This was my 2nd turnkey rental property I purchased out of state in the great city of Indianapolis. I purchased this house in April 2015 and I am really hooked on turnkey rentals now. I purchased this turnkey through a different turnkey provider in Indy. I originally wanted to purchase from the first turnkey providers in which I purchased the turnkey #1 from however the few properties they had available did not fit my criteria this time around. After sifting through another 20 or so turnkeys from multiple sources I finally found one that fit my criteria. The due diligence phase began again and after carefully researching the seller, neighborhood and property I submitted the offer.
This particular house had a newer roof only a few years old, new water heater, updated plumbing and electrical which all fit my criteria. What it did not have was an AC unit and had a really bad fence that needed to be replaced. The seller did not want to include this with the sale. This goes against my normal criteria however as long as you accommodate this in your numbers and include a future AC unit install in the numbers you should be okay to proceed. Assuming of course these new numbers still fit your ROI minimum. In this case it did so I was okay with proceeding.
The inspection came out with a few repairs in which the seller fixed and the appraisal came out right at purchase price. This particular turnkey provider would also be the property manager on this one and I decided it was a good idea to have two different property management teams working for me in Indianapolis. That way if one goes bad, ill have a backup to send my properties to.
Here are the actual numbers used and calculated for purchasing this turnkey rental investment.
Fast forward >> I wrote this in May 2015 so at this point, I’ve only had this property for one month as I closed on it in early April 2015. The first months rent was this month and I was paid on time. No repairs obviously because its so new. So far so good. Feel free to send me a message or comment below to ask me how this property is doing for me now.
If you are interested in purchasing a turnkey, make sure you read this Step By Step Guide.
What size house was this? Also, What is a general rule of thumb for a good/bad Cash on Cash return in your calculator?
I have been using your rental calculator that I downloaded after signing up for your newsletter and it is definitely handy. The monthly income came within ~$50 of a calculator that I had built myself. One of the things I didn’t have in mine was a Cash on Cash return which explains my question above.
That house was a 4/2 about 1700 square feet. Cash on cash is all dependant on individual goals but I like to see mine at least 15% preferably 20%
I love that rental calculator. Glad you are using it.
I can’t figure out how you are figuring your cap rate? And what is a good number? Thanks!
Hi Roland, The cap rate is just Yearly_Cash_Flow/Purchase_Price. This calculation is based on a full cash purchase only. The COC rate is based on financing.
From what I have read a good cap rate is 10 and that is pretty much what I shoot for but it will vary by market. In some markets its impossible to get a cap rate that good. But in the mid-west, I would say shoot for around 10 or higher.
I was confused on this so I had to calculate it….
Cap Rate = ((Monthly Cash Flow + Mortgage Payment)*12) / Purchase Price
= ((310.6 + 199.92)*12)/55000
=11.14%
Are the rental returns still this good in Indianapolis? I’m interested in purchasing there but it seems the home values are higher now than when you bought.
Indy is still cheap compared to most cities of that size or bigger. Yes the returns are still good but its really tough to find the kind of returns I was getting.
So, where are you investing now?
Indy and KC is where I will be concentrating on still. Dont have any plans on changing that for now.
Just came upon your blog and am really liking it so far. I am just getting started in the REI game and I will be following your thoughts. I currently live in Philadelphia and I am looking in the area but it seems the numbers are tough to find.
What areas do you think you will be looking at for your next purchase or two? Appreciate your thoughts.
Hi Rid, Thanks for stopping by!
Since I wrote this post, I literally moved to Indianapolis for the sole reason of buying more properties here and speeding up my financial freedom goal. So as of now, I have been living in Indy for just over a year, have purchased 3 new rentals in that time frame and am now up to 8 investment properties. So to answer your question, Indy is the way to go. I like KC too though but im 100% concentrating in the Indianapolis market right now.
http://www.cashflowdiaries.com/moving-midwest-can-help-speed-early-retirement/
Who do you find to be the best 3 turn key providers in the Indy area?