When it comes to making money off of rental income, turnkey investing is taking the real estate world by storm. The benefit of purchasing a property that’s updated and ready to go — sometimes with a renter already installed — is plain.
While some investors live in areas that are prime rental markets and can purchase properties in cities and neighborhoods with which they are already familiar, others need to purchase in other places in order to maximize their investment. If you’re considering out-of-state turnkey investing, here are a few common pitfalls to watch out for while looking for the right turnkey property.
4 Keys to Out-Of-State Turnkey Investing
Educate Yourself About the Area
While everyone wants to be the first investor on the ground floor of urban renewal in a run-down part of town, getting in on that sort of investment takes real foresight. What’s more likely is that you buy in during the early stages of a boom in a specific area. To look for these sorts of deals, do your research and become knowledgeable about how property values are moving in the neighborhoods or cities you’re considering. Keep in mind that a low crime rate, good schools, and access to amenities like shopping and restaurants will play into the desirability of an area for renters. If a neighborhood doesn’t have them, attracting renters to your turnkey property will prove tough.
Pay Attention to the Numbers
As part of your out-of-state turnkey investing research, you’re going to need to lay out some numbers. First of all, set a clear budget and don’t exceed it. If you overextend your finances, you’ll defeat the purpose of real estate investing, which is to generate passive income.
It’s also important to understand the rental market in the place you’re considering purchasing. No matter how attractive a property may seem, if you can’t charge enough rent to more than cover the cost of the mortgage and maintenance, your investment will quickly put you underwater.
Ask the Experts
If you’re extremely unfamiliar with the area in which you’d like to invest, consider utilizing the knowledge and experience of a real estate investment firm. Different than a regular realtor, these kinds of firms are highly skilled in understanding the nature of real estate as investments, rather than looking at them from a residential buyer’s perspective. Whether you’re in the market for a single-family rental property or a multi-unit property, an investment firm can guide you choose the best turnkey property for your needs.
Hire a Property Manager
Especially for people who engage in out-of-state turnkey investing, hiring a property management company is key to maintaining order and sanity. Because rental income is referred to as “passive income,” this makes it seem as though the property practically takes care of itself. Anyone who has ever owned and managed a rental property can attest that nothing is farther from the truth.
Part of earning this “passive” income involves managing leases, contracts, and rent payments. If a payment is late, the issue must be addressed and late fees administered. Tenants may have problems (or become problems). Evictions sometimes happen. All properties need repairs and maintenance.
Altogether, these items can turn what seemed like a part-time passive hobby into a full-time landlord job. This is why many real estate investors — and particularly those with properties in another state — hire property management companies to handle it all for them.
Out-of-state turnkey investing may sound complex, but with the proper research and guidance, it can be a hassle-free way to earn immediate passive income, as well as increase the overall value of your real estate investment portfolio over time.