Firstly, What is Turn-Key Investing?
How to Talk to a Turn-Key Provider? Different real estate professionals will describe turn-key investments differently. We have four stipulations for turn-key providers:
- A property is purchased and rehabbed
- Tenants are in place
- A projected cash flow statement is prepared
- A team is put together (lender, escrow company, title company, insurance company, property management)
Why Turn-Key Investments?
Simply put, investing in turn-key real estate is the BEST way for the active-duty military to create passive income. Quality turn-key investments are low risk, minimally time-consuming, and have excellent rates of return. And – you guessed it…….. all of the investments we refer you to are Quality!
What to Look for in a Turn-Key Investment
- Excellent track record for the provider and property management team
- Located in Top-notch markets
- Increasing Economy
- Resiliency against a crash
- Increasing rental market
- Restricted ability to build (proximity to industry, terrain, etc…)
- Targeting the middle class
- Luxury rentals are more likely to drop in a declining economy
- Low-income rentals are more likely to have problems (vacancies, destructions, legal issues)
Sold? Ya, me too! Now…
8 Things to do before talking to a turn-key provider
- Liquidate Cash. The first thing you need to do is liquidate enough cash for an investment. For a turn-key investment with our providers outside of an IRA, you need between $20k – $30k. For a turn-key investment within an IRA, you need between $35 – $45k. Check out our blog post for financing ideas.
- Decide if you want a legal entity. For a turn-key investment the legal entity you MIGHT want to establish is an LLC. An LLC would provide you an extra layer of protection in the case that you are sued and your insurance doesn’t cover all of the damages. With an LLC, the claimant would only be able to get at the assets within your LLC – not your personal assets. In MOST instances, if this is your first investment property, you probably do not need an LLC. A good insurance company (which our providers will refer you to) and a good property management team (which we have) will protect you. You can also purchase Umbrella insurance for extra liability protection (USAA has GREAT rates). If you are interested in establishing an LLC, make sure you establish it in the same state that you are purchasing a rental property. Take our course or reach out via the Facebook group for more information.
- Establish a separate checking account. Establishing a separate checking account will help you stay organized, allow you to track cash flow, and facilitate your ability to capitalize on all of the tax benefits of real estate investing. Check out our blog post for more on the tax benefits of real estate investing.
- Be prepared to not make any big financial moves. Once you start escrow, your lender will want your financial assets to stay as “frozen” as possible. Avoid transferring funds, opening accounts, talking to other lenders (who may make credit inquiries), or making large purchases.
- Have your resources available electronically. There are a multitude of players who will be working together in the effort to ensure your acquisition closes on time. Don’t hold up the train. Have W2s, tax returns, checking account statements, savings account statements, IRA statements, TSP statements, and brokerage account statements available electronically. If you own investment property also have mortgage details and leases available. If you have these documents electronically and consolidated it will expedite your ability to send them out once they are requested by your escrow agent.
- Plan ahead so you can be available during escrow. Issues may occur during escrow. An appraisal may come in low or the home repair may dictate a repair prior to close. Make sure you have the ability to make yourself available during escrow to answer these questions and make decisions.
- Understand contracts and the Escrow Process. Don’t be overwhelmed by the purchase contract or the multitude of disclosures you will need to sign. The ADPI team has personally invested with every provider that we refer you to and we have vetted these contracts. Read through the disclosures and ensure you understand the contract. If you have any questions – reach out to us.
- Be ready with the cash to close. The amount you will need to close will be depicted in your closing disclosure. Ensure that this amount is ready in your separate checking account for closing.
That’s it guys. Investing in your first turn-key property is THAT easy.
Real estate investing does not have to be difficult. Listen to any real estate podcast or attend a real estate seminar and you will hear embellished stories about investors going bankrupt or losing their jobs then recovering an making millions through real estate.
You don’t need to go bankrupt and your don’t need to lose your job to be successful in real estate.
Invest with us, grow your education, and start on your journey to financial freedom. It really is that easy.
Author: Jon
West Coast Chief, ADPI
