A growing number of investors have decided to flee the volatile stock market seeking safety, and they will find this in hard assets like in real estate. Nevertheless, many people wish to stay a passive investor, and they don’t want to knock on doors seeking foreclosures and fixing toilets while working as the landlord. A simple search on Google for passive real estate will equate to people becoming the victim of online advertising in a market property known as turn-key rental properties. But what is a turn-key rental property? And is it truly worth your investment?
Turn-Key: What Does It Mean?
To most investors, turnkey sounds like nothing more than a buzzword, and a lot of people throw it around. Many times, the people who throw it around are the new companies that don’t have a definition of what this means. What’s the standard that defines this word? For the uneducated buyer, you might assume that turnkey properties mean that you don’t have to do anything. Don’t let something that looks too good to be true pull you in. The false belief that someone else will renovate, buy, lease and manage the property while all the other people have to do is deposit the rent check is false.
Some companies will sell a turnkey property that will be fully renovated to what looks like-new condition. You will need a property manager who understands how this works. Some companies only slap on a little paint, calling it turnkey. They have hopes that they will attract buyers from out of state.
How Can Investors Protect Themselves
People have to learn how to disregard the marketing in the message. The marketing is what investors have to stay alert to the most. People don’t want good marketers to manipulate them simply because they understand how psychology works. Beware of messages that say, “This is turnkey, and you won’t have to lift a finger.” In addition, investors should go to see the property before they buy it because of what it looks like in photos might be misleading in person.
What’s the bottom line with these investments? Although a may look like it has a cheap and reasonable price, chances are that there will be more work and time you will have to put in. If investors decide to pursue turn-key rental properties, they should always check to make sure that they will be receiving the best price.
After experiencing another long year of rising rent and home prices while going through a declining inventory throughout the country, it is evidently challenging to find a suitable place to invest in expecting to reap reasonable returns shortly. Nevertheless, there are still some scattered sweet spots that can offer investors some much great returns. These cities provide a rare combination of job growth that is better than average.
They also offer some runway before housing is overpriced. Investors who are looking for high-growth markets should try to put their investment in the following cities that have a promising future of good returns in the coming years.
1. Orlando, Florida
Orlando is known as the land of Harry Potter World and Mickey Mouse. In 2017, the housing and home prices of Orlando recorded a hike of 9%. This price increase hit an average of about $247,550 in that year. Interestingly, a Local Market Monitor predicts that these prices are likely to rise with an estimate of 35% from 2018 to the start of 2021. Generally, Orlando city does well when the average American market improves. Optimistic investors should consider investing in Orlando.
2. Provo-Orem, Utah
Provo-Orem was the top newcomer city in the list produced by Forbes for the most promising cities regarding the future of housing prices. The city recorded an estimated average home price of $266,169, a 7.2% population growth in three years, and a 6.7% job growth in the last two years. The city was estimated to have attained a 10% home price growth over the previous year. Moreover, Forbes predicted that the towns home price growth at 31% in the next three years.
3. Ogden-Clearfield, Utah
The Forbes listed Ogden-Clearfield at position five. The city recorded an average housing price of $246,251. Its population was found to have achieved a 5.1% population growth in the past three years. Additionally, Ogden-Clearfield attained 5.7% job growth in the last two years and a 1-year home price growth of 10%. Forbes also forecasted home price growth of 29% in the coming three years.
4. Springfield, Missouri
Springfield city has an average home cost of $154,557, a 3-year population growth of 2.3%, and 5.1% job growth in the last two years. Moreover, Forbes predicted that the home price of this city at 14% in the next three years.
Springfield, Ogden-Clearfield, Provo-Orem, Orlando prove to some of the best cities to invest in housing in 2018. Any of these cities serve as a great option for an investment opportunity for anyone who is looking for a strong return.
Real estate investment has changed. House flipping is commonplace. Increased competition makes finding profitable investment properties more challenging.
Rising above the competitions often means turning to technology. There are two main ways that technology can benefit the real estate investor. Technology can help find new opportunities and improve upon the results of current investing techniques.
New Investing Opportunities
The main areas where technology can assist a real estate investor to find a profitable deal are in bidding, optimizing online efforts, and efficient property searches. Each plays a significant role in staying ahead of the competition.
DealMachine is an innovative tool for finding undiscovered properties. It is a simple idea with amazing applications. Investors merely take a picture of a house, then the app provides owner information. DealMachine’s other features include sending the owner information and express a willingness to buy their property. It also automatically follows up to encourage an owner to respond.
Optimized websites benefit real estate ventures. Carrot excels in this area. It also helps find relevant leads for buying and selling properties. HouseCanary is a nice compliment. It provides filters to determine which are the most profitable rental properties and areas within a community.
Improve upon Results
Managing customer relationships, finances, tenants, and cultivating leads all improve results of real estate investing. Most investors do not make the most of cultivating their leads, REIPro provides a tool for managing real estate relationships. It builds trust and nurtures relationships through features designed specifically for investors.
Another piece of software that benefits lead generation is Call Porter. Among its features is personalized phone communication. Overall, Call Porter is a specialty software that aids several aspects of investing like managing appointments and callbacks.
In regard to technical aspects, DealCheck goes a long way toward improving profits. It is a forecasting tool that estimates repair costs. This aids in analyzing properties and actualizing profits. Roofstock is of benefit in this area as well. Its focus is on cash-flow properties. Investors can purchase properties free of the concern of disrupting tenant occupancy. For out of state investors, Roofstock is a blessing.
More competition has indeed entered real estate investing. However, so have some very useful tools. The savvy investor can still rise to the top in profitable deals.
While your rental property can bring you in a nice passive income, it’s always a good idea as a property owner to reevaluate your property from time to time. Even though you can make money every month on your rental property, there are certain times when it might be more feasible for you to simply sell the property.
- When The Money You Invested Could Be Earning More Elsewhere
While you can’t predict the future, you can make an educated guess of how the real estate market will be by evaluating the present. If your rental property is located in a location with a dying industry, then it might be time to sell and reinvest elsewhere where you’ll be able to earn more in the future.
- When You Need Cash Now
If you need cash now or in the foreseeable future, you might want to consider liquidating your rental property. For instance, if you’ve had to undergo a major medical procedure or your need to fund your child’s tuition, then you might need to go ahead and cash out your rental property to get the funds you need.
- When You Could Get a Significant Tax Benefit
Tax laws are always changing, so it’s important for you to stay up on the latest. If you could realize a significant tax benefit from selling your rental property, then it might pay off more for you to do so than it would for you to keep the property. For instance, under Section 1031, you could avoid paying capital gains taxes when you sell your rental property so long as you buy another one in the next 180 days.
- When The Property Is Draining You
Sometimes you need to sell your rental property simply because it is draining you to upkeep it. If you’re ready to retire, for instance, you might not be up for all the property management and maintenance required to run a rental property. You could simply sell and cash out, or if you still want to keep earning the money from rents, you might want to consider automating as many tasks as possible and turning the rest over to a property management service.
Knowing when to buy and sell can be tricky parts of the real estate. If you already own rental property, the above situations can help you know when to sell.
There’s an age-old debate in the real estate market as to whether primary residences should be viewed as investments or simply as a place to live. While this debate is something that every homeowner should carefully consider, it is clear that there are reasons for buying a nice home, no matter the market conditions, other than simply to maximize one’s wealth. After all, everyone needs a roof over their head.
The same cannot be said, however, for professional real estate investors or anyone who is investing in a property that has the main purpose of income generation. These investors need to be much more careful about things like market timing. Real estate cycles can often last even longer than business cycles, meaning that an investor that buys into an overheated market could be waiting decades to realize any returns at all.
Unfortunately, there is currently ample evidence that real estate markets from coast to coast are overbought. While there still may be opportunities for solid long-term returns that can be located by savvy investors, the current trends in real estate prices indicate that there will be a reversion to historic averages in the near-term future. Buying into a market at a peak like the one we’re very likely seeing now can have disastrous consequences for the long-term performance of any real estate portfolio.
One of the key indicators that the real estate market is well above sustainable price levels is the number of hours that the average wage earner needs to work in order to buy the median home. In some cities, like Los Angeles and San Francisco, the average wage earner would need to work the majority of their waking hours in order to afford minimally decent housing. Contrast that with the norms of the 1960s when many American families only needed a single wage earner to work for 10 hours per week in order to afford the median home.
Another key factor that may bode poorly for the performance of real estate prices over the next five years is the almost certainty that interest rates will soon begin rising. The real estate market is exquisitely sensitive to interest rates, and worst-case-scenario interest hikes could put a big dent in the price gains that housing has seen nationwide since the financial crisis of 2008.