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Purchasing a property to let: Do-it-yourself or turnkey solution?

Purchasing a property to let: DIY or turnkey solution?

Purchasing a property to let can be done in two ways: Via a ready-made solution or as a do-it-yourselfer.

Below you can read all about these two ways in which you can buy an investment property to let.

Think about it, it will affect your free time!

What are turnkey buy-to-let properties?

There is a wide range of turnkey buy-to-let properties available on the property market today.

Many property promoters are trying to take advantage of the current economic situation and low interest rates.

These are companies that specialise in renovating old houses or flats and then renting them out.

As soon as the buy-to-let properties have demonstrable revenue, they are offered for sale as turnkey yield properties.

There are also variations on the theme. There are also companies that do not offer renovation but only new construction.

And so there are also companies that offer ready-made buy-to-let properties for sale without ever having been let and/or without a lease or letter of intent having been signed.

Purchasing a property to let – Two types of investment

On the one hand, it may be a good idea to invest in a turnkey buy-to-let property. You invest some equity and you can enjoy immediate returns.

On the other hand, there are also some good reasons to do everything yourself.

In other words, do everything yourself in order to systematically reach the profitability stage. This includes the following tasks:

  • Purchasing a property to let out and start from the beginning,
  • Searching for and purchasing an attractive property,
  • Carrying out (or having carried out) any renovation and/or repairs,
  • Taking the rental process into your own hands, and so on.

Advantages of turnkey rentals

First of all, let’s define what turnkey rental properties actually are.

There are some companies that promote turnkey rental properties as renovated or newly constructed properties that are rentable. However, this is not enough…

A purely ready-made rental property is one that has been prepared and already let (to tenants or contractually via a letter of intent to let). It may also have a professional property manager already attached, although this is not necessary.

The minimum requirement is that the rental property is managed with due diligence by the current owner (private individual or company) and that no serious problems have occurred with the property during the past few months.

As a private person, you invest in such turnkey buy-to-let properties for mainly four good reasons:

Fastest way to purchase a property to let

To choose this form of investment is to avoid the hard, long work of the do-it-yourself track.

A do-it-yourselfer easily spends two months researching, one month buying (don’t forget the notary), three months renovating (if all goes well and there are no unexpected problems with the property or contractors) and one month advertising.

And then, seven to eight months later, the first rental income will be received. That is a lot of time that passes before the cash flow can become more positive!

Automatic investment that makes everything easier

Is investing in real estate [AVAILABLE SOON] still interesting? If you already have a busy job and also want to spend quality time with your friends and family,…

The answer is a resounding yes thanks to such ready-made rental properties.

Investing in a buy-to-let property suddenly becomes much more accessible as a specialised company takes over the responsibility for the following tasks:

  • Find out which properties or building sites can become profitable buy-to-let properties,
  • Planning and organising construction work, renovation work and/or repairs,
  • Creating publicity and securing a tenant,
  • Appoint a professional property manager with good rental service [AVAILABLE SOON] (in most cases).

In the ideal situation, you will even receive guidance from the company on how to optimally finance your property.

As an investor, you simply sign the necessary documents, invest a portion of your own capital and that’s it: you receive an immediate return.

It could not be easier. So investing in real estate on automatic pilot is possible. In this context, you can also consult the page about becoming a passive property investor or active property lessor [AVAILABLE SOON].

Investing assets with attention to diversification

If you are won over by the idea of investing in turnkey real estate, you can easily diversify in different ways.

This way, you can gradually purchase properties to let in various locations. In this way, you can cope with a local property shock because not all your eggs are in the same basket.

You can also diversify in terms of security and guarantees. Investing with rental guarantee in real estate [AVAILABLE SOON] is possible. Please note that there are large differences in terms of rental guarantees [AVAILABLE SOON]…

Offer: Investment properties with rental guarantee

  • Such rental guarantees vary enormously and can be roughly divided into three types:
    • Bronze rental guarantee. This is a real estate investment whereby the steward promises to do everything in his power to permanently rent out your buy-to-let property (without contractual guarantees). Examples of such investment properties are the following:

Invest safely with less risk – Purchasing a property to let

Opting for such turnkey buy-to-let properties can be considered a form of defensive investing.

Because what if you choose the do-it-yourself route and invest a lot of time, energy and money in the development of an investment property…

To find at the end that you have made one or more of the following crucial mistakes:

  • Selecting the wrong location
  • Overestimation of local demand in the rental market
  • Overestimate the rent you can get for the property
  • Spending too much on the purchase price
  • Choosing the wrong buy-to-let property [AVAILABLE SOON]
  • Spending too much on renovation (due to unforeseen costs or unrealistic budgeting)

All these mistakes can lead to a scenario where you lose money instead of making money.

Advantages of do-it-yourself and the hard way

All good things take effort and time. It is as simple as that. Why do you want to build your wealth with real estate?

The reasons for preferring real estate to a savings account or shares are as follows:

Leveraged rental property financing

Purchasing a property to let can be done by taking out a (mortgage) loan. In this way, you invest money from someone else (the bank) in your rental property. This is called financial leverage [AVAILABLE SOON] in technical jargon.

Depending on the specific details such as the amount, term and interest rate of the loan, you can then evaluate what the financial side of the business would look like.

This allows you to focus on a scenario where the return on your invested equity is higher than the interest rate on the loan.

You can calculate this return by taking into account any subsequent capital gain on sale [AVAILABLE SOON] or not.

If you want to work conservatively, abstract from a surplus value and make your financial plan without counting on a surplus value. Consider such an added value at the time of sale merely as a possible bonus.

You can increase your chances of success by buying a property that is undervalued. With some renovation, you could raise the value further, which would also benefit the rental income.

Reduced volatility

The real estate market is not as volatile as the stock markets [AVAILABLE SOON]. A big bubble or a drastic change in tenants’ behaviour or preferences can be spotted far enough away to make adjustments.

And if the account is right, you might as well just keep the property in your real estate portfolio [AVAILABLE SOON] because it generates a positive cash flow every month.

Control

When you purchase a property to let out, you have complete control over it. In this scenario, for example, you can renovate it according to your own wishes. You can also fully determine the rental price of the property.

You can possibly appoint a property manager yourself, who will be responsible for the rental and maintenance of your buy-to-let property.

Moreover, you can even choose in which neighbourhood and in which building you purchase to optimise your return on real estate [AVAILABLE SOON].

Checking of ready-made investment properties

Now imagine for a moment that you are investing in a ready-made buy-to-let investment property. So what happens to those good reasons for investing in rental properties?

  • Financing via (mortgage) credit is still possible. But the scope for scoring returns on the evolution of the property’s value is smaller. Companies that offer these turnkey investment properties [AVAILABLE SOON] have already purchased at a price below the market price. They then sell to you at a price that is normally very close to the normal market price.
  • What about control? If all goes well, there is no problem. But what if the current property manager is doing a downright poor job? Then you can indeed decide to appoint a new person in charge of rental and maintenance. But then all of a sudden, because of all the headaches and stress, you lose the big advantage of a turnkey investment property, worry-free automatic renting.

There are some other pitfalls also in buying and letting property.

Often, it comes down to the fact that you as an investor have not done your homework. Also, always try to avoid hypes but opt for a proven and tested type of property.

Some of the other problems that make the DIY slope of purchasing a property to let certainly an option with ready-made rental properties are:

Problems with the location

Beware of companies offering ‘the holy grail’ of location. Just because a certain company communicates that a turnkey buy-to-let property is super well located, does not mean it is true.

Do not be naive and rely solely on common sense and possibly the opinion of an independent third party experienced in property investment.

Purchasing a property to let should be approached rationally and with expertise.

Because even if the company is 100% ethically correct, people always remain biased (and irrational) because they are too involved in the project.

Feel free to take a look at the location and the region yourself. You can learn a lot from a few visits (both during the day and in the evening).

Renovation problems – Purchasing a property to let

Some companies offer renovated investment properties for sale [AVAILABLE SOON] . And even though most providers can be trusted, there is always a rotten apple in the basket.

So pay attention and be sure that you are dealing with a company that does quality renovations.

Are you not active in the construction sector yourself? Then the advice is simple: Get independent advice from a professional and inspect the property together before you buy.

Also beware of online testimonials on the provider’s own website… These may be disguised or even outright falsified.

In other words, seeing before believing is the key to success if you go for an off-the-shelf solution.

Problems with tenant(s) – Frequently arising problem when purchasing a property to let

A final problem that may arise is the potentially low quality of tenants if you go for a turnkey solution.

Just because people say that the property has already been rented out to a properly paying tenant does not mean that this is the reality…

Ask for evidence (bank statements, rental contracts, letters of intent, etc.) to verify the provider’s statements.

Also bear in mind that one rental guarantee in investment property [AVAILABLE SOON] is not the same as another!

Purchasing a property to let in a nutshell

Opting for a turnkey property and passive investment in real estate [AVAILABLE SOON] offers some undeniable advantages.

And because of this, as an intelligent investor, you can never write off this form of investing in real estate [AVAILABLE SOON] .

Nevertheless, you should understand why you would buy such a ready-made buy-to-let property. And furthermore, you should never blindly trust the provider in question.

Do your homework and only deal with a party that has the necessary credentials and experience.

Finally, a tip. As an investor, it is always better to let a good property manager manage and rent out a less profitable buy-to-let property than the other way around.

A good property manager with solid standards and values is crucial. So you could be purchasing a property to let without a care in the world, on autopilot.

An additional article that you can consult in this regard is buying a house to let: Three different options.

Other savings alternatives

Need more inspiration to see what the best investment is for your savings? Then visit the following pages full of tips and inspiration:

Interest rates on savings books are very low and you get poorer every year with a savings book as the inflation rate is higher than the interest rate you get.

So a classic savings account is no longer a good savings formula if you want to protect your capital and at least keep it in line with annual inflation…

The pages cited above provide an overview of many alternative savings formulas. Investing in loans, for example, is such a savings alternative. Many of the options and alternatives can also be arranged completely online!

Do not hesitate and go exploring. You will probably learn something from the world of investment opportunities at home and abroad.