Your Guide to Purchasing Your First Turnkey Rental Property
Are you interested in generating more money by working smarter, not harder?
You can't find a better industry than real estate. Specifically, a turnkey rental property that is already fully renovated and thus available to rent out.
This can be an excellent investment–but how do you go about getting one?
We've compiled a guide on buying your very first turnkey rental property. That way, you can start making passive income this summer.
Let's get started!
Select an Investment Market for Your Turnkey Rental Property
If you are serious about finding a turnkey property, it's critical to do research on the best market in which to invest.
For instance, are you thinking about purchasing a rental property in a municipality with a declining population? It's time to revisit your idea. Your best bet is to focus on cities that are on growth trajectories.
Also, if you plan to purchase multiple turnkey properties over time, try to stick with one city at a time.
Once you find a city worth investing in, look for a few solid turnkey properties there before jumping into another market. This will give you the opportunity to master and maximize each market where you claim a stake.
Figure out How You Will Make Your Property Purchase
This is one of the most important steps you can take in acquiring your first turnkey rental property. If you haven't figured this part out, dedicating your time to finding the right future rental property is pointless.
The easiest way to purchase your first turnkey rental property is with cash. Alternatively, you can use funds from your 401(k) plan or Individual Retirement Account. This is especially a helpful strategy for saving on taxes.
Using traditional bank financing to make a property purchase may not be an option with the property provider you have chosen. However, you could still structure lending on your purchase after closing day. The ideal scenario is for you to use a lender who offers cash-out refinances following brief seasoning periods.
If you go the lender route, it's best if you can find a lender with licenses in several states. After all, your investment portfolio will likely need to include several turnkey properties if you want to even think about retiring early.
Having multiple properties in several states is a smart move for the purpose of diversifying your portfolio.
Seek a Legitimate Turnkey Property Provider
Let's say that you have figured out where and how you wish to purchase your first turnkey property. Now, it's time to find the right provider of turnkey properties in your target city.
Note that not all turnkey providers are the same. Some are excellent, while some are downright awful. It's paramount that you look for a provider that has your best interests at heart.
So, what exactly does that look like? The ideal turnkey provider has great properties and wants you to make money from them. The best providers also want to work with you long term.
Look for a provider that has carefully selected its properties with the best rent capabilities in mind. Top-notch providers have properties that are currently being rented or are about to be rented. They are also cash flow positive.
These providers' properties have been assessed to ensure that they are completely functional and comply with the city's building codes. They have also been rehabbed based on high standards.
Neighborhoods, Discounts, and Fees
The best providers' properties are located in stable, solid neighborhoods. Any savvy real estate investor would tell you to stay far away from neighborhoods known to feature high crime and turnover.
In that case, your rental property will likely end up being a bust.
Also, ask your potential turnkey property provider if it offers volume discounts. For instance, some providers may give you special pricing if you plan to purchase five to ten properties and close on them simultaneously. This may not help you right now as you focus on your first property, but it may be a major perk down the road.
Here's another thing to consider. Companies that sell properties off-market shouldn't be charging you commission or finder's fees; so watch out for this.
Once you come across a turnkey property provider who interests you, interview him or her. Make sure that he or she will be the best fit for you going forward.
Take a Look at Your Property Options
So, you've found a top turnkey provider who you're excited to work with. You're just one step closer to claiming your dream turnkey property.
Now, your main focus is on exploring all the properties that your provider has available for sale in your target city. To make your search as efficient as possible, you'll want to come up with a list of criteria for your desired properties.
For example, would you like to stick with a single-family home? Or would a multi-family property work for you, too?
Find out all you can about a target property's rent prices, estimated vacancies, estimated repairs, and tax values. Your turnkey property provider should also be able to give you access to records showing the property's repair and rental activity.
If you're having trouble finding a turnkey rental property that fits your criteria, don't worry. Wait for the right one. Trust us–a good one is always worth the wait.
Enter into a Contract
After you've found the turnkey property gem you've been digging around for, you're ready to get it under contract.
First, you'll need to sign your purchase agreement and attach your earnest money check. Note, though, that not every turnkey provider requires a sizable earnest money deposit. Ask before you make that check out to him or her.
You'll also need to include any addendums you may have. We recommend that you attach an addendum that allows you to quit the transaction process and obtain an earnest money refund. This is in the unlikely event that an appraisal or inspection doesn't meet your requirements.
Get Your Potential Rental Property Inspected
This is a step you can't skip–no matter how great a possible rental property may appear on the surface.
It's best that you order an inspection of the property immediately after handling your purchase agreement. An inspection is critical because it'll reveal if your property has underlying problems that have been covered up with a nice paint job.
Of course, if you choose the right turnkey property provider, this shouldn't be an issue for you. Still, it's best to have your property inspected for the sake of your own peace of mind.
If you don't like what the inspector tells you, you always have the option of walking away from the deal.
Order Your Appraisal
You're ready to order your appraisal only if you're satisfied with the inspection results.
Otherwise, if you purchase your inspection and appraisal simultaneously and you end up walking away from the deal, you would have wasted hundreds of dollars on an appraisal you never needed.
If you proceed with an appraisal and it meets your purchase price requirement, you're ready to begin the next step.
Check out Your Home
If you haven't had the opportunity to see your potential future rental home yet, now is a great time to do it.
Ideally, you want to avoid purchasing a property sight unseen. However, if you're looking for properties in other states, this isn't always possible.
While you're visiting the city of your under-contract property, take time to explore the area in detail and meet your turnkey provider face to face.
This will allow you to see the provider's operation firsthand and determine what other parts of the city may be worth investing in. It'll also enable you to check out other properties you might be interested in purchasing in the near future.
Solidify Your Brand-New Tenants
This is among the most important steps you'll take in your plight to secure your first turnkey property. After all, no tenants = no revenue.
Of course, finding the right tenants is easier said than done. That's where your turnkey property provider comes in.
A top-notch provider should be able to get you some great tenants through its property management company. Ideally, its property management company will offer you a home warranty. This will cover all of the home's major components for one year following your purchase.
Note that just because your turnkey provider has a property management company that it uses regularly doesn't mean you also have to use this company. You can feel free to use any property manager with whom you feel comfortable. Choose one who will work hard to get–and keep–the right tenants in your rental property.
What if you decide to have another property management company help you to secure tenants? Be sure to interview the company about their approach and track record in this area.
Either way, act quickly. Depending on your financial situation, you might want to have tenants in place before your home closing can occur. After all, having tenants already in your home will make your house a true turnkey property.
Ultimately, you want your property to have qualified tenants in it from one month to the next. This will keep cash flowing into your coffers and make life easier for you long term.
Get Ready to Close
It's finally time to close. This is the moment where you can feel free to dance. (Don't worry–we won't look.)
You have so many reasons to celebrate at this point. You've secured a turnkey property provider, a great property, and promising tenants. And now, you're about to get paid.
What more could you ask for?
If your property is in another state, that's not a problem. The title company involved in your deal can send you a notary who will witness you sign the home closing documents.
Before you sign on the dotted lines, review the documents. Ensure that all of the numbers and details therein look correct. Once you sign the documents, you're officially a turnkey property owner.
Time to grab your favorite drink and celebrate like never before!
Payday Is Coming Soon
Closing day is done, which means you can now relax and watch your payments start rolling in.
The best turnkey property providers will make it possible for your rental income to be deposited into your account automatically. That way, you don't have to worry about the hassle of collecting and depositing a bunch of checks on your own.
But don't get too comfortable just yet. You'll also need to be prepared to address any issues/repairs that crop up. Of course, if all goes well, you won't face too many of them.
Life is unpredictable, though. You should always include vacancies and estimated repairs when performing your revenue- and expense-related calculations. And keep some extra cash in the bank available for tackling unexpected expenses, repairs, and vacancies.
Trust us–you will need it at some point in the future.
How We Can Help
We offer opportunities in real estate that lead to high returns–opportunities you simply won't find elsewhere.
We can assist you in acquiring and rehabbing properties, placing tenants, and managing your turnkey properties in a fully systemized way. You benefit by receiving properties at prices that are below market value.
In addition, you'll experience higher financial returns than you'd receive via traditional sources.
Get in touch with us to find out how we can help you to secure your first turnkey rental property this summer. With our industry-leading expertise and resources, you can enjoy passive income in the months ahead and for years to come.