Have you had thoughts and dreams of becoming the next big real estate mogul? Or maybe you just want to keep it modest and simply invest in turnkey rental properties, maybe to pack your retirement years.
Whatever your dream is, taking the first step means doing research – a lot of research. Let’s begin that research right here, learning why investing in a turnkey rental property is a better investment than flipping homes.
Turnkey rental properties are generally fully renovated homes, commercial or apartment buildings that are move-in ready. These properties allow investors to purchase them and immediately turn around and rent them out.
Now, just because this company has refurbished the property and filled it with renters and provided you with a property manager, doesn’t mean you should skip the inspection process before purchasing. Especially for those areas that are the heart of a home, commercial and apartment building – like the roof, furnace and a/c units, plumbing, etc.
One of the Biggest Advantages of a Turnkey Property
Probably one of the biggest and best advantages of purchasing a turnkey rental property is that there is no remodeling that must be done. Oftentimes these properties will be fully rented, or at least partially rented, allowing you to start bringing in the cash flow.
Purchasing a property to flip will mean having to do a thorough inspection, making a list of necessary repairs, doing the repair work and listing the property to be sold – which can take time.
While purchasing a property that is fully remodeled is a huge advantage, it’s not the only advantage. Turnkey rental properties are usually sold by companies that specialize in restoring properties.
And when it comes to managing the property, you don’t have to worry about whether you know how to fix a leaky sink or a furnace that won’t run. You also don’t have to take the time to find a qualified manager to do the work. A turnkey rental will provide your property management services so you don’t have to even think about all the problems that could come your way.
You will be charged a fee for this service, but you’d have to pay a salary and insurance to one that you hire on your own, so it’s advantageous to go this route. Especially if you purchase a rental property out of state.
And oftentimes turnkey property companies will provide the buyer with a warranty that covers any defects in the plumbing, walls, roof and the like, which is usually repaired at no charge during the warranty period. Although you may find that the repairs will be required to be completed through the company’s general contractors. Any repairs that are found after the warranty period has expired, will be completed by the company’s contractors and you will be billed for only the repair costs.
The Turnkey Property Purchase
While purchasing a turnkey rental property can provide you easy income, it’s still very important that you research the property (and the company selling) that you are interested in thoroughly.
As you look to invest, it’s obvious that you want to do so in a market where the prices are steadily increasing. Actually, it’s quite difficult to find turnkey rentals in areas that are experiencing bad market growth. But you should still be aware of this fact and do your research accordingly.
Let’s not forget about one of the other largest advantages of turnkey properties – the tax breaks. Investors are motivated by the tax deductions they can receive on operating expenses, which includes:
- Mortgage interest
- Property management fees
- Property taxes
There are Internal Revenue Service (IRS) guidelines that you will need to get familiar with. Be sure to hire an experienced accountant and attorney to consult with so you don’t find yourself in IRS trouble.
If you decide on an out of state rental property, you could be looking at better returns if you purchase in the right area. But again, be sure your lawyer and accountant are experienced in those states’ rules and regulations as well.
When it comes to purchasing a turnkey rental investment, the options available to you are limited compared to purchasing a property to flip or refurbish and rent. That’s because you won’t find turnkey rentals available in your favored market.
But, out-of-state turnkey options can provide an easy real estate investment – especially since property management is not your concern. That’s what makes this type of real estate investing so beautiful. You don’t have to have experience, huge amounts of cash – heck you don’t even have to be in the same state as your investment.
Truly anyone can become an investor in real estate and begin your own game of monopoly. Think about what that will mean for your retirement. And while there are always inherent risks when investing in real estate, turnkey rental properties can be a promising option. Especially for those looking to invest without having to deal with the issues that being a landlord brings.
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