If you have worked with Ohio Cashflow before, you know that we don’t recommend financing turnkey rental investments, especially if it is your first investment property. In fact, we often have to turn away investors because we only sell investments on a cash basis.
Financing any investment property leaves you open to risk. Loans have to be repaid no matter what your income is. If your rental property goes vacant or you have a major repair bill, you still need to pay your monthly mortgage payments. Many investors assume their investment will always have cash flow, but the truth is not always so bright. That’s why we always recommend buying your first two rental properties using all cash before you start leveraging.
While all investors should be wary of debt, that doesn’t mean it isn’t a valuable tool to grow your portfolio. In this article, we give you our methodology for buying turnkey property, when it is appropriate to use financing, loan options for turnkey properties, and our best financing tips for turnkey properties.
Why Buy All Cash?
Buying an investment property using only cash (no loans) is the best way to minimize investment risk. With an all-cash purchase, you immediately own the property outright, which means you have full equity in the investment from day one. But there are some additional benefits.
Avoid Interest Costs
Debt is not free (especially in today’s interest rate environment). When you buy a property outright, you save on interest payments that would accumulate over the life of a mortgage. Over time, this can result in substantial savings and a higher overall return on investment (ROI).
Close on the Property Faster
The Toledo real estate market is red hot, attracting real estate investors from around the country. When you find a deal, you want to secure it so you don’t miss out. All-cash deals can close more quickly than those involving financing, which can take weeks or even months. If you’re working with a turnkey company, you need to be able to close quickly so that you don’t lose the investment property to another buyer.
No Appraisal or Financing Contingencies
Appraisal and financing contingencies have their place, especially when buying an expensive family home. However, when buying turnkey properties, pricing doesn’t necessarily follow the traditional real estate model. Instead, it includes the fact that the property is already leased (or soon to be leased) at a specific cap rate, which an appraiser cannot consider in their valuation. Therefore, sometimes appraisals don’t come in at purchase price, especially if you’re buying in a market that’s rapidly increasing in value or where there aren’t many comparable sales. If you need the property to appraise at a specific value to secure financing, you might lose the deal.
Is Financing Turnkey Rental Investments Possible?
Financing turnkey rental investments is not only possible but also a common approach for many real estate investors. However, as stated previously, we recommend you start using debt to grow your portfolio once you own two or three investment properties. These properties provide a measure of financial security that protects you should one of your properties go vacant. At this point, you can leverage other people’s money (the bank’s) to purchase more properties or preserve cash for other investments.
Refinancing Turnkey Properties: The Best Way to Finance Your Turnkey Property
Refinancing is a powerful strategy that allows you to unlock the equity in your turnkey property after it has stabilized, allowing you to reinvest in more properties or allocate funds elsewhere. One of the best approaches to financing turnkey rental properties is to buy them outright with all cash and then refinance once you’ve ensured the property performs as expected, allowing you to grow your real estate portfolio.
The key to successfully refinancing a turnkey property lies in timing. Wait until the property has demonstrated stable performance—typically a year or two after purchase. This period allows for any unforeseen issues to be addressed and ensures that the property generates consistent income. In some cases, investors can use the income from the property to qualify for the loan instead of their income.
Access to Capital
Turnkey property investing doesn’t mean you can never access the capital you invested in. Refinancing allows you to withdraw a significant portion of your initial cash investment, which you can use to purchase additional properties or invest in other opportunities. This method helps you scale your portfolio faster without over-leveraging from the start. Investors can even potentially finance with non-recourse loans.
Lower Interest Rates
Waiting until your turnkey rental property is stabilized may put you in a stronger position to negotiate a favorable interest rate. Lenders are often more willing to offer better terms when they see a steady cash flow track record from the property.
Tax Benefits
Refinancing can also offer potential tax benefits. The funds you receive from a refinance are typically not considered taxable income, allowing you to reinvest that money without a significant tax hit.
Loan Options for Turnkey Real Estate
If you want to know how to finance turnkey rentals, you first need to understand the loan options available to you. Most investors finance turnkey rental properties using traditional mortgages. These are loans provided by banks, credit unions, or mortgage companies. The typical requirements include a good credit score, a down payment (often around 20%), and proof of income.
Conventional Fixed Rate Mortgage
Conforming loans meet the guidelines set by Fannie Mae and Freddie Mac, including maximum loan amounts, credit standards, and down payment requirements. The maximum loan amount is adjusted annually and varies by location.
The most common terms for conforming loans are 30-year and 15-year fixed-rate mortgages. It offers a fixed interest rate for the entire 30-year or 15-year term, providing consistent and predictable monthly payments. The major difference between a 30-year and 15-year mortgage is that with a 15-year loan, you pay less interest over the life of the loan, but monthly payments are higher so that the loan gets paid back over a shorter term. Turnkey investors who want to pay down their debt faster should consider a 15-year loan, while those with cash flow might prefer a 30-year term.
For turnkey investment properties, conventional loans usually require a higher down payment than for primary residences. Typically, the minimum down payment is 20% of the property’s purchase price, though it could be higher depending on the lender and borrower’s financial profile. Borrowers typically need a credit score of at least 620 to qualify for a conventional loan, but a higher score (above 700) is often required for investment properties to secure the best interest rates. Credit requirements can be limiting for many investors.
Home Equity Line of Credit (HELOC)
A HELOC is a revolving line of credit secured by the equity in your existing property. Unlike a traditional loan, which gives you a lump sum of money, a HELOC allows you to borrow up to a certain limit, pay it back, and borrow again as needed during the draw period, much like a credit card. A HELOC allows you to tap into the equity of your primary residence or an existing investment property to finance new turnkey investment opportunities.
The benefit of a HELOC is that you only borrow what you need when you need it, which provides flexibility in managing cash flow for real estate investments.
Owner Financing
Owner financing, also known as seller financing, is an alternative method for purchasing real estate where the seller (owner) of the property acts as the lender. Instead of getting a traditional mortgage from a bank or financial institution, the buyer makes payments directly to the seller according to agreed-upon terms. Some turnkey companies may offer partial or even complete owner financing options. However, be wary of owner financing as it usually comes with hefty interest rates and large balloon payments.
Hard Money Loans
Hard money loans are a type of short-term financing commonly used by real estate investors, particularly for fix-and-flip projects or purchasing properties that may not qualify for traditional financing. These loans are typically offered by private lenders or investment groups rather than traditional banks.
Hard money mortgages are secured by the property, making them asset-based loans. The lender’s primary concern is the turnkey property’s value rather than the borrower’s creditworthiness, although some assessment of the borrower’s financial background may still be conducted.
These loans usually have terms ranging from 6 months to 3 years. Hard money lenders can approve and fund loans much more quickly than traditional lenders, often within a few days, making them ideal for investors needing to close deals fast. However, interest rates on hard money loans are significantly higher than conventional mortgages, often ranging from 8% to 15% or more, depending on the lender and the borrower’s situation. If you’re buying a turnkey property with hard money, you must have an exit plan or alternative financing lined up to avoid paying thousands in interest.
Toledo: A Cash-Friendly Real Estate Market
Many investors start to get cold feet when they hear that we only sell turnkey properties on a cash basis. They think, “I don’t have hundreds of thousands of dollars to buy an investment property.” Of course not – and we don’t expect you to!
One of the most attractive aspects of turnkey properties in Toledo’s real estate market is its affordability. Property prices here are significantly lower than in many other markets, especially compared to coastal cities. This low-cost entry point allows turnkey property investors to purchase properties outright with cash, minimizing the need for financing and reducing overall risk. In Toledo, a budget that might only cover a down payment in other markets can often buy an entire turnkey property, giving cash buyers a substantial advantage.
High Rental Yields
Profitable real estate investing is driven by rental income. Toledo’s affordability doesn’t just stop at purchase prices—it also extends to rental yields. The city’s strong rental demand, fueled by a diverse population that includes students, families, and professionals, translates into consistent and attractive rental income. Cash buyers of turnkey properties can benefit from these high yields without the drag of monthly mortgage payments, leading to a faster return on investment (ROI) and greater cash flow from day one.
Lower Transaction Costs
Closing a deal with cash in Toledo expedites the process and reduces transaction closing costs. Without the need for appraisals, mortgage origination fees, and other financing-related expenses, turnkey property cash buyers can save thousands of dollars per transaction. These savings further enhance the overall ROI and can be reinvested into additional properties, allowing for quicker portfolio growth.
Market Stability
While many real estate markets experience sharp fluctuations, Toledo’s market has remained relatively stable over the years. This stability is a boon for turnkey property cash buyers, reducing the risk of significant price volatility. Investors can feel confident that their all-cash real estate investment will maintain their value, providing both security and the potential for steady appreciation.
Buying Turnkey Properties in Toledo with Ohio Cashflow
Purchasing turnkey properties with all cash is not just a recommendation—it’s a strategic approach that significantly reduces your risk when investing in real estate. By avoiding financing, you eliminate the burdens of interest payments, long closing timelines, and appraisal contingencies, all of which can complicate and jeopardize your investment. An all-cash purchase ensures immediate ownership, full equity, and maximizes your cash flow from day one.
Toledo’s real estate market stands out as one of the best areas for turnkey investment, particularly for cash buyers. The city’s affordable property prices, high rental yields, and market stability create a unique opportunity for investors to secure profitable, low-risk investments without needing large loans. In Toledo, you can leverage the advantages of buying turnkey property investments with cash to grow your portfolio faster and with greater peace of mind.
Ready to make a smart investment in Toledo’s thriving market? Ohio Cashflow is the leading turnkey provider in the area, offering handpicked turnkey rental properties that deliver strong returns. Contact us today to learn how you can start turnkey real estate investing and enjoy the benefits of a worry-free real estate investment portfolio.
