How can you have the security of purchasing a turnkey rental property, and make a lot more money? Buy a turnkey process rather than a turnkey property, and keep the equity for yourself rather than giving it away!
What is a Turnkey Property?
A turnkey property is a rental property that is completely set up and ready to generate cash flow. When you purchase a turnkey property, you don’t have to do anything. The house or multifamily property has already been rehabbed, likely has a property management company in place, and may be tenant occupied.
The major difference among turnkey investment properties is whether they are already tenant occupied and generating cash flow.
- Rehabbed, Tenants, Management Company: Buying a rehabbed rental property that is tenant occupied and generating cash flow has the lowest risk; however; the selling investor keeps all the equity for himself – that’s why investors like to sell turnkey properties.
- Rehabbed, No Tenants, May or May Not Have a Management Company: There may be a smidgen of equity in the property, since it is not tenant occupied, but the investor has taken on the lion’s share of the risk; therefore, he has stripped the property’s equity to take profits for himself.
Advantages and Disadvantages of a Turnkey Property
The idea behind a turnkey property is that it minimizes the risk for the investor purchasing the property. By purchasing a tenant occupied rental property, there isn’t much that can go wrong. You buy it, and the cash comes in immediately.
Though turnkey properties are easy and carry less risk, they are not necessarily an investor’s best option. Real estate investors take calculated risks to generate profits; therefore, properties with little risk are slow to generate profits.
The main disadvantage to purchasing a turnkey property is that there is little to no equity left for the investor purchasing the property. The investor selling the property has already stripped the equity in the form of profits generated for himself.
For example, if you purchase a tenant occupied turnkey property for $100,000, the property is worth about $100,000. However, if you purchase the property before rehab for $60,000, put $20,000 into the property to rehab it, you retain $20,000 in equity that goes on your balance sheet rather than the selling investor’s pocket.
What is a Turnkey Process?
As described in the example above, a turnkey process includes purchasing an investment property from an investor who will coordinate the entire “process” for you with industry professionals.
As a real estate wholesaler, when we sell an investor an investment property with a turnkey process, it works like this:
- We present properties to an investor fitting his investment criteria, including financial projections.
- He selects a property, or multiple properties.
- We sell the selected property/properties to the investor.
- We coordinate the rehab, and the investor pays the cost.
- We assist with the selection of a management company who finds a tenant for the property, and manages the property from month-to-month.
By purchasing an investment property with a turnkey process, the investor shares in the risk, does just a little more work, and keeps more of the equity.
Graystone Investment Group
Graystone Investment Group is an experienced real estate wholesaler in Tampa Bay. We serve clients who flip homes in as little as 30 days, as well as clients who hold high cash flowing rental properties.
Unlike other wholesaling groups, we provide clients with a turnkey process at no extra charge. We find properties that we resell to investors at discount prices, while also connecting them with private financing. We also coordinate with rehab and management companies we’ve worked with for years.