Depending on where the phrase is used, turnkey or turn-key can mean something different in the real estate business. New investors hoping to get a better understanding of what is a turnkey property are in the right place. The following is a detailed overview of investing in the housing market to earn passive income through turnkey rental properties.
A home listed on the market as turnkey is advertised to investors as a passive income source. Unlike active real estate investing, being passive means that earned income does not involve legwork. No traditional work has to be performed to analyze the return on investment, safety of the neighborhood or collecting monthly rent payments from tenants. Investors who appreciate the "hands-off" management of a rental home are those who seek turnkey real estate.
Fact: Turnkey real estate does provide a passive income source to investors around the world. Almost all homes for sale as turnkey have been remodeled or updated and are "rent ready" from the first day of ownership.
For someone with little experience with housing investments, diversification with an investment property is an easy way to learn. Instead of going full-force and buying a home to flip, men and women who take interest in a turnkey rental property are provided with a guided approach through a company like JWB.
ROI is built up consistently over a period of time with income producing real estate investments. There are many benefits to owning rental properties that positively impact returns that many first time investors do not consider. These benefits include tax savings, principal paydown, and appreciation. The cornerstone to a successful investment is the right property management company whose goals are aligned with the investor and focused on producing consistent returns.
Depending on where a turnkey house is purchased, a renter might already be under contract to the property. For first-time buyers, the ability to generate positive cash flow right off the bat is a positive in turnkey investing. JWB is one of the few companies that has tenant lease agreements that span multiple years. This strategy does build ROI for investors who appreciate long-term property ownership.
When a person buys a home that will be rented out, the house will need to be rented as quickly as possible to generate cash flow. One way that a turnkey home is different from a regular rental is through professional property management. Some, but not all, companies selling investment properties offer a managed housing strategy. What this provides is routine rent collection, handling of tenant problems, contractor hiring and property upkeep.
Fact: A property manager is what contributes to the daily operations of running a successful property and helps investors to profit in-state or out-of-state where a rental is located.
Property management is a low cost expense that is crucial for investors who are unable to manage day-to-day operations for their investment home. The fees payable can be deducted annually on business tax returns. Managing a rental home is part art and mostly based on experience in the real estate industry. It is a good option for beginners to request when buying a rental.
A regular real estate listing that is reviewed and eventually purchased by an investor almost always comes with additional expenses. Because 99% of homes are sold empty, investors who plan to rent out the home have to make their own investments in interior amenities to make the home attractive to a renter. A turnkey house has already been painted, had its lawn manicured, new appliances installed, bathrooms upgraded and has passed a home inspection.
Fact: Homes cannot be rented to a third party without being inspected for radon gas, water damage, foundation issues and sewage leaks. Regular house flippers have to completely renovate and update the property just to make it livable to a rental tenant.
Investors who are deciding between making real estate a part of their portfolio or not should understand that turnkey homes are almost always less expensive compared to a foreclosure or distressed home purchase. Turnkey companies like JWB have completed all work needed to make rental homes profitable for people who invest.
Location makes a huge difference when earning income in the rental real estate industry. A nice home can be positioned in a bad neighborhood and have extremely high vacancy rates. A neighborhood with a bad reputation is not where most people renting homes would want to live. There are growing markets in the United States that have excellent neighborhoods. Jacksonville, Florida is one rental city that tops many lists each year for its high rent prices and annual tourism.
Fact: Jacksonville is the most populated city in the state of Florida. In 2013, the city was ranked by RealtyTrac as one of the top 20 markets for buying single family rentals.
Duval County in Jacksonville features over 840,000 residents of which many rent homes instead of own their own property. With close proximity to the Atlantic Ocean and a huge college student population, Jacksonville has remained a growing area of the country to buy turnkey homes in Florida.
Based on national averages, adults who are able to diversify a retirement account can build a larger portfolio annually. While popular IRA investments do include real estate, some adults might be unaware that an investment home is a qualified investment using an IRA. Since IRAs have rules that must be followed, some accounts might need to be rolled over into a self-directed account to better manage a rental investment property.
Fact: A Roth IRA can grow income free of taxation and this includes rental income earned as a property owner. Buying turnkey homes with a retirement account can be accomplished to allow adults of any age to enjoy the annual income derived from investing in rental real estate.
Due to cash withdrawal limits, some people might only have access to 50% of IRA funds. Someone who is planning on using an IRA to purchase a rental property might need to secure funding through a non-recourse loan provider. JWB works with trusted companies in order to expedite obtaining a non-recourse loan to help investors who are ready to build cash that is useful during retirement years.
The best companies are positioned in a growing market in a single location in the U.S. While some turnkey companies expand nationally, the best income is earned through a company that specializes in a single market. Knowing the best areas to buy houses and how to keep rental homes filled with renters takes experience. While there is cheap real estate in many cities nationally, the smart approach of creating a solid investing foundation inside one emerging city works out well for investors.
Fact: Not every company has turnkey investments for single family properties. While duplexes and apartment buildings are attractive in some markets, a single structure home does generate long-term ROI for investors based on longer tenant agreements.
When selecting a company to work with, it is important to evaluate the experience level of the owners. Companies that have bought and sold hundreds properties and earned ROI for investors and can prove this data are worthy of researching. Experience is a valued trait in the real estate industry especially when considering a managed investment approach.
The best companies buy and hold property and have a growth plan every year for clients. New pathways of earning investment income like building new construction homes for investors is a clear sign of a hard-working turnkey company.
There are many people who have questions about entering real estate as a turnkey property buyer. Because it can be hard to find good information, knowing some of the most popular questions to ask can help a person know where to start.
Some common questions include:
1. How much are rental properties?
2. What ROI can I expect?
3. Why should I invest in a turnkey rental property?
4. Can I deduct expenses as a landlord?
5. Can I buy a second home with my IRA?
6. Can I participate in a group property buy?
7. Are real estate investment trusts better than owning a rental?
8. What is the cap rate for Jacksonville, FL rentals?
9. Does property age affect the value of a rental?
10. What is the average down payment on a rental property?
11. Who handles tenant vacancy issues?
12. Who owns the property management company used?
13. How often do rental homes need repairs?
14. Do I need title insurance at closing?
15. Can I sell my investment property?
These types of questions are easily answered by calling JWB directly. The free investing guide is offered as a starting point to introduce turnkey investing to the average adult who has little to no real estate experience.
Through good research and helpful assistance, nearly anyone can find the right cash flowing turnkey property to build a passive income in the U.S. housing market.