as well. If your numbers make sense, then take a closer look at the community in which you are going to buy. Are you able to make solid, positive predictions about the market? Because turnkey rental properties are inherently a buy-and- hold proposition, investors should look for markets that have the potential for solid, steady growth over time. Volatile areas that are skyrocketing in value can represent opportunity, but a location with solid employers that tend to hire long-term renters for long-term positions represents far more security. Examples of this include the healthcare industry, manufactur- ing, and employment with a high concentration of millennial employees, such as some sectors of IT. Look for areas with reliable means of accessing public tran- sit, if your tenants are likely to need or prefer it, and, if your provider places tenants with the help of the local housing authority, check into that agency’s background and reputation as well. Your investment and the associated cash flow should be as secure and predictably profitable as possible. “I always say that turnkey buyers should plan to hold a property for at least five years, otherwise you don’t reap the benefits you should be getting,” said Jordan. “With a good turnkey purchase, you should start out with cash flow and good returns, but the really good numbers start to kick in on year three, year four, year five, when you are starting to recoup substantial portions of your initial investment.” TAKING BACK CONTROL At first, the idea of turnkey rental investing can feel like a distressing loss of control for a turnkey investor. However, most find investing a portion of their capital in real estate without also investing a comparable amount of time into managing that investment results in feelings of control and financial security they may not have been expecting. “In today’s political climate and financial markets, I think that Americans are feeling that they have less control over their financial futures if they are restricted to ‘traditional’ investments,” said Hambright. “Real estate is tangible. You can touch it or drive by it. Unlike traditional investments, your returns can be magnified through leverage. More and more investors and would-be investors are waking up to the benefits of passively investing in rental properties, and this is a trend that will only continue for the years and decades ahead.” •

estate market in the country in some form or fashion, many investors find the wealth of selection almost too much to bear. Sometimes, this may lead them to back out of turnkey investing and attempt to simply manage the properties on their own, particularly if they are buying in a local market. If an investor does not have the time or experience to pur- chase and manage rental properties, stepping into the driver’s seat can have a number of negative consequences. Ultimately, opting out of turnkey without the right resources at your dis- posal can lead to overspending and other decisions that might negatively affect an investor’s return. For example, Kristin Weekley, a Century 21 Common- wealth agent in Boston, Massachusetts, said that most of the buyers in her market are looking for new properties for them- selves rather than for investment properties. An investor who fails to transition out of that “me” mindset before heading out to look at potential rental investments may make an expen- sive mistake, particularly in a hot market like Boston. “Most buyers these days definitely want renovated kitchens and baths and open floor plans,” said Weekley. She added, “Most of the real estate here is so old that my clients are also looking for newer roofs and heating systems.” While these are definitely reasonable things to want in a property, not every one of these items will always contribute to higher returns in a rental. Weekley added that the professional turnkey rental inves- tors she has encountered tend to have very different require- ments for their purchases than individual investors who plan to manage the properties themselves or traditional own- er-occupants. “The last property I found an investor was a fixer-upper. She got a very good deal and clearly had different priorities than my other buyers,” she said. That investor was willing to purchase a very different type of property than Weekley’s owner-occupant buyers: “The two-family unit actually came with a resident who was already living on the second floor. The investor is presently converting the units to condos and will probably sell some- time next year for over a million dollars.” Clearly, Weekley’s investor stands to profit upon the sale of the property, but in the interim that investor will be spending a great deal of time and money managing the project. For investors who have the desire to be actively involved in this type of investment, it’s a great situation. For a turnkey investor, however, one of the biggest benefits is that this level of involvement is not required.

5 REASONS AMERICANS ARE RENTING, NOT BUYING N ot surprisingly, the American public’s emerging re- luctance to reenter the traditional pursuit of the “The American Dream” of homeownership has many real estate professionals worried. In fact, the National Association of Realtors (NAR) recently commissioned a collaborative research study on the topic. The results were prepared by Rosen Consulting Group (RCG) and jointly released by the Fisher Center for Real Estate and Urban Economics at the University of California and the Berkeley Haas School of

3. BURDEN OF STUDENT LOAN DEBT Student loan debt is delaying home purchases by at least five years in younger households. The high monthly pay- ments make it difficult to save for a down payment and to qualify for a mortgage. 4. SINGLE-FAMILY HOUSING AFFORDABILITY RCG’s predictions that affordability is going to fall by nine percent nationally by 2019 led their analysts to advocate for more home-buying assistance programs. Good or bad overall, the decline in affordability will likely increase the population of renters even if new programs go into effect. During the housing crisis, single-family home construction plummeted and has not regained its footing. RCG estimated a 3.7-mil- lion-home deficit in the single-family sector, primarily in low- and middle-income housing ranges. For turnkey rental providers, this means that the demand for this type of housing is strong and rents are likely to remain competitive. While this study may not bode particularly well for homeowner- ship rates over the next few years, it does contain a number of pos- itive signals for real estate investors buying turnkey rentals. Based on this study, a large portion of the renting population is making a decision to rent rather than simply being compelled to do so. This creates a population of reliable tenants who are relatively likelier to stay in place and pay competitive rates in return for good, reliable, rental housing like the inventory in your turnkey rental portfolio. 5. SINGLE-FAMILY HOUSING SUPPLY SHORTAGES

Business. Researchers cited five “main barriers that have prevented a significant number of house- holds from purchasing a home,” including:


While most Americans say that they feel positively about homeownership, many simply do not wish to risk undergoing the hardships they experienced or watched fam- ily members experience when they lost their homes to foreclosure. As a result, many qualified buyers are simply opting out of owning.

2. MORTGAGE AVAILABILITY The NAR report states, “Credit standards have not nor- malized following the Great Recession. Borrowers with good-to-excellent credit scores are not getting approved at the rate they were in 2003.” Further complicating the issue of mortgage availability, qualified buyers often opt to rent because they do not believe they are eligible for a mortgage or that they can afford a down payment. In reality, they often are eligible for a mortgage and qualify for reduced-down-payment programs. properties and pay someone else to manage them because it enabled them to let an expert handle the entire process. “Furthermore, turnkey investing allows you to simply invest where it makes the most sense to buy,” said Santarelli, whose “market agnostic” approach to investing carried Norada through the housing crash. It was one of the few real estate investment providers founded before the bubble to survive the bust. “You don’t have to be married to a market if you’re not going

to live in the property or manage it personally,” he noted. “Being market agnostic means you don’t invest in a market because you were born there, live there, or are familiar with it. It’s about basing your decisions only on the economics and the fundamentals.”


Carole VanSickle Ellis is the editor of Think Realty Magazine. She can be reached at

The key to selecting a solid market for a turnkey investment is to run the numbers [read Kevin Ortner’s article on this topic on p. 110] and then evaluate a few slightly less tangible factors

WHEN LETTING GO MAKES SENSE With turnkey rental providers present in nearly every real

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