There are a lot of companies that talk about turn key real estate they sell. The turn key they are talking about is getting the property ready and rented. It is just part of the turn key and a lot of investors need to hear the rest of the story.
What they don’t tell you is how long the tenant will be there and the quality of tenants the property will attract. I had a client out last night and we discussed this issue and what needs to be done. Investors need to be able to buy quality real estate that literally generates income and have a great chance to acquire equity.
Getting a income property is a huge decision and a lot of real estate clubs and companies race to the bottom of the heap. There seem to be a lot of low cost properties they sale, if they were a great place to live don’t you think people would be snapping them up.
When your looking at Income real estate buying up a few notches can make you a consistent income and Appreciation.
When you have tenant turnover it really effects your bottom line. When tenants do not pay rent you have to kick them out. That cost money and usually takes 2-3 months worth of rent and legal cost. You will also have the rehab cost that is needed to get your property back in shape. That might happen yearly with low cost real estate.
Buying nicer Income Real Estate attracts more professional people and better tenants that you get your rent the full term of the lease. They are people that want their deposits back and will usually keep the property in better shape and it will cost you less.
Let’s take a $950 a month low cost home. Say the tenant should pay $11,400 per year and decides after 6 months they can’t pay the rent anymore. So it takes 2 months to get the tenant out and get the property rehabbed. Legal cost will also have to be paid. Say you have $2500 rehab because of the tenants tearing up some of the property. You will usually have $1000 in deposits in this type of property.
So lets look at the cost of this transaction. Rehab $2500-$1000=$1500 2 Months Rent $1900 and legal $500. Then some property management companies will make you pay another commission to rent the property out again. That would cost another $950. So the total cost of one tenant leaving would be cost around $4850. That would take your yearly total down to $6550 or $545.83 a month for rent.
That isn’t much money and your receiving little to no equity growth. That is no way to create wealth. The way to do that is buying income real estate that attracts professional quality tenants. Call Brett that is all I do and I can show you a better way. 216-703-5740 Century 21 Premier and 602-363-6551 West USA Realty