Positive Cash Flow Investing

Should you buy a fixer and rehab it so that you can rent it out or should you buy a turnkey rental property? Here’s a run-down of the differences between the two. Which one sounds more fun to you?

Rehab a Fixer Rental Property:

1. Market and/or research to find the deal – slog through hundreds of listings, find the comparative sales for each one, drive to and walk through each one to check them out.

2. Buy it using your own money or hard money. If you’re using hard money, then you have to go through the whole process of qualifying for the hard money loan. Feel grateful that they’re lending you money at a 15% interest rate and 5 points.

3. Figure out what needs to be done to the property, being careful not to do too much or not enough.

4. Get all the utilities turned on. In some cities, you have to do this in person.

5. Make appointments with a bunch of tradespeople like painters, carpenters, electricians, plumbers, landscapers, etc. Hope they show up for the appointment. If they do, walk through the house with each one and explain what you want done. Then listen as each one gives you a completely different opinion on what the best thing to do is and why anyone else’s idea is a bad one.

6. Get the quotes, call their references, and then negotiate with each tradesperson to get the best possible price. Hire them and hope it wasn’t their sister you were talking to as a reference.

7. Show up at the property at least twice a day to make sure the work is getting done. When you get there and no one is there, start making phone calls to find out what’s going on. Listen to a story about why they aren’t there. Be firm, but don’t get nasty, and tell them your project is important and needs to get done. Show up the next day and do it all over again.

8. Deal with the unexpected issues that come up along the way. You thought the furnace was working but since the gas wasn’t turned on when you bought it, you couldn’t tell. Go back to #6. Or the bathroom floor you were going to re-tile needs a new subfloor. The price from your carpenter seems kinda high but what are you going to do, he’s already in there doing the other work. Add $5000 to the rehab budget.

9. The property is finally ready to rent. You either hire a leasing agent or market the rental yourself, which means you either pay a month’s rent to find a tenant or take a bunch of calls, spend time saying the same exact thing over and over to each prospective tenant and trotting out to the house each time someone wants to see it. You collect an application fee, run credit/eviction reports, call references (being careful about sisters again) and finally…finally…Yippee!, you now have a tenant.

10. Start collecting rent checks.

Turnkey Rental Property:

1. Buy the property.

2. Start collecting rent checks.

I’ve done both, I pick turnkey! Call me to talk some more about the differences.

Did you know you can buy cheap homes with positive monthly cash flow without ever having to do anything hands-on?

While a lot of people who put money into investment real estate property do it as a full-time undertaking, operating as a real estate entrepreneur can take significant amounts of time and effort. To begin with, a person must identify a reasonably- priced property which can be upgraded for resale.

After that, the person will have to buy the property or home, while taking into consideration every bureaucratic, financial, or legal entanglement connected with the property. Subsequently, the individual will have to plan and arrange for repairs and upgrades, while at the same time trying to not go over budget. Ultimately, the individual will have to market the real estate for potential buyers.

Nevertheless, you will find people who have a variety of professional careers who go into the real estate business as a side venture or one-time option. In case you are in the second category, you may well be in a position where your own personal time is really a luxury you just do not want to invest in improving and marketing a real estate asset. You probably currently have a challenging full-time career, along with family members or perhaps local community considerations which take up your time.

For anyone who is in this kind of situation, undertaking every one of the problematic activities on your own is twice as overwhelming. For that reason, you might like to try to make your ultimate investment a totally turnkey property. This would be a piece of property which is entirely all set for purchase, with a property manager and a tenant already in place. In case you have some stressful, high-paying main occupation, a ready-made bit of real estate property can be your best option.

Whenever purchasing a property on your own, you definitely have to check out the house or apartment thoroughly. There exists a likelihood that it might be less sale-ready than the real estate agent or seller may have said. You may additionally wish to hire an attorney, paralegal, or alternate real estate professional to take a look at any contracts you will need to sign, to make certain you aren’t going to be saddled with the previous owner’s legal issues.

Some properties are advertised as turnkey indicating simply that they are in move-in condition. You will still have to put a property manager in place, if you don’t want to manage the property yourself, and maybe even find your own tenant. If you’re looking for a totally turnkey property, look for those properties that have all that work done for you.

It’s possible to find completely turnkey properties with a tenant that has a long-term lease or month-to-month rental agreement already in place, and with a property manager who will handle any day-to- day problems and find another tenant for you when the current one gets ready to move out.

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