Are turnkey rental properties a smart investment for you to make?

On television, turnkey rental properties are highly touted because, many people like the idea of purchasing a rental property without having to do any work to get it ready for rent but the BIG question is are these rental properties a smart investment to make? 

About Turnkey Rental Properties

When we use the term “turnkey rental properties,” we are referring to the loosely defined investment strategy of buying, rehabbing, and managing a property through a third party. The process of working with a turnkey real estate provider typically looks something like this:

  1. Finding a property: Based on your personal investment goals, the company will help you to identify and build a portfolio of properties. Most claim to have a pre-vetted database of turnkey investment properties for you to consider. Some also have proprietary software to evaluate which properties are likely to produce the greatest returns.
  2. Funding the investment: Unlike experienced investors, most turnkey buyers are unfamiliar with the various ways to finance rental properties (e.g. various loan products, 401K, 1031 exchange). The turnkey provider will help you to evaluate a range of financing alternatives depending on your individual circumstances and goals.
  3. Acquiring the property: Once you’ve identified the property you’d like to purchase, the turnkey provider will assist you with all of the paperwork, home inspections, appraisals, loan documents, and more. They provide end-to-end service, much like a real estate agent would, but they specialize in working with long-distance buyers who want to take a hands-off approach.
  4. Renovating the property: Depending on the situation, some turnkey rental properties will be in need of major renovations, while others may simply need minor repairs to bring the property up to code. The turnkey provider will manage all renovations and maintenance for you.
  5. Managing the property: The primary reason that people buy turnkey rental properties is because someone else pledges to manage the property on a day-to-day basis. This includes finding tenants as well as responding to any tenant needs (e.g. fixing a leaky sink). It ostensibly creates a stress-free investment opportunity—all that’s left for the buyer to do is deposit those rent checks!

Generally speaking, most turnkey firms will charge around a 3% fee for property acquisition, and then anywhere from 7 to 10% for ongoing management of turnkey rental properties.

That said, it’s important to know that there are hundreds of turnkey firms across the U.S., and no two are exactly alike. Some will buy, rehab, rent, and THEN sell a property to you (the investor). Others specialize in helping you to find cheap properties (for as little as $20,000!) that need major renovations—and the turnkey company will take on all of those renovations for you. The range of services can vary greatly, so be sure to thoroughly research several turnkey providers before you commit to anything.

The Growing Popularity of Turnkey Rental Properties

Turnkey rental properties have proven a great fit for people like Yang Guo, a 30-year-old data scientist who lives and works for a tech company in San Francisco. Even though he earns a good salary, he’s been priced out of the Bay Area. Nonetheless, Guo still wanted to add real estate to his investment portfolio.

Guo ultimately purchased two properties: A small home in the suburbs of Birmingham, AL and another outside of Columbia, SC. He worked with HomeUnion, a turnkey real estate provider based in Irvine, CA. HomeUnion helped Guo to purchase the two properties for a total of $60,000—quite the bargain in comparison with the Bay Area, where the median home price is over $675,000. HomeUnion, a 3-year-old startup, handled all of the necessary renovations, and they now manage the property for Guo. He’s never actually seen the properties or met the tenants—but he collects a rent check each month from 2000 miles away.

“There’s too much risk with buying property in the Bay Area,” Guo says. “As long as the cash flow is coming and hitting my bank account, I basically don’t care about seeing them in person.”

Novice real estate investors like Guo are attracted to turnkey rental properties because they’re lower-cost and less time-intensive to manage. The average turnkey investment property sells for between $50,000 and $150,000. Most are located in markets that were hit hard by the housing crisis. For example, Florida, North Carolina, Tennessee, Georgia, and Ohio have experienced an explosion of turnkey rental properties. In Florida, for instance, an estimated 12% of landlords are from out-of-state. Turnkey investors tend to come from high-priced markets and want to buy in states with low home prices and relatively strong rents.

However, long-distance real estate investors tend to lack local market knowledge. “You see these people coming from California and what I like to call ‘yuppie-ing up a place,’ but they don’t realize it’s not in the best area because they didn’t do their homework,” says Tony Kazanas, a Cleveland area real estate agent. There are all sorts of miscellaneous things that novice real estate investors don’t consider, like local vacancy rates or the need to obtain hurricane or other specialty insurance. Turnkey companies fill these important gaps by providing local market expertise.

The Dangers of Turnkey Rental Properties

Based on our overview so far, turnkey real estate investment might seem like a no-brainer! Not so fast: Turnkey providers often target uneducated buyers and sell the promise of a stress-free, cash flow-generating investment opportunity. Unfortunately, too many buyers forget to do their due diligence. They fall for a compelling pitch and slick marketing materials, only to regret the investment down the road.

See, there has been an explosion of turnkey providers since the downturn of the housing market. Many of these companies are run by young adults in their early 20s who have little experience in real estate. They bank on the fact that most out-of-state buyers won’t come to see the properties they’re selling in person, which often haven’t been upgraded to turnkey standards. Some are pitching portfolios of turnkey rental properties that look like they’re straight out of the foreclosure process, where upgrades haven’t even begun. This isn’t a red flag for someone who intends to spend money on renovating the homes; but many turnkey investment providers sell people on the fact that the homes have already been renovated when that isn’t actually the case.

As it turns out, many of these turnkey providers are expert internet marketers, not expert real estate professionals. Many are less than capable of managing the properties that they’re selling to you.

Here are some key warning signs that a turnkey real estate company may not be as legitimate as they seem on the surface:

  • Inexperienced operators: Find out how long the company has been in business, where they’ve invested in real estate, and how many buyers they’ve worked with. Don’t be shy about calling references. If you’re going to be getting into business with someone, you have the right to do your due diligence before signing on the dotted line.

  • Lack of direct investments: Has the company invested in its own portfolio of turnkey rental properties? If so, what types of returns are they getting? It’s a major red flag if the company doesn’t own and manage its own properties—how else will they know how to look after yours?

  • Weak support structure: Is the person who’s selling you on the investment the same person responsible for property acquisition, renovation, tenanting, and maintenance? If so, that’s an indication that there’s a weak support structure in place. Legitimate turnkey firms typically have a deep bench with professionals of varying expertise. If someone promises you that they can do it all alone, how much individual attention will your properties really be getting?

  • Shoddy renovations: Before going into business with a turnkey company, take the time to tour a few of the other properties that they manage. What condition is the property in, and have the renovations been done properly? If the company claims that thorough renovations have already been completed on the property you’re considering, an inspection is worth every penny. Otherwise, you could get stuck with costly repairs down the road.

  • Rental guarantees: Experienced real estate investors know that there is no such thing as a “rental guarantee.” A property may be more or less likely to rent quickly, but there’s no guarantee that it will be rented at the price the turnkey operator has stated. Spend some time doing your own market research to understand what rent prices are like in the area where you’re looking to purchase.

  • Overpriced properties: Similarly, spend some time researching the local market. Turnkey providers are notorious for selling overpriced homes to out-of-state investors who are used to expensive real estate markets. A home that sells for $200,000 might seem like a bargain compared to where you live—but if local comps are selling for half that, then there’s a good chance you’re being duped.

Get Property Management Help Here

For affordable and professional property management contact Vestpro Residential Services today by calling us at (832) 971-1841 or CLICK HERE to connect with us online.

 

5 Tips for Filling Vacancies at Your Houston Texas Rental Property

By VestPro Residential Services

HOUSTON, TX. – Do you own a Houston Texas Rental Property that’s not attracting the attention of renters and you can’t figure out why? Although this is frustrating when it happens the reality is that there could be one or more reasons why renters are showing a lack of interest in your rental property and the following steps will help you to get to the bottom of the problem and fix it.

Step #1 – Check Your Rent

Although every landlord wants to rent their Houston Texas Rental Property for the most money possible the reality is that some people may be listing their rentals for more than they should.

To figure out what you should be renting your property for you should do a comparable analysis of similar rentals in your area to determine if you should consider lowering your rent a little in order to attract more tenants.

Step #2 – Improve Your Rental Ads

Let’s face it, advertising is the lifeblood of our business because it’s what helps renters find our Houston Texas Rental Properties.

Sadly, many landlords are running poor advertisements that are turning away potential renters rather than attracting them.

Before running another rental ad you should first take better pictures and video of your rental property then take a look at your ad copy, rewrite the headline, and revise the body copy so that your advertisement talks about all of the benefits, features, and amenities that your rental offers prospective tenants.

Houston Texas Rental Property

Step #3 – Bring Your Houston Texas Rental Property Up To Date

If the last time you updated your Houston Texas Rental Property was before the start of the millennium, you should start making some updates now because new flooring, window coverings, appliances and fixtures in a rental property can go the extra mile with making a rental feel fresh, new, and updated.

Step #4 – Think About Allowing Pets

In 2017 there are more renters out there than ever before who are searching for rental properties that will allow pets. If you don’t allow pets at your Houston Texas Rental Property you should consider changing your pet policy because you will open up your rental to a larger pool of prospective tenants, just make sure to update your lease agreement before renting to someone with a pet.

Step #5 – Ask Your Current Tenants for Referrals

Last of all, but most important, if you have tenants living in your other rental properties you should consider asking them for referrals because the chances are that they might know someone who is looking for a rental and this will save you the time/money and hassle of having to advertise your Houston Rental Property.

Get Houston Texas Property Management

For affordable and reliable property management for your Houston Texas Rental Property contact VestPro Residential Services by calling us at (832) 971-1841 or click here to connect with us online.

How to Handle Emergencies and Keep More Tenants

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One of the biggest problems that can hurt any property owner is how they handle emergencies at their rental properties. Sadly, how any property owner handles emergencies should be one of the most important skills that they master because, it’s very easy to lose tenants if you don’t handle an emergency at your rental property quickly and efficiently.

In this post we will share with you several tips that you can use for handling emergencies at your Houston Texas Rental Properties so you can keep your tenants happy and not lose business.

Tip #1 – Make Contact with You Easy

Although you may not want to be available to your tenants 24/7, the reality is that swift communication with your tenants is the key to success with resolving problems and keeping them happy.

If you don’t have a team managing your rental properties you should consider signing up for a call center so that you can receive messages and be contacted after business hours should problems occur.

Tip #2 – Document Everything

Regardless if it’s a broken pipe or leaky toilet, you should document all problems that occur at your rental property and then document the solutions to those problems because, some tenants may use problems as excuses to not pay their rent, or to move to another rental property, and proper documentation is an important part or professionally managing a rental property and generating long term income from it.

Tip #3 – Keep a List of Contractors On Hand

Another important thing you can do to handle problems at your rental property quickly is to have a list of contractors on hand that you know offers fast, reliable service, especially after hours or on weekends, because, this will enable you have someone you can call to resolve problems quickly without further delaying getting the problem fixed.

Get Houston Texas Property Management

To get property management for your Houston Texas Rental Properties contact Vestpro Residential Services today by calling us at (832) 498-0016 or click here to connect with us online.

 

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Is It Time For You To Consider Houston Property Management?

Get Houston Property Management

There’s no denying that now is a great time to invest in local real estate thanks to great prices and low mortgage interest rates but as you grow your portfolio or rental properties you will also face more responsibility if you are managing those properties yourself and this is why you should consider Houston Property Management.

If you’ve been debating hiring a Houston Property Manager here’s how we can save you the time, money and hassle of managing rental properties yourself.

On Time Rent Collection

When you hire a Houston Property Manager you can rely on them for collecting your rent on time every month and either depositing the rent into your bank account or mailing you a check each month.

A property manager will also eliminate all rent collection delays and or excuses that traditionally come with rent collection for some owners plus insure that your rent is collected professionally each month without you having to go through the hassle of rent collection yourself. 

Professional Property Management

Your rental property will be professionally managed by a qualified property manager including all of the additional time consuming aspects of property management like maintenance requests and other service related issues.

Excellent Customer Service

Sometimes having an actual human being to call your tenants back matters most in the world of property management and when you hire a professional Houston Property Manager you can have confidence that all of your tenants will be responded to in a timely manner when they call or email the property manager.

Excellent Backup For You

Another benefit of hiring an experienced Houston Property Manager is that you can depend on them to be on top of any issues related to your property so that regardless if you live in Portland or are out of state your home or multi-family rental property will be professionally managed by caring professionals.

More Time to Grow Your Portfolio

Last of all, but most important, when you hire a professional Houston Property Manager you will have more time to focus on growing your portfolio of rental properties and focus on the next rental that you want to purchase for your portfolio.

Get Houston Property Management 

To learn more about our Houston Property Management Services contact Vestpro Residential Services today by calling us at (832) 498-0016 or click here to connect with us online.

 

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3 tips for getting your Houston Texas Rental Property Ready For Summer

 

Houston Texas Rental Properties

Summer is right around the corner and with the weather already in the 70’s and 80’s during the spring one can only imagine what the summer is going to be like that’s why it’s important for you to get your Houston Texas Rental Property ready for summer by following these simple tips.

Tip #1 – Inspect Your HVAC System

Since your tenants will be using their HVAC systems during the summer months you should get HVAC and air conditioning units inspected now to insure that they are all running smoothly during summer months once warmer weather arrives.

 

Tip #2 – Check Insulation and Weather Stripping

Last of all, but most important, you should check the weather and insulation in your Houston Texas Rental Properties because proper insulation and weather striping will help your tenants to lower their energy costs and insure that their homes stay cool during the summer months.

Tip #3 – Close Up Crawl Spaces Under Homes

If your Houston Rental has a crawl space underneath it you should close up that space or any access point to your basement or underneath your home immediately because snakes and critters will seek shelter in cool spaces during the warmer months in Houston.

Tip #4 – Clean Up Brush And Dead Vegetation Surrounding Your Property

Take the time to clean up brush and dead vegetation surrounding your property since this will also make your yard space less attractive to critters and also create a firebreak between your home and open spaces if a fire breaks out during the summer.

Tip #5 – Remove Wood From Your Home

Another fire hazard and inviting spot for critters like snakes are wood piles and if one of your Houston Rental Properties has a wood pile somewhere on the property you should move it immediately to insure that the best interests of your tenants are protected during the hot Houston summer.

Get Property Management For Your Houston Texas Rental Property 

To learn more about how you can get your Houston Texas Rental Property ready for summer, or to speak with us about our property management services, contact Vestpro Residential Services today by calling us at (832) 498-0016 or click here to connect with us online.

What Are The Best Investments For You To Make In Your Single Family Houston Rental Property?

By Vestpro Residential Services, LLC

Now is one of the best times for you to remodel your single family Houston Rental Property because mortgage interest rates are still historically low and thanks to recent news it’s likely we will not see a rate increase at all this year.

The big question is what investment should you make in your Houston Rental if you want to increase the value of your property?

Should you add a deck, more closet space, improve the kitchen or have a new roof put on your home?

In this article we will break down some of the best renovations you should consider making to your Houston Rental Property.

What Is The Cost Vs. Value?

During the process of making renovations to your Houston Rental Property one of the biggest things you must ask yourself is what is the cost vs. the value of the renovations or improvements you want to make to your Houston Rental?

Thanks to a recent article by Remodeling Magazine we know that the average return on investment you can expect from major renovations to your rental property.

  • Adding a backyard deck – This improvement will bring you a return of about 80 cents on the dollar.
  • Kitchen remodel – Making a minor kitchen renovation to your home will also bring you a return of about 79 to 80 cents on the dollar.
  • Adding an attic bedroom – One of the smartest investments you can make, this investment will bring you a return of about 77 cents on the dollar as well.

What about Multi-Family Renovations

When making additions or renovations to your multi-family rental properties it’s best to consider making the following renovations:

  • Add wood flooring.
  • Upgrade the kitchen.
  • Improve the interior lighting.

Get Houston Texas Property Management

For effective Houston Texas Property Management contact Vestpro Residential Services today by calling us at (832) 971-1841 or click here to connect with us online. 

What to Look For In a Houston Property Manager

So you’re thinking about hiring a Houston Property Manager to manage your real estate

This is a smart move to make because as your portfolio grows so will all of your management responsibilities and this is why hiring a Houston Property Management company just makes sense.

Before choosing just anyone we will share with you several tips you can use for choosing the right Houston Property Manager.

What to Look For In a Houston Property Management Company:

Tip #1 – Look for a Team

When you choose a Houston Property Management company you should choose an organization that offers you a team instead of one individual because a team will be able to efficiently handle all of the duties required to efficiently manage a rental property including: customer service, maintenance and rent collection.

Tip #2 – Look for Experience

The Houston Property Manager you choose should be experienced in all forms of property management and provide you with verifiable references from satisfied owner clients and happy tenants they have managed over the years.

Tip #3 – Look for Growth

The right Houston Texas Property Management company you choose should also show signs of growth in their company by having acquired new clients over the last 24 months and they should also show signs of growth when it comes to the systems they use to manage their company.

Tip #4 – Look for Efficiency

Last of all, but most important, when you choose a Houston Property Manager you should choose a company that offers the most efficient online and offline tools possible for finding, qualifying and keeping tenants so you can continue to enjoy long term cash flow from your Houston Rental Property without having regular vacancies.

Get a Houston Property Manager Now

To get started with a Houston Property Manager contact Vestpro Residential Services today by calling us at (832) 498-0016 or click here to connect with us online.

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