The following demonstrate how a typical turnkey residential real estate property deal works. These are actual numbers from one of our deals. While every deal is different in terms of the actual numbers, the percentages here are representative because that is our model.
What Is A Residential Turnkey Real Estate Property?
A turnkey residential real estate property is a home that has been purchased, renovated for a tenant, is now occupied by a qualified tenant and is producing very attractive cash on cash rates of returns for the final buyer. The buyer which we name a financial buyer because all is done for them, they simply are paid the monthly cash flow profit. Cash flow profit is the rent paid, less a reserve for taxes,insurance,property management and repairs and maintenance. The net profit for the final buyer results in double digit cash on cash returns for the buyer on an annual basis.
In this article we are focused on the cash on cash returns for the person or company who is our funding partner. The funding partner provides the cash for the purchase, renovation and holding costs of the property. Our doors are open for funding partners and financial buyers.
Property Description: 3 bedroom 1.5 baths 2 car garage Note not all properties have garages and some may be smaller. The key success factor is the demand by a tenant. We buy properties where we know the rent that will be paid and we know it will be rented quickly.
Purchase Price: $20,000
Renovation and holding costs $9000
Total All in Cost $29,000
We project a two month time line for buying the property. completing the renovation, securing a qualified tenant and then selling the property. Our experience is less meaning the average time has been closer to 30 days. However to be conservative we project 60 days.
What We Offer The Person or Company That Funds The Deal
Funding the deal means in this example providing the $29,000 or all in costs. In exchange we offer 10% plus the cost of recording the lien that secures the money with the house. This means the money is 100% secured by the property. Here is what else we do. In the unlikely event the house has not sold in 60 days, we agree to pay 2% per month on top of the 10%
The principle and interest are guaranteed by the deal. What this means is you are the first to be paid when the property is sold. So at closing your principle and interest are wired to you by the title company. You are listed on the selling HUD statement – a legal document required to be filed (the title company files it) on every property purchase or sale. We also prepare and record a mortgage for you on the property which is a lean for the full amount that your funded plus your interest. This is another legal document that gives you assurance you will receiver your principle and interest at closing. See the next section where we give you the valuation of the home in this example that secures your money.
If you do the math using our 60 day estimate, that is 6 turns (360 days divided by 60) 6 turns times 10% is 60% annualized. Are you beginning to see how exciting this program is for those who work with us.
What Is The Value of The Home That Protects The Money?
As we previously mentioned the value of the home is driven by the rental income for the property. We set the selling price so the final buyer is getting an annualized return on their money of 12% or higher. In most cases it is higher. That is a net number. What that means is the return is calculated after we factor the cost of insurance, taxes, reserve for repair and maintenance. So the net cash flow to the end buyer is 12% or more – most cases more.
In this example, we are selling the property for $42,000. We know this is a good value because we double check our selling price assumptions with a CMA or comparative market analysis that is provided by an expert real estate realtor.
Do You Like This Idea of How Your Money Can Work For You? If so then contact me and we can discuss if this program is right for you.
Note: Every effort is made to present accurate information. Each interested person is responsible for completing their own due diligence on turnkey real estate opportunities. Every house is different. The information in this example is for an actual home that is available at the time this article is published.