If you are looking to invest and don’t want the hassle of inspections, repairs, and
property management, the best property type to invest in is the Turnkey (not turkey) single family home. However, in order to get a safe deal and prevent unnecessary problems that could cost a lot of time and money these are the recommended steps to take.
In order to define your budget and in order to take advantage of the entire tax benefits concerning an investment property it’s very wise to take a mortgage loan, since the interest portion of the mortgage payments are tax deductible. Contact a local (in the state where the properties are located) lender and discuss the various investment loans available in the market and then fill out an application to get pre-qualified for a loan.
Location. Location. Location.
Take into consideration your budget, the type of tenants (singles, students, families, blue collar workers etc.) you’re looking to lease to, vacancy rate, school district ratings, and specific desired locations (by a school, a factory, an airport, a hospital etc).
Wide Spectrum Property Analysis.
Include the monthly rent, monthly and yearly expenses (mortgage payments, property taxes, insurance, HOA, property management etc.) and determine the net operating income, cash flow and return on investment. Based on these numbers you could make a calculated decision whether the property is worth investing in or not.
Patience Is Key.
Allow time to Inspect the property to check its physical, legal conditions and making sure it does not have any major/ minor structural issues. Hire a licensed, professional and experienced inspector that would provide you with a very detailed report (including pictures) of the property. If major structural issues (like foundation, roof) are found, it’s wise to stay away from a property rather than trying to repair. If there are minor issues, negotiate the price. You have the option to fix it from your own pocket or requesting the seller to do the repairs and include it in the price of the property. As part of the legal inspection, in most cases the title company is required to make sure that the deed would be transferred to the buyer free and clear of any liens, mortgages and subordinations. Also, it’s recommended to request from seller to provide a survey to make sure that the property measurements and boundaries are as published.
...is the key factor when it comes to “buy and hold” strategy. Check the records and references of the current property management, ask for the PM agreement, check their services as far as procedures and standards of qualifying a new tenant, rent collection, paying expenses, repairing policies costs and commissions, eviction procedure, monthly reporting and transferring monthly income to the property owner.