“Turn Key” rental properties are often sold by real estate investment firms who specialize in acquiring undervalued properties and renovating them for occupancy. The companies market to and pre-screen tenants, then secure a capable management company to oversee the investments.
All in all, buying Turn Key rental properties can be a great long-term investment strategy if you’re willing to put up with everything that comes with owning rental properties. If you buy right, get paid by a credit worthy tenant and have a good property management company in place, these types of investments could be excellent for generating consistent income for years - all with minimal involvement.
1. You’re buying a cash flowing asset from day one, as the property is purchased with a pre-screened credit worthy tenant.
2. You decide on your level of involvement. If a good management company operates your rental, your investment will be very passive. If on the other hand, you have lots of free time, handy and wish to operate the investment by yourself (an idea we don’t recommend), you could learn the business and save yourself lots of expenses.
3. You'll enjoy Ownership Benefits such as:
a. Appreciation of value which may lead to a profitable sale of the asset.
b. Borrow funds against the property and let the tenant pay off the debt.
c. Enjoy tax benefits such as Depreciation and Loan Interest Deduction (if you are paying off a mortgage).
d. Take advantage of passive rental income which is taxed at a lower rate than that from earned income.
e. Earn a higher rate of return than just being a private lender.
SOME RISKS TO CONSIDER....
If you want to "run your operation yourself", you will deal with “typical” real estate headaches such as non-paying tenants, repairs, fees, evictions, renovations after turnovers, negotiating leases or agreements with contractors to name a few.
Even if you use a management company, you will still have some expenses that the company will need you to authorize.