Reality Check With Turnkey Rentals

December 29th, 2020

Buying turnkey rentals is a great way to build wealth, create passive income and leave a legacy for your heirs. But it doesn’t happen overnight. It’s not a get rich quick scheme; it’s more like a get rich steadily scheme, if anything. We want you to buy turnkey rentals from us. We want to help your family grow wealthy and create a lasting legacy. But we don’t want you to be misled as to how long it might take to get where you want to be financially. That’s why we’re posting this reality check about turnkey rentals. 


Fix Your Finances First


Unfortunately, there’s a lot of misinformation out there that leads some people to believe that being the landlord of a turnkey rental  or any other kind of property is the answer to all of their money problems. If you have credit problems or employment problems, you may have read that if you can just buy a rental property you’ll get paid every month and never have to work at a “real” job. That’s not the case at all. In fact, if you have money problems, you’ll want to get those cleared up before investing in a turnkey rental. Every successful real estate investor will tell you the same thing; get your credit in order first. Get to a point where lenders are happy to connect with you. Then you can start thinking about how you can buy your first turnkey rental property. When your credit is in order, you’ll be more likely to be approved and you’ll pay less interest on any turnkey rental property loans you take out. 


Be Realistic About Your Savings


Building a real estate legacy and wealth portfolio takes time and capital. Many people try to invest in real estate and they only have $20,000 to invest, but they want to make $10,000 a month. That’s just not possible right off the bat. It takes a significant amount of time to get to a point where you’re pulling in $10,000 in passive income a month. And you’re going to need a lot more capital than $20,000 to get there. $20,000 is a great start, definitely. But it’s only a start. After you invest your first 20 grand and buy your first turnkey rental, you’ll want to save for your next property right away. You want to take advantage of the interest rates at record lows right now. You can use the income from your first rental property and put that toward buying your next property. But even that won’t be enough. You’ll still need to keep working. Don’t quit your day job just yet. Your $20,000 in savings will get you on the first rung of the ladder. But you still have a lot of climbing to do.


You May Want to Borrow Money to Invest


There’s a term that savvy investors use. It’s OPM, which stands for other people’s money. It may surprise you to know that most of the wealthiest individuals (and companies) in the world borrow money to invest. They frequently don’t use their own capital, even when they have it sitting in the bank. They understand that there are a number of advantages to borrowing money to invest instead of using your own capital. One is that the interest paid on a loan is deductible, which offsets profits, which results in lower taxes. The other is that—especially in today’s low-interest climate—it’s better to get into real estate investing as soon as you can rather than wait, so you can start reaping the benefits of depreciation and all the other deductions you get as a landlord. 


If you decide to invest in real estate that’s not turnkey, you’ll probably want to borrow money to invest. But when you don’t have the capital and you want to build a legacy and create a large portfolio, that’s going to take even more time. Because if you don’t have capital you’re going to have to go and acquire the capital somewhere, which means you’re going to have to raise money, and that takes time as well.


Then let’s say you go out there and do raise the money for these real estate investment deals. Now you’re gonna have to disburse a portion of your profits to your investment partners. So instead of doing ten deals to retire you may need to do 100 deals to be able to retire, which might take even longer than doing the ten original deals. So investing outside of a turnkey rental isn’t going to make you rich any faster than a turnkey rental would. Worse, you’d be exposing yourself to more risk, more expended time and a lot more work.  


We always recommend finding the best real estate strategy for you within your budget. But you also need to have realistic expectations about how long it might take to build your wealth portfolio. Get started as soon as you possibly can and get your money working for you early on, because it’s going to take longer than you probably think. Turnkey rentals represent the simplest path and the most straightforward way to get passive income. But one or two turnkey rentals isn’t going to dramatically change your life. You won’t be rolling in the dough right away. But hopefully those first one or two turnkey rentals will give you an appetite for investing in real estate; a taste of what’s possible that will motivate you to keep on saving and acquiring more turnkey rentals over and over again.


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