Why You Shouldn’t Pay Cash For Your Turnkey Rental

June 30th, 2020

Are you getting ready to buy a turnkey rental? When you buy real estate, you always have the option of paying cash or getting financing. If you’ve been saving for a while or plan on using your self-directed retirement account to buy a turnkey rental for sale, you may be thinking of just paying cash. After all, that certainly simplifies the transaction. With a cash purchase, you get to forego the sometimes tedious task of applying for a loan, waiting anxiously for approval and then hoping the loan offer doesn’t fall through at the last minute. However, when investors are contemplating turnkey rentals for sale, paying cash isn’t always the smartest choice. Sometimes the notion of “cash is king” doesn’t serve your long-term investment goals. Here are the reasons why you shouldn’t actually pay cash for your turnkey rental:


Turnkey Rental Companies Are Equal Opportunity Sellers


If you’re in the market for a primary residence and there’s a lot of competition, then being identified as a cash buyer carries clout. Home sellers love cash buyers. Cash buyers are seen as eager buyers. They usually want to close quickly. Cash buyers won’t end up backing out on the transaction because they couldn’t get a loan. These are all reasons why home sellers jump for joy at cash buyers. 


But turnkey rental companies don’t share the same concerns as primary home sellers. Whether a turnkey rental sells for cash or it sells through financing, the turnkey rental company still gets their money. They don’t necessarily need to close quickly, either. They’re in business. They have plenty of other investors waiting in line if financing falls through for one buyer. In other words, you won’t lose any clout with a turnkey rental company by financing a purchase. Your transaction will be treated just as fairly as it would be in the case of any other qualified buyer.


Turnkey Rentals Pay For Themselves


When you buy turnkey rentals, your tenants pay for the property via their rent payments. Your down payment and closing costs are all you need to invest to get what ultimately amounts to an almost free property. Remember, return on investment takes into consideration your down payment and closing costs, property management fees , interest and insurance. When you buy a MartelTurnkey turnkey rental for sale, you’re looking at around a 15% or 16% return on investment. That’s considered excellent in any market. So you don’t need to pay cash and buy the turnkey rental upfront. Your tenant will buy the property for you and you can still enjoy a fantastic ROI!


Your Cash Can Be Invested Elsewhere


If you tie up all your liquid reserves in just one turnkey rental property by paying cash, you’re not serving your own long-term investment potential. Let’s say you have $100,000 to invest. You see a very nice turnkey rental for sale for $90,000 on the MartelTurnkey website. You decide to pay cash. So now you own the property outright. That’s great—usually. Except you’re an investor. And now, instead of having $80,000 left over to invest (after putting $20,000 down), you only have $10,000. And, you just robbed yourself of tax deductions for mortgage interest that you could have used to offset taxes from your regular income. On top of that, you lost out on a ton of depreciation benefits. If you had used that $80,000 to buy four more turnkey rental properties, you’d be able to take depreciation on a total of five properties. Plus, you’d have an estimated $1,350 in passive income from buying five turnkey rentals instead of just about $400 passive income from the one property you bought with all cash. 


When it comes to investing, the less you use of your own money, the wealthier you’ll become. Paying cash for some things make sense. Investment experts advise people to pay cash for consumables and to borrow money for investments. When buying turnkey rentals, that advice is especially excellent. Besides, when you buy from MartelTurnkey, we connect you with trustworthy, investor-friendly lenders that make it easy to finance your purchases. Send us an email today to learn more or to get started.


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