The Process of Buying Turnkey Properties

The shelter is one of the human’s fundamental necessities. People will always need a place to stay. Therefore, real estate is a great investment. The demand for housing will always be there. As long people are needing a place to stay, real estate will always be significant. In this article, we will focus on the process of buying turnkey properties. We already have discussed some of the different ways of investing in real estate. Investors have varieties of options depending on their interests, capital, location, and skills. We have tackled how to flip houses, becoming a private money lender, investing in self-storage, mobile home parks, and even senior housing.

What is Turnkey Property?

From the term itself, “turnkey properties” are houses or apartment buildings where you will just turn your door key and move right in. Most turnkey properties are fully and newly renovated even before they have been put up for sale. They are purchased from real estate companies that specialize in real estate restoration. Hence, investors can immediately purchase and rent them out. Oftentimes, turnkey properties have tenants already living in the house and a property manager that manages the property. If not, the companies are helping buyers manage the property or offer property management services. In that way, the new owners do not need to worry about the transition. This kind of set-up is helpful for new real estate investors. Also, investors that have the capital to buy properties but do not have time to perform the renovation.

How Investors Generate Income from Turnkey Properties?

Since the property has been prepared for rental, it makes the property available for tenants anytime. The purpose of turnkey properties is to generate income immediately by renting it as soon as the new buyer purchase the property. The shorter the turnaround of the property, the better as the new owner will start seeing a return on their investment.

Is it a great investment?

Are rental properties a great investment? This is a no-brainer question. The answer will always be yes. With rental properties, you get passive income monthly from rent payments. These payments will compensate for the costs and build your wealth at the same time. However, there are factors that investors need to thoroughly study and consider in mitigating risks. To fully understand how turnkey properties work, we will next discuss the process of buying turnkey properties.

Process of Buying Turnkey Properties

Do Your Research

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This is the most important process of buying turnkey properties. Whatever real estate investment you decide to invest to, doing research is a must. You can start your research on the market you want to focus on. In addition, you can also check for the home prices around the area using reliable websites available on the internet. You may also check comparable prices of other properties available in the neighborhood so you can save yourself from overpaying.

Other things you also need to know:

• How much tenants are paying for rent?
• What are the fees that may include?
• How long it takes to fill vacancies?
• Who handles maintenance requests?

Investors need to do the numbers before investing. If the numbers do not make sense, then the investment is not for you. These data and numbers help investors make good decisions. Most successful real estate investors are supported by reliable data.

Find the Right Turnkey Real Estate Company         

As mentioned above, most turnkey properties are purchased from real estate companies. Thus, you need to find the right real estate company that will meet your financial goals and needs. The main reason why investors want turnkey properties is that they do not want to put too much effort into renovating, maintaining, or managing the property. All these responsibilities are handled by the real estate company. These will make or break your investment. So as an investor, you can secure your investment capital by working with a trustworthy company. Perform due diligence, interview at least 2-3 companies, and do background checks.

Finance Your Turnkey Property

The next step is securing your investment property by getting funds. This can be a complicated step especially to those who need financing. You are lucky if you already have funds! In that case, you can skip this.

How to find a lender?

Find and work with a reputable lender that will offer you the best loan term and lowest mortgage rates. If not, you will find yourself overpaying your investment property. Most people do not think of finding a lender as important as finding a real estate agent or insurance company to work with.  A good lender will help you get the loan based on your ability and financial goals. Preferably a state licensed lender.

Visit the Property

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Since you have done your homework on the initial part of the process of buying turnkey properties, you might have filtered the potential properties at this point. So, all you need to do is to visit the property. Doing a walkthrough helps investors get a grasp of the neighborhood and the hidden issues of the property (if there is any). It is highly recommendable to perform a walkthrough with a professional inspector. The inspector’s service will be the investor’s guide if there are other major repairs needed and the current condition of the foundation and important parts of the property.

Negotiate and Put Property Under Contract

Now that you have chosen the turnkey property that matches your criteria, you can then negotiate the selling price with the company you are buying it from. Do not be shy to negotiate the best price terms according to your budget. Once the selling company agrees, the property can be put under contract. Be sure to carefully read the contract and know the terms included in it. Before you get too excited, make sure the inspection and the appraisal meet the requirements.

And finally,

Get the Property Rented

This last step in the process of buying turnkey properties only applies if the property does not have tenants in it. But in most cases, there are already tenants living in the property. A good real estate company will find tenants for the new buyer before closing the deal. Others may even provide a property manager. However, as a new owner, you have the freedom whether to use the property management services offered by the company or not.

DISCLAIMER:

PROSPECTIVE INVESTORS ARE STRONGLY URGED TO CONSULT WITH THEIR OWN ADVISORS PRIOR TO DECIDING WHETHER TO INVEST.

Neither Alpesh Parmar nor Wealth Matters associated claim to be an expert in tax, legal, or insurance strategies. Please consult an expert or advisor.