
c. In many cases they showed lower maintenance, lower insurance etc..
d. When I discussed with turnKey providers and ask about materials, appliances etc the underlying answer is why do you care when its renting. When I ask about the property is higher priced than market, its always why do you care or why do you say that when cashflow is positive. So I am a bit confused as its almost like "actual property has no significance"
3. In the similar areas, the houses I could find say were $200K (instead of $225 by TurnKey), however the cashflow does NOT make sense because 1400 on a 200K property doesn't flow positive for my calculations.
I know there are lot of great (and genuine) TurnKey providers in this forum (and I am not complaining). I want to learn and my initial analysis didn't seem favorable? I am sure I must be missing something.
Am I understanding things wrong? TurnKey or not, shouldn't the 1% or closer rule still apply. People who successfully invested in TurnKeys in the recent past, any tips or perspectives? If any of you can share actual numbers it would be super helpful.
Thanks!
