Hey everyone, and welcome to Passive Real Estate Investing. I’m Melissa Nash, your guest host jumping in for now. Let’s dive in.
If you’ve ever wondered what a real turnkey deal actually looks like, not just theory, but the actual numbers, the returns, the process, then this episode is for you. I’m about to walk you through a real deal breakdown using actual available properties from markets that I personally invest in and help clients buy in every week. And by the end of this episode, you’ll see exactly how a single rental property can build wealth for different ways and how we’ve made the entire process hands off for our investors. Now, let’s start off by defining turnkey. What does turnkey mean to us?
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Now, first of all, a lot of people are going to say turnkey is where you buy a property and you basically turn the key, you open up the door and it’s move-in ready.
That’s generally what people say turnkey is. But what we define turnkey investing is it’s actually an entire system. It’s not just the property. So let’s talk about it. A turnkey property when you’re working with us is newly renovated, tenant ready and professionally managed by a third party local property manager. And the numbers are going to show positive cash flow. Now, you’re not managing contractors, you’re not, you know, hiring some random realtor on the MLS. You’re not chasing tenants for payments and you’re not trying to figure out what neighborhood is safe or what the rent should be, that’s already done for you. So we have analyzed the top performing markets across the country for over 20 years, and we have the data and the receipts to back it up. These are markets that are landlord friendly, stable and cashflow positively, and have some type of growth and appreciation.
We love to have a little bit of appreciation because then we also see more rental increases. Now we have vetted and built long-term relationships with local trusted property managers, renovation teams and lenders who can work with you and finance you in these markets that only work with investors so they know what they’re doing and have the best rates. Every property is fully renovated with warranties on the work. And again, every single property comes with a local property manager already in place. So when you buy with us, you’re stepping into a system that’s already running. You’re not building anything from scratch. And that’s why I love this model so much and why I am a turnkey investor as well. It’s perfect for people who want all the benefits of real estate appreciation, cash flow, tax advantages without taking on another job. So I hope I did a good job explaining that, but I really, really wanna get into the deals themselves.
So first of all, let’s look at a real property that is actually available right now. So this particular property is newly renovated in St. Louis, Missouri. This is considered a B class area. The purchase price is $155,000 and the monthly rent is $1,450. Now this comes from this price, or the rental amount comes from the property manager directly. I am not a local property manager in St. Louis, and I am not about to guess and try to mess around with numbers and try to figure out what the rents are. This comes directly from the horse’s mouth, meaning the property manager, they know what the average rents are and what it should rent for. So we’re gonna let them tell us what that number is. Now, year one, the returns are actually insane. The cash on cash returns on this property is 16.5%. You guys, let me explain for a second what cash on cash return is, because this number is huge.
Think about it like this. You have money sitting in your bank account, and let’s just say it’s in a high yield savings account, and let’s say it’s earning 3%. Well, your money, your cash on cash return is 3%. So think of it the same way. If you were to take your money out of your savings account and buy a property, and let’s say you’re buying this property in St. Louis and you’re gonna put 20% down and then you’re gonna have some closing costs, you are going to be paying, let’s just call it just to kind of keep math simple, $35,000. So on this particular property. So you’re taking $35,000 outta your savings account. Now what we want to do is figure out what the annual profits are on this property. After all expenses are paid, what are the profits? So the profits are just about $6,000 a year.
So if we divide that by 12, then we are going to get a monthly cash flow of just under $500 a month. First of all, you guys, that is insane. I don’t know who out there does not think this is an an amazing return, but you’re crazy if you don’t think this is, you didn’t do any of the work, you didn’t find the property, you didn’t renovate the property, you’re not managing the property. This is passive income. So what we wanna do is we wanna divide that $500 a month, and again, it’s just under $500 a month and we’re gonna divide it by your $35,000 because again, that is the money you took outta your savings account. We wanna know how hard that money is working for you. So when we divide that, we get a cash on cash return of 16.5% return. So that means your hard earned money, your $35,000 is no longer earning 3% in that savings account.
It is earning 16.5% on just the cash flow. So let’s talk about the other profit centers because again, this episode is to talk about what all the profit centers of real estate is. Okay? So let’s do a deep dive on where else we are profiting on this property. Now, I have an amazing spreadsheet that an engineer built for me, and I go off of this spreadsheet solely because it’s going to show us all of the profit centers for this property, not only for year one, but all the way through year 30. So this is really important because we’re not just looking at the profitability from year one. This is a long-term investment. So let’s look at year one and go, great, that looks amazing. Now let’s continue on and let’s look at year five, year 10, year 20. That’s really gonna show the wealth that you are creating through real estate.
So this spreadsheet is pretty amazing, and if you want to get a copy of this spreadsheet and find out more about this property and properties like it, then please reach out to us and book a free strategy call. We here have a couple of strategy calls available to new and current clients every week. So definitely click on that button and let’s chat. So let’s continue on. So when we talk about expenses on a rental property, we have property taxes, we have insurance, we have property manager and we have your mortgage. These are the majors that you’re gonna have to pay every month. Okay? So these are the first things we include. The other things that are gonna come up eventually on your property at some point you will have a vacancy and at some point you will have a maintenance call. We don’t know when these are gonna happen.
We don’t know for how long these are gonna happen, but we definitely want you to have money saved, aside and ready to go to pay for these expenses. Now everybody does it a little bit differently. Some people take money out every single month and put it into a savings account. I, I mean you can do that. That’s, that’s kind of on the spreadsheet. That’s where somebody might say 5% for vacancy, 5% for maintenance. That means they’re physically taking out 5% each month and putting it in a savings account. So in this circumstance, that would mean mean they were putting 10% aside every month in a savings account. So when those expenses come up, they have money set aside. That’s great if you wanna do that. I actually recommend investors take the entire cash flow from year one. So with this property, it’s almost $6,000 for that first year.
Why don’t you take that cashflow for the first year and put that aside in a savings account? Don’t you think that’s a pretty good savings account? Then you don’t have to worry about, you know, taking 10% and putting it aside. You actually are just gonna take it all and put it aside. At some point you will need to tap into that because again, you will have a vacancy. You, this is a landlord situation where you have tenants unless you get lucky and they stay forever. And it does happen. People do stay for a while. But generally in a single family house, tenants tend to stay every three to four years they move. So we need to plan for that vacancy and to getting the property rent ready again. So again, that’s just my suggestion as an investor. That’s kind of what I do. Year one, I just kinda let all that money sit in there.
Now let’s talk about the other profit centers that I keep on teasing about. So again, with this property, year one, your cash flow is $491. Now, what’s really cool is my spreadsheet shows you principal reduction. So every single month, your mortgage, your loan that you took out is going down by $214 a month. So your tenant is paying off your house by $214 every single month. Pretty awesome. Now the next one is first year appreciation. Now I’m being a little bit conservative with this particular property and I plugged in 4% for average appreciation for this area. Now my spreadsheet does the math for me, and it tells me that every month my property is actually going up in value by $517 a month. Okay? You don’t see that money, that money doesn’t come into your bank account, but it is there. It is happening quietly in the background.
Now the other one is tax savings. Now, tax savings we’re not gonna get into that in this episode, but there are tax benefits like depreciation and mortgage interest. So we are just going to use $94 a month for tax savings, which is the average interest. So every single month you get $94 in tax write-offs for this property, possibly more depending on what type of an investor you qualify for. So my point is, with all of this, your actual return with these tax savings is actually $1,316 a month. This property is actually making you almost $16,000 a year. And again, these are using very conservative numbers, okay, that is amazing. So when somebody says to me, oh, it’s only cash flowing so much, that’s not a great investment. I don’t buy that. We want you to have some type of cash flow because we want you to be able to cover the property if there’s any unforeseen expenses, and we want you to put extra money in your pocket whenever you can.
However, people are not looking at principle reduction that the tenant is paying for. We’re not looking at appreciation and we’re not looking at tax savings. Now, I’m not even gonna go into hedging inflation ’cause that’s a whole other episode and a whole other conversation. But again, we are hedging inflation, meaning the US dollar is going down in value every year and you are locking in a loan at today’s dollar. So again, you thought this property was only cash flowing $491 a month, which by the way is phenomenal. You’re actually cash flowing. Well, your actual true return is $1,316. Year one, your total return on investment, that percentage is 35%. So let me ask you this, where are you getting a 35% return anywhere else out there? I’ll sit and wait, <laugh>, because I know you’re not. If you are, please come and tell me where you are getting that type of return where you also leveraged your money.
You did not. This property is $155,000. You didn’t pay $155,000 for this property. You put 20% down your money out of pocket is only 35,000. So you guys, this is why real estate is so amazing and why these turnkey deals are so amazing. This is a real property, not a hypothetical example. You could literally buy this home and our team will walk you through every single step from lender prequalification to the day your first rent check hits your bank account, okay? And again, that’s what I love about this property. Rehab is complete, it’s under warranty, and there is a local property manager ready to go. Again, everything, we’re not guessing at it, the numbers have been verified from the property manager and you’re not guessing at repair costs. They’re already covered and you’re not guessing who to trust. We’ve already got the vetted teams for you.
So again, we’ve got cash flow, the freedom builder, this is your monthly passive income. After all expenses. We’ve got loan pay down, which is what I call the silent wealth builder. The tenant pays down your mortgage every single month. We’ve got appreciation, the long-term wealth multiplier. And in this property, again, I plugged in 4%, but even if I only put in 3% on a property, it could grow to about $180,000 in just five years. That’s over $25,000 of equity gain. So you’re appreciating on money that you borrowed. That is the power of leverage. And then of course, tax benefits is the secret profit center. So again, when we add it all up, I think that that kind of gives you guys a good idea of what the actual returns of a real property are. Now, if you’re interested in learning more about this property and checking out the numbers, again, reach out to us.
We will share everything with you. Now, this particular property, I have a couple of notes for you on it. Year one, you have free property management. So when I ran these numbers, I’m showing them with zero property management the first year. Now, when we are analyzing a property together, year two, the property management fee does kick back in. So I will add that property management fee back in for you. And then the other thing with this particular team in St. Louis, they will also give you a 2% seller credit that you can buy down the interest rate. You have to use one of our recommended lenders to get this, but it’s pretty awesome. And right now with one of our lenders, you can get an interest rate as low as 6.75. Actually, I’ve seen some people get it for as low as 6.4%. If you use that credit to buy down the interest rate, our team here has a two month rental guarantee.
They’ve got repair warranties, all the things. So anyways, reach out to us. We’ll talk to you about St. Louis. Now I wanna give you another example and let’s pull up a property in Indianapolis. We love Indianapolis, another great market. Now this property is $190,000, and this would be a phenomenal B class area, a four or yeah, I’m sorry, four bedroom, two bath, newly renovated. It’s ready to go and it will be renting for $1,600 a month. Now after we pay all taxes, insurance, property manager mortgage. Now this one does not have free property management for the first year, but it does have a discounted property management fee for the first year. So reach out to me if you’re interested in this property. This property has a year one cash on cash return of 10%, which again is phenomenal. You are not gonna get that return very many places just on the cash, on cash return, monthly cash flow over $350 a month.
So we have so many properties that aren’t even listed on the website. So my goal for you is to get you excited about these numbers and really, really understand the profit centers so that you don’t miss out on good opportunities. So if you want to, again, book a strategy call with us. If you’ve been thinking about investing in real estate and don’t know where to start, this is it. We’ve done the hard work for you. Book that free strategy call with myself or somebody else on the team on the call. We’re gonna learn about your goals, your budget, help you get pre-qualified with one of our trusted lenders, and we’re going to match you with a market and properties that make sense for you. And again, not all of our properties are on our website. The best deals do move fast, and many are shared exclusively with pre-qualified investors.
So if you’re serious about getting your money to work really hard for you, schedule that call. We’ll help you make smart hands-off investment decisions. So anyways, thanks again for listening in. I’m Melissa Nash and my goal is simple to help you create freedom through passive income. I’ll help you do it the lazy way with systems, teams and cash flow that work for you while you live your life. Again, book your free call at noradarealestate.com. Click the link in the show notes below. Until next time, keep investing smart, stay focused on freedom, and I’ll see you on the next episode.
Thank you, Melissa, for sharing your insights and experience. We hope you found this episode informative and full of valuable takeaways. If you haven’t already, be sure to subscribe so you don’t miss out on future episodes. We’re grateful to have you with us. Thanks again for listening and we’ll see you in the next episode.
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