Purchasing a Property Up to Current Standards is an Investor’s Secret Weapon to Higher Rental Rates and Returns.
Older homes that are renovated to current standards often yield better cash on cash returns than buying a newer home. However, finding a reputable contractor to complete a renovation, managing the construction, along with finding tenants and property management can mean more time and money than anticipated. What is a turnkey property? It is a fully renovated property that is purchased and can be immediately rented out. Many successful real estate investors prefer turnkey properties for quick cash flow. The BRRR model (Buy, Renovate, Rent, Refinance, and Repeat) can work flawlessly when paired with the right group of investment professionals. You get all the benefits of a turnkey property without the hassle of managing the renovation.
Turnkey properties provide quick cash flow opportunities for investors.
The popularity of turnkey properties grew following the housing crisis of 2007-2008. With trust in homeownership at an all-time low, many families opted for rentals. As such, investors began purchasing turnkey properties ready for tenants to move in immediately. They have remained a standard real estate investment strategy, especially in emerging markets where a fast turnaround is possible. Moving into a fully upgraded home is appealing for tenants, leading to low vacancy rates. The quicker the investor is able to rent the property, the sooner they begin seeing a return on the investment. The term can apply to move-in ready residential sales. However, experts in the industry use the term “turnkey properties” to refer to an investment opportunity dealing with the purchasing of renovated housing for rentals.
With Turnkey properties, investors can take advantage of lucrative real estate opportunities remotely.
One of the huge benefits of turnkey properties is the way they are managed. Many turnkey investments are set up with a management company that takes care of the day-to-day maintenance of the rental. Without having to be onsite, an investor gets all the benefits of sustained cash flow without the time and effort of dealing with the stresses of being a landlord. Additionally, investors are able to take advantage of real estate markets that they otherwise would have avoided due to distance.
Turnkey property companies can utilize economy of scale pricing to increase investor returns further.
While it may be tempting to invest in residential real estate solo, when it comes to turnkey properties, it tends to be a better financial decision to work with an investment or management firm. These firms have access to better pricing on everything from contractors, appliances, and on-site employees. You can significantly reduce your expenses and increase overall returns, particularly when you are looking for oversight as a remote investor. Matthew Friz, a real estate investor and wholesaler from Bigger Pockets shared some insight into why turnkey property companies are an excellent option for real estate investment.
“Some of the companies purchase the property and renovate it up front, which saves you as the investor from having to find renovation contractors or do the work yourself. This ultimately cuts down on maintenance repair issues from the start and turn-over costs in the long run.”
With all renovations and management handled, all you need to do is decide whether to move forward and enjoy the passive cash flow from your investment.
When purchasing any investment property that needs extensive renovation or construction, the right support is necessary.
When you purchase any property that isn’t move-in ready, you will need the right support to take advantage of an excellent investment opportunity. Finding tenants for a turnkey property can be easily in a high-demand rental market. Getting a home into the right condition takes the right support. There is nothing worse than finding the right property that is in a high-demand rental market and having to wait an indeterminate amount of time to begin seeing a return on your investment. Or worse, when renovations end up costing double or triple your initial estimate. Finding a reputable company who provides time and budget guarantees is key. This will help to prevent expensive surprises during renovations and ensure you are getting a return as quickly as you anticipated.
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