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Buy a Turnkey Rental Instead of a First Home: Here’s Why

 

Are you saving up money for a down payment on your first home? If you already have $17,000 or $20,000 saved up and sitting in an account, what’s the best way to make that money work for you? Buying a home actually isn’t the smartest decision, especially at this stage in life. Whether you’re still saving or you have enough money to put a down payment on something, you should buy a turnkey rental instead of a first home. Here’s why.

 

You’ll Be Saddled With Your Home

 

Homes come with a never-ending list of things that need to be done and things that need to be paid for. Make no mistake – a home takes money and work to maintain. Whenever anything goes wrong, it’s on your shoulders to fix it, whereas if you’re renting a place for yourself, you just call up the leasing agent and they send someone out.

 

A Turnkey Rental Gives You Freedom

 

On the other hand, a turnkey rental gives you more time and fewer responsibilities to do what you want. When you buy a turnkey rental with a tenant and a property manager in place, your only job is it deposit checks into your bank account. Actually, strike that. That’s the property manager’s job. All you have to do is receive the money. Turnkey rentals essentially take care of themselves, with the help of the property manager of course. And, with the added cash flow from just one turnkey rental, you can maybe even take an extra day off work once a week, or save up to buy another turnkey rental for even more freedom.

 

Home Ownership Isn’t the American Dream

 

You may have been sold on the idea that home ownership is the American Dream, but that’s a fallacy that the banks tell you in order to sell you a mortgage product. The American Dream is more like life, liberty and the pursuit of happiness. It’s not a huge house that ties you down to one spot for the rest of your life, forcing you to work 80 hours a week just to pay the mortgage and put food on the table. Home ownership can shorten your life through stress, take away your liberty to create future wealth and make you miserable and worried that you will lose it all in foreclosure. That sounds more like a nightmare than a dream.

 

Turnkey Rentals Offer a Chance at Financial Freedom

 

Financial freedom is something that everyone can strive for. Buying a turnkey rental is a step on the path toward financial freedom. Cash flowing turnkey rentals put money in your pocket every month. Yes, there will be months when you need to pay for something that needs replacing or fixing, but the bottom line will be positive cash flow. That’s extra income that will help you to ultimately achieve financial freedom. One turnkey rental may ‘only’ yield $200 in positive cash flow a month. But when you build upon that, you could have four or five turnkey rentals in your portfolio. Then you’d have $800 or $1000 in extra income every month. That’s income that doesn’t require your time, once you make your original purchase. That’s true financial freedom.

 

Home Ownership Isn’t That Great For the Economy

 

When people buy a home, they tend to live there for a long time. It’s only when they sell and buy a new home that the economy is stimulated. In fact, the economy in general only thrives when things are bought and sold; not when people hold, like they do with primary residence homes.

 

Turnkey Rentals Make Economic Sense

 

From a purely economical standpoint, turnkey rentals make better sense.

If everyone rents their house, and everyone owns turnkey rentals, then everyone gets a share of the housing market. The renters are also the landlords for rental properties. Renters tend to move more than homeowners, since they can move to where the jobs are, or where their new school is located.

 

There’s obviously a lot to be said for homeownership. Buying your own home lets you put down roots, become part of a community and customize your home and surrounding property the way you want to live. After a time, you’ll eventually likely want to buy your own home. But if you’re in the early stages in your life, and you have only your job and a little bit of savings, buying a turnkey rental is a better choice than buying a first home.

 

With a turnkey rental, you have the chance to build a better future for yourself that includes financial freedom. If you buy a house, it could be decades or never before you ever have the money again to invest in turnkey rentals.

 

 

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Why Use Turnkey Rentals For Your 1031 Exchanges?

Turnkey rentals are ideal for the real estate investor who does 1031 exchanges. If you’re a new or seasoned investor and you want to take advantage of Section 1031 of the Internal Revenue Code to defer capital gains tax, there’s no easier way than to team up with a turnkey rental company for all of your investment properties.

 

What Are The Basic Rules of the 1031 Exchange?

 

In order to qualify for the 1031 exchange, the investor must comply with a basic set of rules and guidelines. Some of them are straightforward while others are more ambiguous. Here they are in a nutshell:

 

Property Must Be Like-Kind

 

As the IRS states, “Like-kind property is property of the same nature, character or class. Quality or grade does not matter. Most real estate will be like-kind to other real estate.” The IRS like-kind tips site goes on to say, “Real properties generally are of like-kind, regardless of whether they’re improved or unimproved.” For example, almost any type of investment property could be like-kind to a turnkey rental property.

 

Property Cannot Be Investor’s Residence

 

This includes the primary residence and vacation homes and second homes. You can rent out the investment property to a family member or friend at fair market value if you want, but you can’t live in it yourself for any length of time.

 

Property Must Be For Investment Purposes

 

This means no fix and flips. Most tax experts recommend holding the property for a minimum of a year to demonstrate investment intent. Nothing in Section 1033 specifies a year minimum, but it’s a rule of thumb most CPAs and smart investors are tending to follow. If you use turnkey rentals for your 1031 exchanges, your investment intent isn’t likely to be questioned at all, since the property will be cash flowing from day one.

 

Use of an Intermediary

 

This is one of the ambiguous guidelines. You don’t absolutely have to use an intermediary. However, you aren’t allowed to use or profit from the money between the sale and purchase. The best way to ensure you keep your hands clean, so to speak, is to use a qualified intermediary who can control and safeguard the funds.

 

Titles Must All Be in the Same Name

 

If you purchase a property under your own name, all the 1031 exchanges you do in the future pertaining to that property must be in the exact same name. So if you want to form an LLC for investment purposes, you should do it before you buy your first investment property. Note that you can take advantage of the 1031 exchange as an individual or a business entity-the IRS allows all tax paying entities the same 1031 exchange benefit.

 

Identify Property to Buy Within 45 Days

 

Here’s one of the strict rules of the 1031 exchange. When you sell a property you have just 45 days to identify a new property that you’re going to purchase. As a real estate investor, you know how hard it can be to find a cash flowing investment property. It’s challenging enough to do it when there’s no pressure, but not you’ve got the IRS breathing down your neck to hurry up and formally identify the next property.

 

This is one reason why it’s advantageous to use turnkey rentals for your 1031 exchanges. When you choose to work with a turnkey rental company such as MartelTurnkey, you have online access to an inventory of eligible turnkey rentals that are already cash flowing. It’s like having a catalog of turnkey rental properties at your fingertips. You could literally choose one in a day. 45 days would be more than enough time to identify a turnkey rental property.

 

Yet another aspect of 1031 exchange rules is that you aren’t limited to identifying one property. You’re allowed to identify up to three turnkey rental properties. You don’t have to buy two or three, but if you are ready to move up to the next investment level, MartelTurnkey periodically has two house deals and three house deals. This makes it incredibly convenient to advance your real estate portfolio in one fell swoop.

 

Close on New Property Within 180 Days

 

The last major rule you have to follow in order to claim your 1031 exchange capital gains tax exemption is that you must receive the new property within 180 days after closing on the exchanged property. Your CPA can help you work out the exact dates and deadlines; just be aware that those are actual days, not business days.

 

When you work with a turnkey rental company like MartelTurnkey, you won’t have any trouble complying with the 180-day rule. We already own all of our turnkey rentals for sale so you’re not dealing with an unknown seller that may delay or complicate the sale. Each of our turkey rentals for sale have property management in place and paying tenants. All you have to do is take over and enjoy the cash flow.

Turnkey rentals make good sense when you’re taking advantage of the 1031 exchange rules. If you’d like help choosing a turnkey rental property or you have questions, please feel free to contact us.

 

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8 Tips For New Turnkey Rental Owners

Have you recently bought your first turnkey rental? Turnkey rentals are one of the best real estate investment decisions you could ever make. As a new turnkey rental owner, you may have a lot of questions about what’s next. While there isn’t exactly a manual for new turnkey rental owners, we can let you in on what to expect in the years to come, and how to make the most out of your new passive income source.

 

1. You’ll Start Getting Income Right Away

 

If you’ve purchased a turnkey rental from us with a tenant in place—as all of them have—you can expect to receive your first rent check as soon as the next first of the month rolls around. Make sure that before closing you get all the documents that the property management company has requested from you. This will include setting up your bank account for the funds to be sent to the correct account. Be mindful that you can have the funds sent to any account of your choosing. Some investors make separate banks accounts for their investments and others do not; the choice is yours.

 

2. Set Up Contact Information For Your Property Management Company

 

If you haven’t already done so, gather all the contact info for your property management company, and in particular your representative. You’ll also want to organize your online portal username and password so you can log in and view or download reports pertaining to your property. Your property management company rep can help you register for the first time.

 

3. Don’t Expect to be Busy

 

Turnkey rental ownership is a very passive income source. There really is very little for you to do, so don’t expect to be kept busy with it. Beyond organizing your home files and letting your CPA know you’ve purchased a turnkey rental, there’s not much else you’ll need to do except collect those rent checks!

 

4. Meet With Your CPA

 

Speaking of your CPA, you’ll want to either meet in person or talk on the phone to learn more about all the new tax deductions you’ll be entitled to as a turnkey rental owner. This is so that you’re sure to retain the records relating to the ownership. Your property management company will automatically provide you with receipts and records. You’ll just need to access them via your online portal and hand them over to your CPA when tax time comes.

 

5. Put Some Money in Savings

 

It’s prudent to save a percentage of the rental income for future expenses. As with regular home ownership, there will be things that need to be repaired or replaced at some point in the future. These expenses will be tax deductible but you do still have to pay for them. To ensure you can readily do that, save some of the rental income.

 

6. Save Money For Your Next Rental

 

Another reason to save rental income rather than spend it on luxuries is to buy another turnkey rental in the future. Just think of how your passive income can grow when you build up a portfolio of turnkey rentals over time. You could conceivably live quite comfortably solely on your turnkey rentals once you have a large enough portfolio.

 

7. Leverage Your First Turnkey Rental to Buy Another

 

Once you have sufficient equity built up, you can leverage your first turnkey rental to buy another. One such method is refinancing. For more information on how to refinance your turnkey rental and make another turnkey rental purchase, just contact us. We can put you in touch with willing lenders who are familiar with turnkey rental investment strategies.

 

8. Don’t Overthink the Tenants

 

When you have a property management company in place, you really don’t have to worry about the tenants. The property management company takes care of vetting tenants, renewing leases and filling vacancies. Even if an eviction becomes necessary, the property management company will handle that on your behalf. And remember, your MartelTurnkey rental property already has a trusted property management company in place.

Now that you’re a new turnkey rental owner, you can look forward to years of passive income. Thank you for choosing MartelTurnkey. If you have any other questions about your property or what to expect, please feel free to contact us.

 

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How to Improve Credit

Poor credit can prevent you from acquiring the funding you need to purchase real estate investment property. Even if you have the cash for a down payment, it’s unlikely you’ll be able to get approved for a mortgage through conventional financing. The good news is, you can improve your credit by taking thoughtful action. In order to do that, it helps to understand exactly how lenders look at your credit and which factors most impact their decision, as well as which factors have less influence. Once you see a little bit behind the scenes, you’ll be better equipped to tackle your own credit issues in an intelligent and purposeful manner.

 

There are myriad residential property loan programs out there, and each loan program has its own unique criteria, so for details you’ll need to speak to a mortgage lender about the particular program you’re interested in. We spoke with veteran loan officer Ransom Kelly of Assurance Financial in Birmingham, Alabama, who gave us tremendous insight into how lenders evaluate your credit report.

 

What Do Lenders Look At?

 

Lenders look at several things on your credit report. Following are the main indicators of your risk factor:

 

Credit Score

 

Your credit score is the result of a complex algorithm that comprises factors like how well you pay your bills, how you handle debt and more. What’s confusing for many people is that there are now more credit scores than ever. There’s the FICO score and the Vantage score and each of those have sub categories of scores that can vary from the “main” score. Then you have the three credit reporting agencies; Transunion, Equifax and Experian, and your score can vary among those as well.

 

So how do lenders look at these scores when you apply for a mortgage? Ransom Kelly says that most lenders rely at the middle score. In other words, they don’t take the highest or the lowest; they use the middle number for the borrower’s credit score indicator.

 

But what’s most interesting is that the free online credit scores you get with many credit card companies these days aren’t precise. “Those free score numbers you can access through your credit card company’s dashboard are based on soft pulls,” says Ransom. “Lenders do hard pulls, which dive deep into your credit history. Unfortunately, the credit score you see online could be significantly higher (or lower) than your actual score used from a mortgage credit report.”

 

When you’re ready to look into a loan, you can call a lender in your area to find out the minimum score you’ll need to qualify.

 

Debt-to-Income Ratio

 

Your debt-to-income ratio is a calculation of how much you owe out versus how much you bring in. You can calculate this by yourself. The formula looks like this:

 

recurring monthly bills (rent/mortgage, car payment, credit cards, etc.)

/ gross monthly income = debt-to-income ratio

 

If you want to impress lenders as well as improve your credit score, start paying off your debts while simultaneously either maintaining or growing your income.

 

Collections

 

If you have collections listed on your credit report, you may assume there’s no way you’d qualify for a mortgage. However, there are caveats you should be aware of. “Collections aren’t necessarily approval killers,” says Kelly. “Every situation is considered on a case by case basis. For example, medical collections aren’t typically weighted the same during underwriting review as other collection accounts from vendors. Medical collections get a pass because they’re often exorbitant charges that the person incurred unintentionally. Charge-offs don’t count against you if they’ve been charged off and the balance owed is zero; although they may still have a detrimental impact on your credit score.”

 

Other factors affect how lenders look at collections, too, according to Kelly, whose loan officer career has spanned nearly a decade. “You can have a total of up to $2,000 in collections and it could have minimal influence on the lending decision.”

 

However, don’t forget that collection accounts do bring down your credit score. So if you have collection accounts under $2,000 that you can afford to pay off, it might be worth doing so in order to raise your overall score.

 

Late Payments

 

Late payments listed on your credit report can be problematic, says Kelly. “You can’t have any late mortgage payments in the last 12 months.” If you do, you’ll need to wait for time to pass before you’ll get approved for another mortgage. Late payments on credit card balances count against you, but to a lesser degree. They do negatively impact your credit score, though. Before applying for a mortgage, it’s best to establish a long track record of on-time or early credit card payments.

 

Credit Card Usage

 

“Credit card usage is a huge determinant for mortgage approvals,” says Kelly. “If your credit cards are maxed out, it will lead to a lower credit score and make it more challenging to get approved. Lenders look more favorably upon borrowers that have a conservative history of revolving credit usage. The number one thing I tell clients is to pay off or pay down those credit cards before applying for a loan – but don’t close the accounts. Low balance to credit limit is one of the best things to do to improve your credit score.”

 

One trick to paying off credit cards that some finance experts recommend is making smaller incremental payments during the month. This is often easier to manage than one large payment on the due date.

 

Tips to Improve Your Credit

 

So what can you do to sway the odds in your favor? Lots of things. Here’s what you should be doing to improve your credit both now and in the future.

 

Monitor Your Credit

 

You’re entitled to one free credit report per year from each of the three reporting agencies. Be sure to take advantage of them by visiting their respective websites. You’re also entitled to another free credit report if you’ve been denied credit within 60 days. The letter from the creditor will tell you which agency they based their decision upon. Just go to the reporting agency website and navigate to the section where you’re requesting a report based on denial of credit. Finally, consider signing up with a credit monitoring service. Just remember that the credit score they give you may vary considerably from the score a lender will see, so don’t use it for that purpose; use it to keep an eye on your credit report.

 

Review Your Credit Report For Errors

 

Go through each entry on your credit report with a fine-toothed comb. Report any errors that you find to the credit reporting agency through their website. Any error you find should be reported, no matter how small. Look for errors in:

 

– addresses

– dates

– name spellings

– account balances

– payment histories

– account ownership

– account status (open, closed)

– credit limits

 

If you find an error and submit an investigation request, the creditor has 30 days in which to prove the accuracy of the entry. If they can’t, you might be able to have the negative entry removed or at least amended. Each reporting agency website has its own system for submitting disputes, so you’ll need to navigate each website independently to complete this step.

 

Consult With a Mortgage Lender

 

You don’t have to go through the whole process of applying for funding and then hope and pray for approval. Be proactive and consult with a lender ahead of time. A professional mortgage lender can review your credit with you, including other loan factors like assets and income so you can be better informed and take action before applying for funding for your real estate investment.

 

Ways to Grow Your Credit Score

 

If your credit score is low, there are strategies you can implement to raise it. Bear in mind that it can take several months for changes to reflect in your score. For that reason, the sooner you take control of your credit, the better.

 

Consider Getting a Secured Credit Card

 

A secured credit card is tied to a line of credit that is secured to your own money. Essentially, you deposit a certain amount and that is your total credit line. You make charges as you normally would, making monthly payments on the card. This is a way to establish a history of paying on time.

 

Obtain a Collateral Loan

 

If you own a vehicle free and clear or another valuable asset, you might be able to get a collateral loan from your bank. Collateral loans are secured with your asset. You give the bank the physical title on the asset, and they lend you money. Once you pay it off, you get your title back. In the meantime, your payments are reported to the credit bureaus, which can improve your credit. Confirm that the bank will report the payments, and make sure all your payments are on time.

 

Become a User on Someone Else’s Credit Card

 

If your spouse has a better credit score, you might improve your own credit by becoming an authorized user on one of their credit cards. Their credit limit will be reported as your credit limit, and this can potentially raise your credit score a few points.

 

Get a Standard Car Loan

 

It’s easier to get a car loan than it is to obtain a mortgage. You could qualify even with poor to bad credit. A car loan gives you a chance to demonstrate your creditworthiness, assuming you make payments on time. Just realize that with poor credit you’re likely to get a high interest rate. When your credit improves, consider refinancing the car loan for a better rate.

 

Make Early Payments

 

Making on-time payments is the hallmark of a good credit risk. But making early payments is the hallmark of smart financial planning. By doing this, you pay down your principal faster, which ultimately reduces your debt-to-income ratio.

 

Your credit plays an important role in whether you’ll be able to take advantage of the many opportunities in real estate investing. If poor credit is holding you back from being able to qualify for a mortgage, it’s time to do something about it. Take these steps to correct past mistakes. And, from this day forward, practice smart credit habits to ensure your credit is the best it can possibly be.

 

At MartelTurnkey, we work with a variety of lenders on our turnkey rental properties. Feel free to contact us if you would like an introduction or assistance with obtaining financing.

 

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It’s Better to Invest in a Rental Property Than to Buy a Home of Your Own

One of the biggest shams that’s been pulled over the public is the American Dream of owning a home. Home ownership has been lauded as the ultimate symbol of financial freedom. It’s been brainwashed into the American psyche that buying your own home should be your primary goal, to be undertaken soon after marriage. Dwelling in your own home symbolizes freedom of your domain; the liberty to do what you want where you want on your own property. In reality, the idea of the American Dream is a fabrication of the banking system for the sole intent of making money selling mortgage products.

 

Why the American Dream is a Nightmare For Many

 

As we so candidly witnessed a decade ago, the American Dream turned into a nightmare for hundreds of thousands of homeowners. Families were turned out of their homes, had their credit ruined and their personal lives turned upside down. The subprime mortgage crisis was more than a collection of bad judgments; it was a window into the indifferent machinations that drive the mortgage industry. And those same machinations are still turning the wheels today.

 

For a large majority, buying a home at any cost is still the primary goal. Single professionals, young families and even older folks scrimp and save every penny for the privilege of handing it over as a down payment for a primary residence. They go into debt for hundreds of thousands of dollars—often for much more than they can afford—so they can say they’re living the American Dream. And lending institutions are more than happy to encourage and facilitate this belief. After all, mortgages keep the banking industry wheels turning.

 

Your Home is Not an Asset

 

The smartest financial advisors will tell you – your home is not an asset. Real estate is an asset, yes. But not your primary residence. Robert Kiyosaki of Rich Dad, Poor Dad said it, “Repeat after me: Your house is not an asset.” Why isn’t your home an asset? Because it’s a liability. It costs you money to own; it doesn’t pay you money. Think about all the money and work that goes into home ownership; the sweat equity, the repairs, the maintenance. It all detracts from your bottom line.

 

Rental Properties Are Assets

 

Now, some kinds of real estate are an asset. When you can make real estate work for you, it becomes an asset. Rental properties are an asset because they pay you money through rent. If you look at your balance sheet, you’ll be ahead when you own a cash flowing turnkey rental property.

 

Your Home as a Benefit

 

By now, you may be thinking, “but owning a home offers other benefits besides money. Home ownership equals stability and security, right?” Again, that’s part of the sham. That stability and security is only so good as your last on-time mortgage payment. Miss a few too many mortgage payments and the bank will foreclose on you just like they did during the subprime mortgage crisis. When that happens, you lose your home, your dignity, your peace of mind and worse. A foreclosure is ruinous for your credit. Good luck trying to get a loan for anything as long as that foreclosure is on your record. It’s basically a death knell for your future financial situation. Does this scenario sound like stability and security to you?

 

The Difference Between Borrowing For Homeownership Vs. Borrowing for Investment

 

When people borrow for a primary residence, they tend to borrow as much as they can get approved for so they can get into as nice a home as possible. After all, this is the home where their kids will grow up. And, nice homes today in good neighborhoods with good schools usually cost in the hundreds of thousands of dollars. Better homes equal higher prices. So right away, people are borrowing as much as they can qualify for, which depletes their cash savings, maxes out their debt tolerance and condemns them to 15, 20 or 30 years of mortgage payments—for a liability. For many people, they’ll never be able to save money after that to make a real estate investment because they have little to no money left over after paying the hefty mortgage.

 

On the flip side, when people borrow for a turnkey rental property, the price of the property itself is much more reasonable – hopefully less than one hundred thousand. The payments are so reasonable that even with all the costs associated with the rental property – the property manager, repairs, maintenance, insurance – the property still cash flows. It’s an asset that pays them money every month. Doesn’t that sound more like stability and security – to own an asset that brings income every month?

 

Now, we’re not suggesting that you never buy yourself your own home to live in. What we’re saying is that it’s smart to set yourself up for real financial freedom first – before you buy a home to live in. Take that first lump sum that you’ve been saving for a down payment and buy yourself a real asset – a turnkey rental. Once you have one or two rental properties in your portfolio, you’ll be in a better position financially to buy a primary residence some day; one that won’t max out your finances and destabilize your future.

 

The true American Dream shouldn’t be about owning a home. It should be about owning your finances; creating financial freedom that will last for generations. Take a look at some of our affordable, cash flowing turnkey rentals right now. If you have any questions or would like to make a purchase, please contact MartelTurnkey.

 

 

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Glossary of Common Real Estate Terms

If it sometimes seems like real estate professionals have their own private lexicon, you’re correct. There is a whole bank of terminology in the real estate industry that professionals use to communicate value, property details and processes. These terms help real estate professionals do their jobs more efficiently, but they can be confusing for the beginning investor who’s trying to understand the world of real estate. If you’ve wondered what the heck words like cap rate, ROI and SFH mean, then you’ve come to the right place. Here is your glossary of commonly used real estate terms.

Appraisal

An appraisal is an assessment of the fair market value of a property. Appraisals are conducted by professional third parties at the behest of the lender. Neither sellers nor buyers can request certain appraisers to be used, or control their findings.

Assessed Value

The assessed value is the value placed on a property by the city or town. Property and the land it sits on are usually assessed separately. The local government uses the assessed value to calculate the property taxes for the owner. The assessed value can change over time, which is why assessments are repeated every few years.

Cap Rate

Cap rate is short for capitalization rate. It’s used by real estate investors to determine the potential rate of return on a property if it were bought with all cash.

Net Cash Flow

Cash flow is the monthly net profit generated by an investment property after all the monthly expenses have been paid.

Cash-on-Cash Return

The cash-on-cash return is the annualized return that an investment will generate when taking into account financing. For example Net Cash Flow Per Year / (Down payment + Renovations Costs) = Cash-on-Cash Return %.

Comps

Comps is short for comparables. To gauge a fair market price for your property, you will “pull comps.” This means you will do research to see what similar homes in your area have recently sold for. If you have an agent do this for you, they will give you what is called a CMA, which stands for Comparative Market Analysis, which is simply a written report on the comps in the area. Comps are going to be very important whether you’re doing a rental property or a flip, so learn how to find good comps.

HOA

HOA stands for Home Owners Association. An HOA is a private governing body in a community that upholds neighborhood covenants; ostensibly to ensure an attractive, safe community where everyone abides by the same uniform standards. HOAs typically charge a monthly fee that community owners are obliged to pay in addition to top of rent or mortgage payments. The HOA fee is non-negotiable and perpetual.

Inspection Report

The inspection report is done by a third party to determine if there are any safety issues with the property. Inspection reports can be ordered by the lender, by the buyer, the seller or their assigns, at any time. These reports can be as short as one page, but most often they run several pages long. They cover everything from minute details like the presence of non-GFCI outlets near the kitchen sink to plantings located too near the perimeter of the property’s foundation wall. Inspection report findings are often used by buyers as leverage to negotiate a lower selling price.

MLS

MLS is an acronym for Multiple Listing Service. The MLS is a paid subscription-based service that’s exclusive to real estate agents and other real estate professionals. When you contract with a real estate agent, they list your home on the MLS so the property details can be seen by other agents and brokers.

PMI

PMI is an acronym for private mortgage insurance. But it’s not insurance for you; it’s insurance for your lender in the event that you default on the loan. You have to pay PMI in certain cases, including if you put less than 20 percent down on your home purchase. Usually–but not always–you can drop the PMI insurance when your equity stake reaches 20%.

Realtor®

Realtor® is a professional designation of membership in the National Association of Realtors®. Every Realtor®is a real estate agent, but not every real estate agent is a Realtor®.

ROI

ROI stands for Return on Investment. It is calculated very similarly to cash on cash return. The formula would be  Profit / Cash Invested = ROI. ROI does not take into account time, so normally ROI percentages are very high. For example, if you invest $50,000 into a property and you flip that house and make $25,000 profit then your ROI would be $25,000/50,000 which is 50%. But this doesn’t take into account that it may have taken you 2 years to make that return!

SFH and MFH

SFH stands for single-family home and MFH stands for multi-family home.

 

There are hundreds of terms used in real estate dealings that you may not be familiar with. This list represents only a small percentage, but these are the most common ones that you’ll hear as you move along your real estate investment journey. If you have any questions about what terms mean, or you want to better understand how a turnkey rental property investment works, please feel free to contact us or to leave a comment below. We’re always happy to help.