TURN-KEY OR DIY: PURCHASING RENTAL PROPERTIES THAT MAKE SENSE FOR YOU TRACY ROYCE
Depending on where you invest, your working
Depending on your market, there could be dozens if
capital available, your knowledge of renovations,
not hundreds of other motivated buyers combing over
access to efficient teams/people, and desire to be
the same properties you’re searching through, as well.
hands on, turn-key properties may not be for you.
Short Sales, REO’s, and other distressed properties
could be a viable but competitive and uncertain
However, if the sole appeal to go it alone to
inventory.
purchase, fix up, qualify tenants, and manage a
property yourself is hinged upon improving your
Regardless of where you find your homes, if the
bottom line, then let’s explore what you’re paying
property does have good margins, most likely it will be
for when choosing a completed (turn-key) deal.
distressed and may not qualify for financing. Many
After all, there are fees built in when you buy a
investors use cash or hard money loans for their
turn-key property; the providers are a business like
acquisitions, which require large down payments and
any other!
high interest rates. If you don’t have the funds for the
down payment or float the costs until sale or refinance,
Step 1: Finding and Buying a Deal
then purchasing distressed sales at large discounts will
prove difficult.
If you’re a full-time real estate investor, you may
already have drip marketing, direct mail, signs,
billboards, and door knockers bringing you leads. If
not, finding deals could be an ultra-competitive and
spontaneous feat. Figure into it, that it usually
takes 100 leads and 10 interested people to boil
down to just a few good deals. And they might just
be that, good, but not great.
Turn-key business’ typically have access to large
amounts of property, and buy in bulk. Or, they have the
resources and outreach for ongoing and consistent
campaigns that make them a recognizable resource for
Sellers and Brokers alike. When you’re purchasing an
end product, you’ll be required to come in with your
down payment, and have to qualify for traditional
financing.
You can also have an agent searching the MLS for
you and making offers, and the commissions will
Step 2: Rehabbing the Property
have to be figured into your acquisition costs.
Although rehabbing a property will include a matter of
subjectivity, there are methods and cost considerations
when fixing to retail, and fixing to rent.
If the property is only in need of minor repairs, you may
be able to get away with using handymen, or even
doing the work yourself. But, if the home is in need of
anything more than cosmetic fixes, you’re likely going
to need professionals.