Are you looking for somewhere to invest your money? Investing in a turnkey rental property is a great way to generate a passive return.
More than 10 million Americans are landlords, averaging $34,000 in rental income, according to Internal Revenue Service (IRS) data.
What are the benefits of buying turnkey rental property? We’ve put together a turnkey rental property guide to help you get started.
What Is a Turnkey Rental Property?
A turnkey property is one that is ready to move in. All you need to do is “turn the key” in the door. The property will have been renovated recently, so there will be little maintenance work to do. It may also already have a long-term tenant in place, so you won’t have to go through the hassle of finding a reliable tenant.
What to Look For in a Turnkey Rental Property
Before you make a turnkey rental property purchase, you should do some research into the market. There are several turnkey rental property tips you can consider to help you find the best property for your investment.
Look for neighborhoods where there is a large population of renters and prices are affordable. This will give you a bigger pool of renters, and increases the chances that you’ll find a good tenant.
If you live in an area that does not have a good rental market, one of the advantages of buying a turnkey property is that you can invest out of state more easily. This is because you don’t need to be present to oversee renovations or screen potential tenants.
Research property prices in your chosen location, so you have an idea of the current level of the market. Consider the average price per square foot for properties in the area. Find out if there are features that would make a property more valuable than similar properties in the same neighborhood.
You need to understand the prevailing rental prices in your target market, in addition to property prices. This will help you to understand whether a property offers the best value for money, and how soon you’ll be able to make a return on your investment.
Choosing a location where rents are rising will give you the opportunity to increase your income in the future.
Quality of Housing Stock
When choosing where to buy a rental property, you should consider the quality of the homes in the area. Are there new builds in the neighborhood with the latest fixtures and fittings? Are there older homes that are unsuitable for turnkey properties because they need work? Are there historic buildings that have restrictions on renovations?
How to Buy a Turnkey Rental Property
The more informed you are before you get started, the less risk that you’ll make a bad investment choice. Once you’ve done your research and decided where you want to invest in a property, you can start the buying process.
If you don’t have the funds for an all-cash deal, you’ll need to get a mortgage. If you’re investing out of state, you’ll need to find a lender that has a license for the state(s) where you’ll be buying the property.
Find a Turnkey Property Seller
Choose a turnkey property provider that will meet your needs in the market where you want to buy. Compare the reviews and service offerings of several companies to find the best one.
Property firms that specialize in turnkey sales have specific industry experience and market knowledge. They will give you valuable turnkey rental property advice to help you make the most out of your investment.
Choose Your Property
With the help of your turnkey property provider, decide on the type of property you want to buy. Choose whether you will invest in a house or an apartment and how many rooms it should have. Shortlist your options and select the property that is most suited to your goals for a rental investment.
Put the Property Under Contract
Once you’ve selected a property, sign a contract, and put down an earnest money check, or good faith deposit, to show you are serious about the deal. You should try to include a refund of the earnest money in the agreement in case the purchase falls through.
Order a Property Inspection and Appraisal
You want to make sure that the property is in fact in turnkey condition and that there are no serious issues with the interior or exterior. If the property is currently being renovated, you should do the inspection after the word is complete.
You’ll need to hire a licensed, reputable inspector that has experience in knowing what to look for, as they will be able to identify any potential problems. Once the property has passed inspection, have it appraised to make sure it is worth the sale price.
Close the Property Purchase
The inspection and appraisal will raise any issues that you need to negotiate with the seller, such as repairs and maintenance, before you commit to buying the property. They may even show the property to be a bad investment, saving you from losing money down the line.
If the property passes the inspection and appraisal, review and sign the documents to close on your turnkey property purchase.
Choose a Property Management Company
Some turnkey property providers also offer property management services. They handle all tenant screening, communication, and administration, collect the rent, and handle any repairs or maintenance the property needs.
If they don’t provide these services, they can often recommend a property management company. If not, check reviews and referrals to find a company that can manage the property on your behalf, especially if you live out of state.
With the management company handling the turnkey rental property for you, all that’s left is to collect your monthly income.
Get Started Buying Turnkey Rental Property
Are you looking to invest in a turnkey rental property? Choose Memphis Investment Properties, we have owned and managed rental properties in Memphis since 1979. We have the experience you need to make a success of your passive rental investment. Contact us today to get started.