As Jon indicated, you can include certain purchase costs into the basis.

This indicates an expense ratio of about 33%, which is extremely low unless you're doing the property management and maintenance yourself (in which case, you need to factor that time/effort into your equation).The reason your expense ratio seems so low is that you have just rehabbed a couple units and just started filling vacancies.

Businesses are KEY to sucess.

A key IRS rule is the holding period of the replacement property.

You need to ensure that there is still this profit potential left by the time they take their cut of the deal.For the the most part, I don't trust many of these "turn-key rental" companies, but if you can find one with a good track record -- and if you are knowledgeable enough to vet the deal yourself -- it's possible that these returns are accurate.

I just wanted to resurect this thread becuase Im zeroing in on what this will actually cost me and what type of income it would generate.Roughly it would generate $11,300/mo (4 3bed, 6 2bed, 6 1bed & Im operating on the conservative side for the rent amount).Expenses would roughly be debt service of about $6,600, $900 for property insurance, Its exempt from property insurance for 5 years (renisance zone), $700 in maintenance, and I would do all the property management.We are talking the place from the gutting phase all the way to turn key for a million bucks.

To me, a bad inspection report says "water heater was working at time of inspection with no noted issues" while a good one says "although water heater was fully functional at time of inspection, the serial number indicates it was manufactured in 1997 and therefore may be near the end of its useful life".

You would just ignore the LLC for tax purposes and let the rental income flow through your return.Also, to help with taxes, a key thing you can do is to own more property that you can depreciate.

You didn't indicate how much they owed?

Throw unit occupancy in there for budget and understanding purposes which also will lead to indications of the stability of the purchase price and ownership type ratios.Ethan points out some less controllable events.