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How is Buying Turnkey Property the same as buying an Investment Property?
Turnkey properties are a great addition to your rental home portfolio. They may not be available at rates well below the current market prices. But they have good returns potential, require fewer repairs, and attract good tenants. In the case of traditional rental home loans, the returns can be in the range of 15 to 20 percent. However, in turnkey real estate, the returns can be around 10 percent. With turnkey homes, you would want to pay a higher price since the rental deal is already in place, the home is well kitted and you can simply start making money the day you sign the deed.
What these properties promise is diversification in your rental properties. When buying a rental property, there are gems and there are stones. Turnkey represents the gems meaning they are more credible in the eyes of the lenders. A rental home in another state would not only help diversify the portfolio but also make the portfolio immune to extreme losses due to sliding real estate prices in the home state.
Turnkey Properties and the Returns Quagmire
It all depends on the initial price and the rent ratio. There is no point in buying an expensive turnkey only to wait 30 years to recover the capital. For example, if a turn-key property is retailing at $50,000 and can generate around $700 or so in rent per month, it would be considered an awesome ratio. Such a cash flow can justify the long-term investment potential as well as the timely repair expenses.
This brings us to the important question: Is it worth buying cheap rental properties? If you have cash, then it is always a good strategy to buy cheap rental properties. However, if you have to apply for rental home loans, go for decently priced ones and factor in the loan payments before calculating the actual profit.
Conclusion about turnkey properties
Buying an investment property involves research. And in the case of out-of-state rental homes, you need a good local dealer if you are new to the rental business. Do not go only for diversification and do the math about returns on investment.