How to Invest in Long-distance Turn-key Rental Properties

Turn-key rental properties can be a great option for investors looking to get more cash flow with less work. They are also a great option for investors who cannot find cash flowing properties in their state and must invest long-distance. Turn-key rentals properties are fully repaired, rented, and managed by a property manager. Buying a turn-key property allows a long-distance investor to buy a property that cash flows with minimal work. I have bought a turn-key rental and you must be very careful with the property you buy and the company you use.

What is a turn-key rental property?

Some consider a turnkey property to be a house that is remodeled and needs no repairs, but it may not be rented. I consider turn-key to mean the home needs no repairs and has a tenant and property management in place. Make sure you and whomever you are talking to about turnkey properties have the same definition of turn-key! If you are investing out-of-state in a turn-key property, make sure that it is already rented and has property management in place.

What are the advantages of turn-key rental properties?

Here are a few advantages to buying turnkey rentals and why I bought a turn-key rental. I go into much more detail on each point throughout the article.

  1. Easy to find: You can buy a turn-key property very quickly from turnkey providers who have a stock of turn-key properties available to purchase. Turn-key companies can have a large inventory of turn-keys because the properties are providing cash flow and are making money while the company owns the properties. You do have to know the right turnkey companies to work with.
  2. Less work than a normal rental: Turn-key properties are already rented, managed, and repaired. You do not have to find contractors, property managers, or real estate agents.
  3. Provide cash flow from day one: The first day you buy a turn-key, it will have a tenant in place paying rent. You do not have to worry how long the repairs will take or how long it will take to get a tenant.
  4. Provide a great return: Most turn-key rentals provide 10 to 15 percent returns. The return begins right away and takes little work to maintain because a property manager takes care of the house for you.
  5. Provide diversification: Buying turn-key rentals in different markets of the country gives you diversification.
  6. Can be bought for cash: Many foreign investors have trouble buying properties because they cannot get financing. Turn-key rentals can be as inexpensive as $30,000, making them easier to buy with cash.
  7. You can invest your retirement savings: You can invest a self-directed IRA or 401k into turn-key rentals.

What are the disadvantages of turn-key properties?

While there are many advantages to buying a turn-key rental property there are disadvantages as well.

  1. Turn-key rentals are usually priced at retail value or even above retail value. I like to get a great deal on my rentals and that is why I have not bought more turn-key rentals.
  2. It can be tough to know where to buy a long-distance rental or keep track of it. You must have a great property manager to make sure the home is maintained and managed right.
  3. Not all turn-key companies are reputable and many take advantage of long-distance buyers because they do not see the property.
  4. There may not be as much cash flow with a turn-key property than if you buy it yourself.

How can you find turn-key rental properties?

There are many turn-key rental property providers throughout the United States. Some companies are specific to local markets such as Memphis, Ohio, Missouri, Florida, Texas, Chicago, and Wisconsin while other companies have properties all over the country. The properties vary in price, rent, financing options, and returns, but a good turn-key property will cash flow. Even with cash flow, I would advise investors to spend time researching the property manager and the area they want to invest in before buying any turnkey property.

A Google search for turnkey rentals will get many results for property managers and houses for sale that are not rented. I have spent a lot of time researching turnkey companies and have met with turnkey companies in person. Fill out the form below and I will refer a company to you I trust. Your information will not be given to anyone or used for anything except a turn-key rental property company to talk to you about turn-key rentals.

[ninja_forms id=32]

Do I invest in long-distance turn-key rental properties?

I had always bought my rental properties in Colorado until 2015. That was when prices became too expensive here to get good rentals. I bought one turn-key property in Ohio that has done well for me and I am planning to buy more in other parts of the country. I am very interested in a company that can provide prehab properties that are below market value. I pay for the house and the repairs on a prehab, but the turn-key company still finds, a tenant manages the repairs and manages the property. You can fill out the form above or email me to get more information on this company. [email protected]

How much do turn-key rental properties cost?

Every turn-key property is different and every location for turn-key properties is different. I have seen turn-key rentals that are repaired, rented, and managed that range from $35,000 to $150,000. I have not seen turn-key properties in higher price ranges because it is much harder to cash flow on a higher priced rental property than a lower priced one. The lower priced turn-key rental properties usually provide better cash flow and may be a good option for foreign investors who have a hard time getting a loan on properties in the United States.

Can you make money with a turn-key rental property?

I normally do not buy rental properties that are turn-key ready, because they usually cost more. I rarely buy homes that are fixed up, because they usually are not a great deal. Rental property number nine, which I just got under contract, is the closest thing to a fully repaired property that I have purchased (or that I will have purchased). It needed a bit of paint, but that was about it. In a perfect world, I would love for all the rentals I buy to be repaired and rented before I buy them, which is one advantage of turn-key properties.

When I buy my rentals, they usually need work and I get a discount for the money and time I have to put into repairing them. In fact, it is less helpful to buy a home that needs repairs than purchasing a home fixed up, unless you can get a great deal. It is harder to have built in equity on a turnkey rental, but you do not have to spend time repairing the home, renting it out, or finding a property manager.

How much money can you make with rental properties?

When would investing in a long-distance turn-key property be a good idea?

I have had many people reach out to me about investing in rental properties, but they do not know how to start because their market is too expensive. When starter homes are $300,000 or more in an area, it is almost impossible to cash flow on a rental property unless you pay cash for it. When you pay cash, your returns are not nearly as good as if you can get a loan (as long as the property cash flows). Rents are almost never high enough on a $300,000 home to cash flow, no matter where you live.

The down payment on a $300,000 property is going to be at least $60,000 unless you use a technique to buy with less money down. Then you have to add closing costs, reserves, repairs, and other costs associated with buying a rental property. I can buy two or three cash flowing rental properties in my market, where someone in a more expensive area would only be able to buy one that may not cash flow at all. I never invest for appreciation, which is what many people are forced to do in these areas.

If you are in an area with very expensive homes or very low rents compared to home prices, you may want to consider long-distance investing and possibly long-distance, turn-key investing.

Diversification with turn-key rental properties

Many people like to spread out their risk when investing and rental properties are no different. If all of your properties are in one place, it could be riskier if something were to happen to that area. I have all of my rental properties in one place; one reason I like the idea of an out-of-state property is that it would provide diversification.

What is the difference between long-distance investing and long-distance turn-key investing?

Long-distance investing is simply investing in real estate outside of your local market area. You are still in control of the purchase, the renovation, and finding a property manager. This can be a great way to invest if you have a great team that can handle all of these aspects for you or if you are able to travel to handle them yourself. However, it takes a lot of time and work to buy a rental property in another state; you have to control the entire process of finding the property, repairing it, renting it, and finding a property manager.

Why do you need to do due diligence on a turn-key rental property?

Turn-key rental properties are typical houses that have been purchased by a turn-key company, renovated, rented and have a property manager put in place. An investor still has to perform due diligence when buying a turn-key to ensure the properties are as advertised. The turn-key companies know their clients are out-of-state and they may try to fudge their numbers a bit to make more money on a deal. It does not hurt to have an inspection done on any property you buy even if the turn-key company says the home is completely repaired.

How can an out-of-state investor determine the value on a home

I wrote an article here about how to determine value. Even if a property cash flows great, an investor still does not want to pay much more than market value for a home. It is not easy to determine market value from a long distance, but it is possible. The best way to find out what a home is worth is to get an opinion from a local real estate agent.  You can also use websites like Zillow or Trulia, but I would not count on them to be very accurate.

How can you find a real estate agent to provide a price opinion?

I wrote an article about how to find a great agent here, but many agents will be wary of providing values to an out-of-state investor. My advice is to be perfectly honest with the agent and tell them you are trying to verify if a price on a home is market value. Tell them your situation and see what they say. You should be able to find an agent or two who will give you ballpark values. You may even find an agent who knows of more turn-key properties in the area.

If you want a detailed value you can even order a BPO (broker price opinion) from a real estate agent. Most REO agents perform BPOs for banks on distressed properties. For $75 to $100 you should be able to find an agent who can complete a BPO report. Try looking on usreop.com, nrba.com or reonetwork.com for experienced REO agents. The agent should have their own BPO form they can use that provides three sales, three active comparables and they should know exactly what a BPO is.  If not, find another agent.

How can an out-of-state investor determine fair market rents?

Not only does an investor need to know that they aren’t overpaying for a turn-key property, but they also need to know that the rents are accurate. It is possible a property manager or turn-key company rented a home for more than market rents by charging a premium to an unqualified tenant. You don’t want to buy a turn-key, have the tenant stop paying and then find out the home was rented for more than it should have been.

The best way to determine rents is to call a few property managers in the area. Tell them you are an investor, are buying some homes and need a property manager. This serves a few purposes; it gives you an idea of market rents, the property manager can let you know if a property will be difficult to rent, and you can interview property management companies in case you need a new one.

You can also check Zillow for rent rates, but again they may not be accurate. You can also look at Craigslist, the classifieds or check out this article for more tips on determining rental rates.

How to determine if your property management company is good on a turn-key property

The most important piece of a long-distance rental property is the property manager. A bad property manager can cause thousands of dollars in losses through lost rent or a damaged property. This article on how to find a great property manager can help you determine if the property manager the turn-key uses or referred you to is any good. Make sure you ask the property management company what kind of screening process they use to check tenants; background checks, credit checks, references, income and job verification. It is best to let the company tell you what they do and not suggest these screening processes to them.

In some cases, it may be difficult to contact the property management companies. A lot of turn-key companies sell hundreds of properties a year and the property managers do not have time to talk to hundreds or even thousands of prospective buyers.

What can you do if the rents, values or property management is off on a turn-key?

The first thing you want to do is make sure you discover any issues before you buy a turn-key property! It will be difficult to get any recourse after the fact, although some turn-keys offer rent guarantees and buyback programs.

If you discover a problem before you buy a property, talk to the turn-key. Tell them what the issues are and see what they offer. The more facts and information you can back up your numbers with the better. You may be able to negotiate a better price or have them help you find a new property manager.

This is a great time to see how customer service oriented the turn-key company is as well. Will they work with you and try to come up with a solution or become defensive? If they won’t try to help at all, then you have a great idea of how good they will be to work with after you buy a property and there is a problem.

Are turn-key rental properties a good option for foreign investors?

Foreign investors can buy homes in the United States, but it is hard for many of them to get financing. Traveling to the U.S., researching markets, finding real estate agents, closing on properties, and then repairing and renting properties is very difficult when you live in another country. Turn-key rental properties make it much easier for foreign or any long-distance investor to invest in rental properties. If you buy a turnkey rental property, you might not make as much money as if you did all the work yourself, but the time and money saved may be worth the cost.

Are turn-key rental properties a good option for self-directed IRAs?

You can invest money from a self-directed IRA into real estate. When you use an IRA to buy real estate, the IRA is buying the property and all income and expenses must go through the IRA. Some turn-key rental properties specialize in self-directed IRA investing and can help investors invest from their IRA into rental properties.

Can you buy turn-key rental properties with less than 20 percent down?

Some turn-key rental property providers offer seller financing that can be used to buy turnkey proprieties for less than 20 percent down. The trade-off with putting less money down is higher interest rate and loan costs. Rates may be as high as 9 or 10 percent on seller-financed turn-key properties.

Conclusion

Turn-key rental properties are a great way to invest for cash flow when cash flow is hard to find in your market. Turn-key rental properties are also a way to invest in rental properties without having to repair or rent out the house or having to find a property manager. However, it is hard to get a great deal on turnkey rentals because turn-key providers want compensation for all the work they do.

How can you get more detailed information on specific turn-key properties?

If you would like a custom report on turn-key rental properties and more information on turn-key rental property companies, please fill out the form below. Your contact information will not be given to anyone, except a turn-key rental property company.

[ninja_forms id=32]

50 thoughts on “How to Invest in Long-distance Turn-key Rental Properties”

  1. Hello Mark,
    I am thinking of buying most of your books as a package deal which is discounted so I can afford most of them at one time. Can you guide me where I can get the most discounted price so I have the ability to keep all of them in my library.
    Thank you

  2. Mark, I’m new to the property investment. Could I get the contact information for the turn-key rental company you’ve been using?

  3. Hello Mark,

    Not sure is you’re still monitoring this as it’s been a while since the last post…but I’d like to know if you have any information on turnkey rental companies in Colorado…specifically the Pueblo and/or Colorado Springs areas. You can email to [email protected].

    Thank you

  4. Hi Mark,

    Understand your 15th rental is a turnkey with AWB. In your experience with the company and given the ROI earned, do you plan to purchase another one?

    Ryan

    • It has done relatively well, it was vacant for a while and needed some repairs but they covered the costs since it was in the first year. I am not going to buy another turn key, but that is because this was more of a one off experiment with money I had in my IRA. I never planned to buy more than one from the beginning.

  5. Mark, very new to the investment rentals. So new your podcast and blog are the first ones I am reading and learning about the rental game. I heard your podcast about Turn_Key rentals and would like to learn more. Can you send me turn-key providers.

  6. Thanks so much for the detailed write-up. Would it be possible for you to email me a list of your preferred turn-key vendors? I would really appreciate it!

  7. Can you please also send me info on the turn key providers? I currently live in SoCal and am in the process of relocating to NY. Neither location is ideal for rental investment so I am really looking forward to knowing more about this option. Thank you ahead!

  8. Great info. I am getting out of a long distance self managed property and looking to do a 1031 exchange. A turnkey sounds great, as I live in SoCal and cannot afford to buy here. Please send me your turn key providers Thank you!

  9. Hey Mark,

    Great article, as always.
    Could you please pass along the turn key providers you have experience with?
    Much appreciated, keep up the great work!

    Thank you

  10. Hi Mark,
    It is such a great article, first time I heard about turnkey investment and very interested in getting involved. Would you please forward me you turnkey preferred vendors to [email protected]? Thanks so much!

  11. Hi Mark et. al.,

    I am very confused about this turn-key rental. What do you mean by 10%-15% return? Meaning if I purchase a $100,000 home for 20% down associated with one of these people, I am looking at a $2000-$3000 per year profit in rental income?

    That’s a little depressing because it would take 24 properties for me to reach my monthly cash flow goals of $5000 mo.

    I have read many of your blogs but feel like I would really benefit from a skype or even phone call for 1-2 hours. What is your rate for consultation?

    I am living in Hollywood and manage vacation rentals here. I am from Michigan and my dad suggests I buy the condo next to him for $135,000 as it’s market value is supposedly $141,000 but he knows the seller. Rental is about $1275 per month, HOA $180, Taxes about $225 per year so with all factors on a 5% conventional loan (I wouldn’t mind living there the first year), I am still not gonna be making positive cash flow for years to come more than $50 or so. Bad move right?

    I need help making a plan and taking my first step. I plan to invest $20,000 – $30,000 per year into real estate but I don’t know how to get those $400-$500 per month positive cash flow properties in today’s market, plus, I’m not sure I have time for the research it would take in Michigan since I am usually not there.

    Can I hire you for a consult?

    Tobias

  12. Mark,

    Your the first article I read about turn key and would like to get involved. Would you have information that you can send to a beginner as myself, such as turn key providers you have experience with?

    Thank you.

  13. Mark, could you please send me the name of the turn key company who will finance with 5% down? I understand that the interest rate will be much higher, but I have to start somewhere. Thanks!

  14. Mark,

    I am eager to get into turnkey properties for cash flow. I have NO knowledge of how to get started other than the valuable information I just read in your article. As a new beginner, where do I start?

    Arthur

  15. Mark, what is the turn key rental property company that will finance with 5% down? Are they specifically local to Colorado or are they nation wide? You can email me the info at [email protected] yahoo.com if you prefer. Thanks.

  16. I have some great turn key rentals coming online out of State. I’m located in Denver, Colorado myself. However, I’m finding some amazing deals in Kansas City and St. Louis County, MO. These properties are cash flowing and have ROI’s over 15%.

    I agree, that at home is much more comfortable, but haven’t been able to find a rental in Denver, Colorado Springs or Fort Collins area with an ROI at even 10%. Sometimes to get a good return you do have leave your own back yard.

    Thanks, Andrea

  17. Good information Mark. I started a Property Management business in Atlanta 5 years ago to offset my Brokerage business as many of my clients/sellers were upside down, and needing to move. It has been a huge benefit for all involved. I currently manage 35 residential property’s and look to take on more each year. I would also suggest to realtors, to work rentals, gain that income to your business bottom line and make future clients out of the rental business.
    Robert Mason – RM Property Group.

  18. Is buying turnkey property’s process differ from transitional sale? I heard that buyer need to ask prove of their rent and give that information to the bank for mortgage. I’m interested in buying turn key four plex and commercial building.
    James

    • Mark
      I am me to your site but I find your information to be invaluable. I personally have purchased 18 homes in the last 13 months and done most of the work my self. A lot of long days and 7 day weeks later and I have a portfolio of 18 homes with 17 rented. The last one is almost completed and will be rented by February 1. The biggest challenge I am having is getting financing to grow this business even further. I have spoken to a few lenders but I think my best option may be to cash out and start over. I could use the proceeds to buy even more properties. Thoughts?

        • Thanks Mark. I have gotten term sheets from B2R and Rental Home Financing. Aside from being expensive, they are really Balloon loans. I would like to know that I have financing in place for more than 5 years. I did get a letter of intent from First Key Lending and those guys seem to be the most like a bank, offering a true 30 yr fixed rate loan etc. I was wondering if you have ever heard of them? I hired a very good real estate attorney and he is looking over the docs, but every bit helps. I believe they are backed by Cerberus, the Pvt Equity Firm that once owned Chrysler. In any event, I think you provide a great service here, and if I could ever be of service to you in the NY/NJ/PA area please don’t hesitate to call. You can email me for my contact info, but I am registered on your site.

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