How do you purchase turnkey rentals?

Turnkey properties are purchased just like any other home. You enter into a sales contract between yourself and the seller. You will have a predetermined time to do your due diligence, inspect the property, and to get your financing in place. The closing will be managed by a title office and they will insure that you receive a clear title, deed of trust, and title insurance.

Should I finance the property or pay cash?

This is a question that you will have to answer yourself. We do not give financial advice and don’t know your personal financial situation. We can however give you a quick breakdown of some of your options and the pros and cons of each.

Cash Purchase

Buying an investment property with all cash will make the transaction much easier since a lender will not be involved and will give you 100% of the equity…
You are the sole owner.

Pros

  • Higher cash flow since there isn’t a mortgage payment
  • No loan approval process or paperwork (easier transaction)
  • No loan origination fees (lower acquisition cost)

Cons

  • You’ll spend a large amount of cash savings
  • You won’t be able to leverage that cash to buy multiple properties
  • Your ROI will be lower without taking advantage of leverage

Financed Purchase

Buying a rental property using a loan will allow you to multiply your money and allow for a lower cost of entry.  Lenders typically require 20% and you will have a monthly mortgage payment until the home is paid off.

Pros

  • Financing gives you the ability to leverage your money and scale your rental portfolio
  • Lower cost of entry
  • Your savings will allow you to buy more properties and create stability in your portfolio
  • Your ROI will be higher since you are taking advantage of leverage
  • You can write-off your interest payments (contact your tax advisor)

Cons

  • Your monthly cash flow will be lower because you have a loan payment
  • The closing process will take longer and requires extensive paperwork
  • You will pay additional closing cost in the form of loan origination fees
  • You may owe more than the home is worth if there is a dramatic economic shift

Why Choose Debt?

Getting a loan (aka using debt) to fund your real estate investments gives you the opportunity to earn a higher rate of return on your investments and to grow your business at a faster rate. As an investor, you are likely looking into more than just one property to fix and flip or buy and hold, so using debt, could help you tremendously.

We have partnerships with the nation’s leading real estate investing lenders. We can introduce you to small local lenders in the markets that we operate. These lenders understand the turnkey model and are eager to earn your investing business.
We also work with national lenders that specialize in conventional financing, portfolio financing, and asset-based lending. Every borrower has different wants/needs and we do our best to connect you with the lender that will provide that service.

Contact us today to learn more about your financing options!

Until you own rental properties, you often don’t realize that your run-of-the-mill retail bank can’t help you. The problem is, they won’t tell you they can’t help you until you are several weeks into believing that your funding is coming.

Big banks (Chase, Wells Fargo, etc.) don’t ‘get us’ as real estate investors. But, the friendly retail sales people in your local branch will do their best to earn your business. Don’t fall for it… it won’t end well.

It’s important that you’re dealing with a lender that ONLY works with real estate investors. To get deals done, you need to minimize drama. Heck, if you’re financing falls through in this hot market, it’s likely that you’ll lose the deal completely.

The financing you often need comes down to whether your property is ‘stabilized’. By stabilized, we mean it doesn’t need work (or has work to be done that you won’t need a loan for), or you don’t need a loan for purchasing the property AND for repairing it. In addition, how many rental properties you have financed makes a difference (especially if you have more than 10).

Bridge Financing or Portfolio Loans

If you need short-term lending to rehab a property before you turn it into a long-term hold, or if you already have more than 10 properties… you need a different kind of lender. Because we at FlipNerd are also investors, and because we listened to our ~68,000 subscribers, we found a lender that would help our members fund their deals.

You can learn more about FlipFunds.com, including applying for a loan, refinancing a loan, or even obtaining a pre-approval letter right here: http://flipfunds.com/