4 Common Misconceptions About Turnkey Rentals
Despite the rise in popularity of turnkey rentals, several misconceptions endure about this form of real estate investment. First of all, turnkey rentals are investment properties that require no work on the part of the owner. That’s enticing enough for most real estate investors. Unfortunately, when you throw in myths and misconceptions, the luster fades and many people are erroneously discouraged from investing in a turnkey rental. In fact, turnkey rentals are one of the few real estate investments that are attainable by almost anyone with decent credit and a modest amount of savings to invest. If you’ve been put off by what you’ve heard about owning a turnkey rental, read on to learn the truth.
1. Turnkey Rentals Are Only for Rich People
Like many falsehoods, there’s a little bit of truth in this myth, but it’s not what you think. Those who have invested in turnkey rentals for any length of time typically enjoy some level of financial success. Many turnkey rental investors could be considered well-off or “comfortable.” When you encounter someone who is a turnkey rental investor, your preconception that it’s only for rich people may be validated if you find out they have accumulated wealth. But what you don’t see is that turnkey rentals probably greatly contributed to their current wealth. With a little digging, you’d likely discover that they began their wealth building with just one turnkey rental. Then they built on that, adding one turnkey rental after another to their portfolio. And you can do the same thing. Turnkey rentals aren’t just for rich people. They’re for people who want to get rich.
2. It’s a Pain in the Neck to be a Turnkey Rental Landlord
Again, there’s a grain of truth to this misconception about turnkey rentals. And again, it’s because there’s an error in thinking about how turnkey rentals operate. It’s definitely a pain to be a hands-on landlord. Who wants to spend their weekends knocking on tenants’ doors asking for rent checks that should have arrived in the mail a week earlier? No one. Who wants to play the handyman for a tenant with a ripped screen door or a double-hung window with a broken pulley? No one. Certainly not someone who isn’t particularly trained in performing home repairs. So it’s very true that being a hands-on landlord is a pain. However, this is where the misconception comes in. If you have a turnkey rental, you aren’t a hands-on landlord. You’re a landlord because you own the property. But you aren’t a landlord in the sense that you have to pick up the phone at 2 a.m. to hear your tenant complain that the furnace blew. And if you own any kind of rental property and you’re getting those calls—you’re doing it wrong. These days, we have property managers. Qualified property managers are made up of teams of people who handle all that good stuff for you. They collect the rent, take the phone calls, fix the screen doors, get the furnace replaced, and much more. As long as you have a property manager—which you will have if you buy a MartelTurnkey rental property—being a landlord is a joy, not a pain.
3. You Can Only Have One Turnkey Rental Mortgage at a Time
There’s also a misconception about how many mortgage loans you can have open at one time. With a traditional mortgage on an owner-occupied property (i.e., your family home), lenders will scrutinize your debt-to-income ratio. If you already owe hundreds of thousands of dollars and your income is a fraction of that, it would be hard to buy a second owner-occupied home. But with turnkey rental property mortgages, you’re getting an investment loan, which is a totally different ball of wax. Lenders look at these mortgage applications differently because they are income-producing. As long as your credit is healthy and your financials are the same or better from one loan application to the next, you can have multiple outstanding investment property mortgages simultaneously. So who gives out these magical investment loans? Almost all large financial institutions have investment property lending arms. All you need to do is speak to a loan officer about your real estate investment plans. If you’re interested in a specific MartelTurnkey rental property, we have vetted lenders that we can recommend for you, too.
4. Cash Flow Doesn’t Include Mortgage Payment and Property Insurance
Another misconception about owning a turnkey rental is that the cash flow number doesn’t include all the expenses related to owning the property, like the mortgage and the insurance. Time after time, we hear people saying, “Yes, but then you still have to pay the mortgage, the insurance and everything else. Then you have to pay the property manager if you want one. There’s nothing left over.” This is so not true. It’s also really one of the most disturbing misconceptions because it means people are missing out on one of the easiest ways to build wealth. When investors speak about a turnkey rental cash flowing, that refers to the money that goes into your bank account after the mortgage, the insurance, the taxes and the property manager have all been paid. It’s free and clear money that you can save or spend at your discretion. If you want more information about how cash flow works, please feel free to contact MartelTurnkey. We’d be happy to walk you through the steps. Our goal is to educate anyone interested in investing in turnkey rentals so you can make the most of your investment savings.
This should help to clear up many of the prevalent misconceptions about turnkey rentals out there. Owning a turnkey rental is such a fantastic investment, we want everyone to be fully informed and free of misconceptions and myths. For more information about turnkey rentals, or if you have questions about any of our available properties, please don’t hesitate to reach out to us.