1st rental property - would love advice
I live in Los Angeles, where property is expensive to rehab and rent unless you have a lot of money to lay out.
I'm doing a cash out refi of my primary residence, which will net me about $200k to spend. The issue is, I need to buy a property out of state and I have very little free time due to my full time job.
I'm thinking that Turnkey is a good way to get my feet wet, but I am confused by them. I see that there are places like Roofstock, that sell properties on a marketplace that already have tenants. And then there's places like Spartan that make a deal with an investor, rehab the property, and then rent it for them.
Is there a reason people go with operators like Spartan, which would require months before the property is ready, and even then, no guarantee of a tenant VS Roofstock, which seems quick and already has guaranteed cash flow?
Also, it seems like most of the Turnkey properties have 1-3% annual appreciation. Assuming the cash flow meets the 1% rule, that means an investor is only making between 2-4%/yr. The stock market averages 8%, and it's more liquid. So what's the point of investing in Turnkey at all?
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Corey @Bjorn Ahlblad makes a great point - you have several options. I would read David Greenes book "Long-Distance Real Estate Investing" which might help you select a strategy.
As far as your comment about the 2-4% vs the 8% return in the stock market, I have had the same thoughts! What makes real estate attractive to me is the tax benefits as well as leverage. I pay very little in taxes due to the depreciation of my rentals. And remember, the 3% appreciation is on your $1,000,000 property, not your $200,000 investment into the property. Therefore your return is 15% ($30,000/$200,000) not 3%.
Hope that helps! Best of luck!