How much money do I need to get started? What are the costs involved and closing cost?

There are transaction-associated costs with any real estate purchase, including fees from the lender, title company, and appraiser. However, there are no additional costs for investing with us beyond what is standard for any home purchase.

If you are using conventional financing, a 20% down payment of the purchase price is required. Additionally, there are standard closing costs, which typically amount to around $3,000 per transaction. These costs can vary based on the property, lender, and state. Generally, the breakdown is about $1,000 for lender fees, $1,500 for title fees, and $500 for appraisal.

A common point of confusion involves pre-paid taxes and insurance due upfront at closing. An additional amount, possibly up to $2,000, might be needed at closing, but these are not closing costs; they are prepaids that are accounted for on our pro forma monthly basis. If you’ve purchased a home before, you may be familiar with this process. If you opt for the lender to handle your annual tax and insurance payments (which is optional), they will collect a year's worth of taxes and insurance upfront to fund your escrow account. This ensures the lender has the necessary funds when tax and insurance payments are due the following year. A portion of your monthly mortgage payments will then be allocated for future tax and insurance payments. This combined payment is referred to as your PITI payment (principal, interest, tax, and insurance). When you sell the home, you will receive a refund for any money remaining in the escrow account.

In summary, in addition to the 20% down payment, you might need an additional $4,000 to $5,000 at closing. However, not all of this amount constitutes true closing costs, and not all of it is mandatory. Most people opt to have the lender manage their taxes and insurance through escrow, as it offers the convenience of not having to handle these payments independently each year.

What are the potential risk of investing in real estate and turnkey properties?

There’s no such thing as a risk-free investment. Every investment comes with its own upsides and potential downsides. People often ask, "This sounds too good to be true," or "What's the catch?" In reality, there isn't a catch, but it's crucial to be aware of the risks associated with real estate. Understanding our business model can help mitigate these concerns. Our turnkey model specifically addresses many of these risks through a systematic approach to investing in these areas. We control many variables, but the biggest variable is always the tenant. If you own enough properties over time, you will inevitably encounter a difficult tenant or a property that doesn't perform as expected. This is why having a diversified portfolio with multiple streams of income is essential. It helps balance out any underperforming properties.

In our opinion, the highest risk for an investor is owning only one rental property. If that property becomes vacant, you lose 100% of your rental income while still having to pay the mortgage and expenses. Conversely, with four or five properties, you would likely still have positive cash flow even if one property is vacant. It's also essential to plan for unforeseen expenses and maintain appropriate reserves. Most lenders require six months of reserves for mortgage payments per property, which is around $3,000 per property—a good starting point for initial reserves.

The turnkey approach reduces the risks associated with venturing into an unfamiliar market and investing in properties on your own. Attempting to acquire a property in an unknown market without a local team can introduce a host of additional risks. Our turnkey model offers a more secure pathway by leveraging our established systems and local expertise.