If the image of lounging on a sandy beach under the tropical sun raises red flags for you when you consider an income-producing investment opportunity, you’re probably right to be skeptical. Few paths to wealth creation are so easily paved and promises of passive income creation seldom deliver on the expectations the promise.
The one exception to the illusive dream of passive income generation and long term investment growth lies in turnkey properties. These are properties that a real estate group selects and sells to investors who then lease them to carefully screened tenants.
Turnkey properties provide even more advantages beyond a passive income stream and a dependable return on investment like:
6 Reasons to Love Turnkey Investments
1. Income Generation from Start to Finish
Turnkey investment properties are rental units owned by individuals and managed by specialized real estate agencies. Investors work with these agencies to find, purchase and hold the properties that provide a monthly income stream. It’s possible to purchase occupied properties that produce income from the get-go. At some point, the owner sells the property to take advantage of the unit’s appreciation.
2. Favorable Tax Treatment
Few investments afford you the tax deductions that rental properties do, along with the ability to shelter the profits at the time of sale. All the costs of property management and upkeep are fully deductible, and when it’s time to sell, you can reinvest your money into another property under the federal 1031 exchange rules. You an also take capital gains in amounts under $500,000 tax free more than once.
3. Almost Free Travel
That image of resting on a sandy beach could be a reality when you own rental property that’s too far for you to reach by car without taking a rest break. Almost all trip expenses qualify under the current tax code as deductions, as long as they’re made in conjunction with legitimate activities concerning rental property.
4. Neighborhood Familiarity
Few people know a housing market as well as local real estate agents. They apply their knowledge to selecting properties and neighborhoods for rentals. Many turnkey properties are located in upscale areas where rental unit demand is high, driven by factors unique to the area. It’s in the agent’s best interest to choose properties that will rent quickly and attract solid tenants who have low turnover rates.
5. Minimal Involvement
Anyone who owns a home knows that repairs and upkeep take time and some can’t wait. If the idea of calling for emergency plumbing repairs or an HVAC contractor in the middle of the night doesn’t appeal to you, rest easier when you you’re your management company on speed dial.
With a turnkey management group at your side, those ongoing and unexpected chores are completed by carefully selected contractors. Since they’re local professionals, it’s likely they buy at discounts and pass the savings onto the management group. They’re more likely to be licensed, bonded and insured, as well.
6. Deep Expertise
Finding and screening tenants take time and experience, which real estate agencies have in droves. They have effective marketing and advertising programs in place to find renters and use resources for background and credit checks.
The dynamics between the for-sale and rental market are different, and it’s in the best interests of property managers to select properties that provide the greatest returns to their clients from the start to the finish.