Cash-flowing properties can provide valuable revenue that allows you to expand your real estate portfolio and take advantage of good deals as they arise. Do-it-yourself (DIY) and turnkey real estate investing both offer notable benefits and drawbacks surrounding the cost of the initial investment, the turnaround timeline, and more.

Have you ever considered investing in real estate? According to Investopedia, real estate is one of the most popular investment vehicles for all types of buyers, from middle-class investors with a small stake in real estate trusts to cash buyers with millions to spend on properties.

The most important aspect of any real estate property is whether or not it generates enough cash flow to cover expenses and opens up more opportunities for owners to expand their investment portfolios. 

What Is a Cash-Flowing Property?

A cash-flowing property means that the property still generates money every month, even after all relevant expenses have been paid. Some of the key operating expenses that a property owner may face include:

  • Taxes, licenses, and fees
  • Regular property maintenance
  • Insurance policies
  • Property management company fees

Every investor should have cash-flowing properties as a goal, because these funds can then be used for property upgrades or invested elsewhere.

What Is the 50% Rule in Rental Property?

The 50% rule in rental property investing dictates that no more than 50% of of the gross income should be used for operating expenses. The method helps investors stay on top of their properties and provides more insight into where money goes. Maintaining utilization of under 50% frees up funds for emergencies or other investment opportunities. 

Comparing DIY and Turnkey Real Estate Investing

When you begin your property investment journey, you must decide between DIY and turnkey real estate investing. The type of investing you choose will dictate your overall strategy, upfront costs, and many other aspects of the process.

Initial Investment

If you have a larger initial investment and want to begin making money right away, turnkey real estate may be the ideal solution for you. All it takes is signing the home over in your name and bringing new tenants in for the money to start to flow.

Investors who prefer the DIY method often do not need as much of an initial investment. They can buy a property as-is and put in the work to flip and sell it down the road. 

Turnaround Time

Investing in a turnkey property involves a much shorter turnaround window. Once you fill out the appropriate paperwork and transfer the deed, you will be able to start seeking new tenants right away.

For DIYers, turnaround time is typically longer, especially if you are new to the types of projects and renovations that the property needs. A longer time frame could be beneficial if market downturns are expected or the owner simply wants to wait for the highest offer through a third-party selling website.

Resource Requirements

Since a turnkey property requires little to no renovations before listing it, the owner will not have to pay for materials and labor to fix issues. A DIY distressed renovation often needs quite a bit of care and many trips to your local hardware store for supplies.

Adherence to Regulations

Since turnkey properties are often new construction, they are much more likely to adhere to local building codes and regulations. Older homes may need extra work to be brought up to code before they are fit to sell.

Frequently Asked Questions

When Should You Work With a Professional for a DIY Renovation?

While it may seem appealing to complete a renovation all on your own, the process is often deceptive. Online tutorials have democratized property renovations and provide easy access for all types of projects, but the tradeoff is that inexperienced owners often make crucial mistakes during the process. 

If you are unsure about any step, it is best to reach out to an expert. What appears to be a minor problem could cause major issues down the road if you’re not careful, leading to tenant dissatisfaction and even potential legal action. Out-of-state rehab pitfalls will be even more stressful if you’re dealing with the problems from far away.

Consulting a professional contractor or home renovator is still much cheaper than paying them to complete all the work. Make sure to take notes and document as much as possible through photos and videos. You will have a solid reference the next time you attempt a similar project.

Is It Possible to Time Your Real Estate Purchase to Maximize Profits?

Timing the market is nearly impossible. However, there are some signs to look out for that may signal it’s time to purchase or sell properties so you do not lose money on your investment. 

For instance, if interest rates continue to rise and you have the cash to purchase a property outright, you will face less competition from buyers who need financing. Conversely, low interest rates indicate a seller’s market, and fierce competition over available properties could result in bidding wars.

How Can I Further Diversify My Real Estate Asset Portfolio?

Diversifying a real estate portfolio lowers your risk and allows you to expose your investments to all sectors of the market. For a more hands-off approach, consider investing in real estate investment trusts (REITs) or property conglomerates, rather than individual properties.

Transform Your Real Estate Portfolio Into Cash-Flowing Properties

Cash-flowing properties are the bread and butter of any real estate investor. With these types of properties, you can generate money to invest in other sectors that you’re interested in and grow your portfolio even more.

At Memphis Investment Properties, our dedicated team provides all types of property management services, ultimately taking the burden off of our clients. With plenty of experience in the Memphis real estate market, our experienced team members can guide you through every step of the property investment process, from combing through available listings to calculating potential revenues.

Are you ready to dip your toes into the complex landscape of Memphis real estate? Reach out to us today to learn more about all of the services we offer in the Memphis, TN, area. We can’t wait to meet you!