Real Estate Investing in Turn-Key Investment Properties - Part 3
In Real Estate Investing in Turn-Key Investment Properties Part 1 and Part 2 we discussed the steps involved to make a property turn-key and 5 benefits to acquiring rental property from a turn-key property provider.
In this article we will discuss 6 requirements when selecting a turn-key property provider.
1).
Buy directly from the seller It is common in real estate investing for investors to wholesale other people's properties.
A red flag is when the seller is in California selling a property in Ohio.
The problem with this is that the wholesaler doesn't really know about the property and the property can easily become misrepresented.
Always ask if the seller actually owns the property.
Inform the seller that you would like to discuss the property with the person or company who originally acquired it and performed the renovations.
Even if purchasing from a broker, sign an agency disclosure agreement and still insist on speaking with the owner.
When speaking with the owner, interview him/her on the renovations that took place.
2).
Pay for a property inspection: It is always wise to pay for a 3rd party inspection to confirm the property is fully renovated.
Don't be alarmed if the inspection has a few minor items, as all reports do.
An inspector must justify his cost.
The main thing is that the seller promptly takes care of any/all issues.
3).
Make sure the renovation is 100% complete: Never buy a property at a wholesale price where the rehab isn't already 100% complete.
Some property providers sell the property and then do the repairs.
For example, "For sale for $39,900 and only needs $15k in rehab.
" The question is does it really needs $15k in rehab.
According to who? Performing what repairs? These type of transactions may sound appealing but leave the buyer very exposed to either an under-renovated property or "extras," exceeding the original estimate.
Furthermore, the investor would have to buy the property and then wait for the renovations to be completed, delaying time to begin renting and realizing a return on investment.
4).
Know the financials: The seller should provide a financial analysis showing all the expenses, cash flow, cash on cash return, cap rate and other key financial ratios.
One item often misrepresented is the property taxes.
Be sure the stated taxes are based on non-homestead rates even if the property currently is assessed with homestead taxes.
Sooner or later, the adjustment will come and non-homestead taxes are much higher.
5).
Property Manager/Rents: Be sure to interview the property manager and make sure you are clear on your goals, objectives, and expectations.
For example, discuss collection policy and what type of qualifications you would like to see in a tenant.
6).
Work with a company that has a proven track record: When it comes to real estate investing, there are many novice or beginning investors.
Be sure to use a company that is established and has a strong track record.
Look at previously sold properties and testimonials and ask for referrals.
A solid company will work with the best property managers, insurance agents, lenders, appraisers, etc.
Find out how long they have been in business.
Be sure to do due diligence and learn about the area, rents, property, etc.
Select a company that has excellent customer service, superb properties and plans on being around for a long time.
Be sure to obtain a full warranty deed and clear title.
Above all else, work with only the best in the business! Be sure to read, "Real Estate Investing in Turn-Key Investment Properties Part 1 and Part 2.
"
In this article we will discuss 6 requirements when selecting a turn-key property provider.
1).
Buy directly from the seller It is common in real estate investing for investors to wholesale other people's properties.
A red flag is when the seller is in California selling a property in Ohio.
The problem with this is that the wholesaler doesn't really know about the property and the property can easily become misrepresented.
Always ask if the seller actually owns the property.
Inform the seller that you would like to discuss the property with the person or company who originally acquired it and performed the renovations.
Even if purchasing from a broker, sign an agency disclosure agreement and still insist on speaking with the owner.
When speaking with the owner, interview him/her on the renovations that took place.
2).
Pay for a property inspection: It is always wise to pay for a 3rd party inspection to confirm the property is fully renovated.
Don't be alarmed if the inspection has a few minor items, as all reports do.
An inspector must justify his cost.
The main thing is that the seller promptly takes care of any/all issues.
3).
Make sure the renovation is 100% complete: Never buy a property at a wholesale price where the rehab isn't already 100% complete.
Some property providers sell the property and then do the repairs.
For example, "For sale for $39,900 and only needs $15k in rehab.
" The question is does it really needs $15k in rehab.
According to who? Performing what repairs? These type of transactions may sound appealing but leave the buyer very exposed to either an under-renovated property or "extras," exceeding the original estimate.
Furthermore, the investor would have to buy the property and then wait for the renovations to be completed, delaying time to begin renting and realizing a return on investment.
4).
Know the financials: The seller should provide a financial analysis showing all the expenses, cash flow, cash on cash return, cap rate and other key financial ratios.
One item often misrepresented is the property taxes.
Be sure the stated taxes are based on non-homestead rates even if the property currently is assessed with homestead taxes.
Sooner or later, the adjustment will come and non-homestead taxes are much higher.
5).
Property Manager/Rents: Be sure to interview the property manager and make sure you are clear on your goals, objectives, and expectations.
For example, discuss collection policy and what type of qualifications you would like to see in a tenant.
6).
Work with a company that has a proven track record: When it comes to real estate investing, there are many novice or beginning investors.
Be sure to use a company that is established and has a strong track record.
Look at previously sold properties and testimonials and ask for referrals.
A solid company will work with the best property managers, insurance agents, lenders, appraisers, etc.
Find out how long they have been in business.
Be sure to do due diligence and learn about the area, rents, property, etc.
Select a company that has excellent customer service, superb properties and plans on being around for a long time.
Be sure to obtain a full warranty deed and clear title.
Above all else, work with only the best in the business! Be sure to read, "Real Estate Investing in Turn-Key Investment Properties Part 1 and Part 2.
"
