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A Step-by-Step-Guide: How To Buy a Turnkey Rental Property

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The idea of making money in real estate sounds amazing. Who wouldn’t want to collect rent checks every month and watch their wealth grow? But actually being a landlord? Many would probably say “no thanks!” to dealing with late-night clogged toilet emergencies and tenant complaints.

But, what if you could skip the landlord headaches and fast-forward to the rewarding part: collecting passive income? That’s where learning how to purchase turnkey real estate comes in.

This guide is your step-by-step turnkey investment roadmap. We’ll break it all down, from finding the right place to picking the right people.

hands, house, home

What is a Turnkey Property?

Okay, so you’re intrigued by the idea of stress-free rental income. But what exactly is a turnkey property, and how does it differ from traditional real estate investing?

In simple terms, a turnkey property is a ready-to-go investment property. It’s move-in or rent-out ready, meaning you don’t have to lift a finger for renovations, repairs, or even finding tenants.

Now, how does this differ from traditional rental properties? When buying a fixer-upper, you’d spend months, maybe even years, renovating, dealing with contractors, and chasing down permits before you even think about renting it out.

Turnkey properties eliminate those hassles. They’re typically renovated by turnkey companies that handle everything from acquiring and renovating the property to finding tenants and even managing the property for you. This hands-off approach makes turnkey properties incredibly appealing, especially for busy professionals or those new to real estate investing who want to minimize risk and maximize returns.

How Do Turnkey Properties Work?

Turnkey properties offer a streamlined approach to real estate investing, taking the “DIY” out of the equation.

Turnkey investment properties function as a “done-for-you” real estate investment solution, allowing you to reap the rewards of property ownership without the typical hassles of being a landlord.

Pros and Cons of Turnkey Rental Investments

Turnkey properties are often touted as an easy button for passive real estate investing, especially for beginners. While they offer a streamlined, hands-off approach, it’s crucial to weigh the advantages and disadvantages.

The Pros

  • Cash Flow From Day One – Turnkey properties come with tenants already in place, so you receive rent checks as soon as you close the deal.
  • No DIY Disasters – With turnkey investing, there’s no contractor headache, renovation delays, or unexpected repair costs.
  • Tax Perks – Like any real estate investment, turnkey properties come with tax benefits like deductions for depreciation, mortgage interest, and operating expenses, putting more money back in your pocket.
  • Property Value Growth – While maybe not as dramatic as a fixer-upper, turnkey properties still appreciate in value as the market goes up, building your long-term wealth.
  • Live Your Life, NOT a Landlord’s Life – This is the big one! No more late-night calls, chasing down rent checks, or dealing with tenant drama. The turnkey company (or their property manager) handles everything, letting you enjoy true passive income.
  • Invest Beyond Your Backyard – You don’t have to be limited by your own city or even country when investing in turnkey real estate.

The Cons

  • Renovation Blind Spots – You’re trusting the turnkey company to make smart renovation choices, but their idea of “cost-effective” might not align with long-term quality or tenant appeal.
  • Do You Trust Their Property Management –  Even with a hands-off approach, a bad property manager can derail your investment.
  • The Higher Price Tag – Convenience comes at a cost. Expect to pay more for turnkey properties compared to buying and renovating yourself.
  • Turnkey Scams – Unfortunately, not all turnkey companies are reputable. It’s advisable to vet any company before investing.

Getting Started: Determine Your Investment Goals

Before you browse properties, define what success looks like for you.

Is a turnkey rental property right for you? Having clear investment goals will help you make smarter decisions and choose the right properties. Here’s where you should start:

  • Financial Goals: Are you seeking passive income, faster financial independence, or more financial freedom?
  • Risk Tolerance: Do you prioritize immediate cash flow or long-term appreciation? Or a blend of both?
  • Time Commitment: Are you looking for short-term gains or long-term wealth building?

Defining your investment goals is the first step towards building the passive income portfolio of your dreams. Turnkey rental properties aren’t designed for earning quick value appreciation, but for long-term real estate investors who want cash flow and convenience.

Step One: Evaluating the Best Markets for Buying Turnkey Rental Properties

When evaluating real estate markets for turnkey rental properties, the focus should be on long-term profitability and stability rather than short-term gains.

Appreciation vs. Cash Flow Markets

Once you understand market dynamics, define your turnkey investment strategy: will you target appreciation or prioritize cash flow?

Appreciation-focused markets bank on property values increasing over time, yielding profit when selling. However, they offer little (or no) immediate income profitability and rely heavily on market speculation, making them riskier.

Cash flow-focused markets, ideal for turnkey investing, prioritize generating consistent rental income that surpasses expenses. That means cashflow in your pocket every month. This provides immediate returns and is less susceptible to market fluctuations, offering a more predictable, stable income stream.

Why Cash Flow is King for Rental Properties

Cash flow is the bedrock, the essential element that supports your entire investment strategy. Here’s why:

  • Consistent rental income provides a predictable income stream, even during market downturns. This is unlike appreciation, which is speculative and offers no guarantee.
  • Positive cash flow can cover mortgage payments, property management fees, and other expenses, leaving you with passive income.
  • Strong cash flow allows you to reinvest profits into more properties, scaling your portfolio and building long-term wealth.

While appreciation can be a welcome bonus, it should never be the primary driver of your investment strategy, especially in the world of turnkey real estate.

Tips for Conducting Market Research

While turnkey properties can streamline the investment process, they don’t replace the need for due diligence. Before you even consider a property, allocate time to research the market itself. Here’s what to look for:

  • Median Household Income Growth: Look for regions with an annual income growth rate of at least 3%.
  • Population Growth: Target areas (or micro neighborhoods) with an annual population growth rate of 1% or higher.
  • Median Home Price: Compare the median home price to other similar markets to gauge affordability.
  • Median Rent and Rent-to-Value Ratio: Aim for a rent-to-value ratio of 0.8-1.2% per month (e.g., $1,000 rent on a $100,000 property).
  • 1-Year and 5-Year Equity Growth: Look for markets with 1-year equity growth of 3-5% and 5-year growth of 20-30%.
  • 1-Year and 5-Year Rent Growth: Seek areas with 1-year rent growth of 2%+
  • Job Growth: Focus on markets with an annual job growth rate of 1% or higher.
  • Unemployment Rate: Ideal markets have an unemployment rate below the national average, typically around 3-4%.

Tools And Resources For Market Analysis

Smart real estate investing starts with thorough market research. Here are some valuable tools and resources:

  1. Real Estate Portals (Zillow, Realtor.com, Redfin): Analyze median home prices, rent trends, and housing market forecasts.
  2. U.S. Census Bureau: Obtain detailed demographic data, population growth trends, and income statistics.
  3. Bureau of Labor Statistics (BLS): Access employment data, job growth rates, and unemployment statistics.
  4. NeighborhoodScout: Analyze neighborhood-specific data on crime rates, school quality, and housing trends.
  5. Local Government Websites
  6. Real Estate Investment Groups (REIAs, Online Forums)
  7. Turnkey Provider Market Reports
  8. Property Management Companies

Step Two: Picking and Vetting the Turnkey Providers

You’ve researched promising markets and identified your investment strategy – now it’s time to find a turnkey provider. This isn’t a decision to take lightly, this decision is crucial to ensuring a smooth, profitable, and hands-off investment experience.

Criteria for Evaluating Turnkey Providers

Choosing the right turnkey real estate provider is a critical step in ensuring the success of your investment. The following criteria will help you evaluate potential providers and make an informed decision:

  1. Reputation and Reviews: Begin by assessing the provider’s reputation through online reviews on platforms such as Google, Yelp, and the Better Business Bureau. Look for consistent positive feedback while noting any recurring negative comments. Ask the provider for references from past clients and speak directly with them to understand their experiences.
  2. Experience and Track Record: The experience and track of the turnkey real estate company record are crucial indicators of their reliability and stability. A longer track record typically indicates a stable and reliable provider; you want a turnkey company with years in the game.
  3. Market Knowledge: Local expertise is essential for a turnkey provider. They should have deep knowledge of the local real estate market, including neighborhood dynamics, rental demand, and property values. Evaluate the quality of their market analysis and the data they provide for making investment decisions to ensure they can guide you effectively.
  4. Property Quality: Inspect the quality of renovations in the provider’s properties. Ensure that renovations meet your standards, use durable materials, and match your investment preferences. Review third-party inspection reports to verify the condition of the properties, ensuring transparency and quality.
  5. Property Management Services: Determine whether the property management services are handled in-house or outsourced. An in-house property management company can lead to better accountability and service. Check the range of services they offer, including tenant screening, rent collection, maintenance, and handling evictions, to ensure comprehensive management support.
  6. Financial Transparency: Financial transparency is vital in evaluating a turnkey company. Ensure there is a clear breakdown of all costs involved, including the purchase price, renovation costs, property management fees, and any other associated expenses. Assess the realism of their return projections and compare them with market norms to avoid any unrealistic expectations.
  7. Customer Support: Evaluate the provider’s responsiveness and communication quality. Prompt and clear communication is crucial in managing real estate investments. Understand their process for resolving issues with properties and tenants to ensure they can handle problems efficiently.
  8. Legal and Compliance: Verify that the provider is properly licensed and accredited by relevant real estate and property management organizations. Ensure they comply with all local, state, and federal regulations regarding property management and real estate transactions, protecting you from legal complications.
  9. Investment Philosophy and Alignment: Ensure the provider’s investment philosophy aligns with your own goals and risk tolerance. Understand their recommendations and support for potential exit strategies when you decide to sell or liquidate your investment, ensuring they can guide you through the entire investment lifecycle.

27 Questions to Ask Potential Providers

When interviewing potential turnkey real estate providers, asking the right questions can help you gauge their competence, reliability, and suitability for your investment goals. Here are key questions to ask a turnkey provider while evaluating their services and investment methodology.

Company Background and Experience

  1. How long have you been in the turnkey real estate business?
  2. Can you provide references from past clients?
  3. What is the size and scope of your current portfolio?
  4. What percentage of your clients are repeat investors?

Market Knowledge

  1. How do you select the markets you operate in?
  2. Can you provide data and analysis on the local real estate market?
  3. What are the current rental demand and vacancy rates in your markets?

Property Acquisition and Renovation

  1. How do you source and acquire properties?
  2. Can you walk me through your renovation process?
  3. Do you use in-house contractors or outsource renovations?

Property Management

  1. Is your property management service in-house or outsourced to a third-party property management company?
  2. What services are included in your property management package?
  3. How do you or your property management company screen and select tenants?
  4. What is your process for handling maintenance and repairs?
  5. How do you handle tenant evictions and lease violations?
  6. Do you provide assistance with legal matters related to property ownership and management?
  7. What are your key performance metrics for evaluating property management success?
  8. How do you handle underperforming properties?
  9. What is your average time to fill a vacancy?

Financial Transparency

  1. Can you provide a detailed breakdown of all costs involved in purchasing and managing a property?
  2. How do you calculate projected returns on investment?
  3. Are there any additional fees or hidden costs I should be aware of?

Investment Philosophy and Alignment

  1. What is your real estate investment philosophy?
  2. How do you align your services with my real estate investing goals and risk tolerance?
  3. What are your recommended exit strategies for turnkey real estate investors?
  4. How do you support investors in scaling their turnkey property portfolios?
  5. What sets you apart from other turnkey providers?
  6. What should I know about turnkey investing that I might not have considered?

Buying Turnkey Rental Properties with Ohio Cashflow

You’ve done your research, you understand the power of turnkey, and now you’re looking for a trusted partner to guide your journey.

Look no further than Ohio Cashflow. As a nationally recognized, top-rated turnkey provider, we’ve been helping investors like you build wealth and achieve financial freedom since 2014. We’ve helped over 250 investors acquire cash-flowing properties, with over 1,000 properties sold – a testament to our commitment to your success.

But we’re more than just numbers – we’re a team of 30+ dedicated professionals, and investors ourselves, who understand the ins and outs of the real estate market. We’re here to provide comprehensive support every step of the way, from property selection to tenant management, so you can sit back, relax, and watch your passive income grow. 

Step Three: Analyzing Potential Turnkey Properties

You’ve found a promising turnkey provider – great! But before you sign on the dotted line, it’s time to roll up your sleeves and analyze the properties themselves. Here’s what to scrutinize:

  • Location –Research the neighborhood, rental demand, schools, crime rates, and amenities.
  • Property Condition – Don’t just rely on photos. Scrutinize renovations and get a professional inspection.
  • Tenants (if applicable) – Request screening reports and review the lease agreement if the property already has tenants.

Crunching the Numbers

This is where your investor hat really comes on. Understanding the financial viability of a property is non-negotiable.

Cash Flow Analysis – Your Bread and Butter

Your cash flow analysis tells you how much money you’ll actually pocket each month after expenses.

Cash Flow = Gross Rental Income – Operating Expenses – Mortgage Payment

Let’s break it down:

  1. Gross Rental Income: The rent you collect each month.
  2. Operating Expenses: All the costs of owning and running the property (taxes, insurance, management fees, maintenance, etc.).
  3. Mortgage Payment: Your monthly mortgage payment.

Positive cash flow is the goal – it means your rental is making you money.

Return on Investment (ROI)

ROI tells you how effectively your investment is working for you. For rental properties, we often use Cash-on-Cash Return, which measures your annual pre-tax cash flow against your initial cash investment.

Here’s the formula:

Cash-on-Cash ROI = (Annual Pre-Tax Cash Flow / Total Cash Invested) x 100%

Example:

You invest $50,000 in a rental property, and your annual cash flow (after expenses) is $6,000.

Your Cash-on-Cash ROI is: ($6,000 / $50,000) x 100% = 12%

This means your investment is generating a 12% annual return based on your initial cash outlay. Generally, a higher ROI indicates a more profitable investment.

Comparable Properties: Are You Getting a Fair Deal?

Don’t rely solely on the asking price. Analyze recent sales of similar properties (size, bedrooms, bathrooms, condition) in the same neighborhood. This gives you a realistic idea of market value and helps you avoid overpaying.

Step Four: Purchase Your Turnkey Property

Once you have thoroughly evaluated the turnkey property and set aside the necessary cash, it’s time to move forward with the purchase. This step begins with making an offer on the property, though it is important to note that when working with a turnkey provider, the price is typically non-negotiable. Turnkey providers set a fixed price based on the property’s market value and its projected returns, ensuring transparency and consistency in the purchasing process.

After reviewing the property’s financials, inspection reports, and other relevant documentation, you can submit your offer and sign a contract. Your turnkey provider will guide you through this process, ensuring all necessary paperwork is completed accurately and efficiently. It is essential to carefully review the purchase agreement, which outlines all terms and conditions of the sale. Pay close attention to details such as contingencies, closing timelines, and any warranties or guarantees provided by the seller or turnkey provider. If any clauses are unclear, don’t hesitate to seek clarification from your turnkey provider or legal advisor.

With the purchase agreement signed, the focus shifts to the closing process. This involves several steps, including performing due diligence to confirm the property’s legal and financial status. A thorough title search will ensure there are no liens or encumbrances on the property. At the same time, buyers can get a final inspection to verify that the property’s condition aligns with the turnkey provider’s claims. Additionally, you will need to arrange for the transfer of funds to cover the purchase price and closing costs, which may include title insurance, escrow fees, and legal fees.

Throughout the closing process, maintain open communication with all parties involved, including your turnkey real estate company and closing agent. Their expertise and coordination will help ensure a smooth and efficient transaction. Once all documents are signed and funds transferred, the property ownership will officially transfer to you, marking the completion of the purchase.

By purchasing the property outright with cash, especially if you are investing remotely, you simplify the process and avoid the financing risks. This approach not only expedites the closing process but also positions you to quickly transition to the next phase: having the turnkey real estate company source an experienced tenant to begin generating rental income immediately.

Step Five: Collecting Rent and Staying Connected with Property Management

Once you have successfully purchased your turnkey property and secured a tenant, the next critical phase involves managing the property effectively to ensure a steady stream of rental income. While turnkey properties are designed to minimize the hands-on involvement of investors, having a professional property management company oversee your investment is crucial for several reasons. That’s why Ohio Cashflow set up our own in-house property management company, Oz Realty.

Engaging a property management company allows turnkey real estate investors to continue their passive real estate investment journey. Instead of handling all the work yourself, you get to sit back and collect rent checks while your manager ensures your investment property stays profitable.

The Role of a Property Management Company in Real Estate Investing

Property management companies handle the collection of rent, ensuring that payments are made on time and addressing any delays or issues promptly. This consistency is vital for maintaining your passive cash flow.

Staying Connected with Your Property Management Company

Maintaining open and regular communication with your property management company is essential for a successful investment. Your property manager is part of your investment team. Here are some tips to stay connected:

  1. Regular Updates: Keep an eye on regular updates on your real estate investment property’s performance, including financial reports, maintenance issues, and tenant feedback. These updates can be provided through monthly reports, emails, or phone calls.
  2. Use Their Online Portal: Your property manager should offer an online portal where you can access real-time information about your property. These portals typically include financial reports, maintenance requests, and tenant communications.
  3. Annual Reviews: Schedule annual reviews with your property manager to discuss the overall performance of your property and any potential improvements. This meeting can help you align your investment goals with the management strategy.
  4. Clear Communication Channels: Establish clear communication channels with your property manager. Ensure they know your preferred methods of communication and response times for various issues.

By entrusting your turnkey rental property to a professional property management company, you leverage their expertise and resources to safeguard your investment. They handle the day-to-day operations, allowing you to enjoy the benefits of rental income without the stress and hassle of managing the property yourself.

Start Building Your Passive Real Estate Portfolio Today

Building a passive income stream with turnkey real estate investing doesn’t have to be complicated. With the right knowledge, a trusted partner, and this turnkey property buying guide, you can start enjoying the benefits of property ownership sooner than you think.

The process of buying turnkey rentals is a simplified, streamlined approach, putting you on the fast track to financial freedom without the typical landlord headaches.

We’ve walked you through the ins and outs of turnkey investing, from understanding the benefits to finding the perfect property and everything in between. Now, it’s time to take action.

Are you ready to make your move? Ohio Cashflow is here to help. We’re passionate about helping investors like you achieve financial independence through turnkey real estate. We’re not just a company – we’re a team of experienced investors who have walked the walk and are dedicated to guiding you every step of the way.

Complete our Investor Application today, and let us guide you to financial freedom through passive real estate.

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About the author

Picture of Kelsey Heath
Kelsey Heath is a real estate content specialist with an extensive background in residential, industrial, and commercial property. She has been involved in the industry for a decade as a professional and personal investor, gaining a deep understanding of the market and trends. With a passion for written communication, Kelsey loves helping people understand the sometimes-complicated concepts behind real estate and is now a sought-out guest and ghostwriter.