Table of Contents
What Is a Turnkey Property?
Turnkey Real Estate Investing Explained
Turnkey Real Estate Investing Pros
Turnkey Real Estate Investing Cons
How to Find Turnkey Investment Properties For Sale
Turnkey Real Estate Bottom Line
What Is a Turnkey Property?
A turnkey property is a fully renovated home or apartment building that is ready for immediate occupancy or rental. This term is commonly used in real estate to describe properties that require little to no additional work by the buyer, making them attractive to investors who want a hassle-free investment or homeowners looking for a move-in-ready residence.
Usually, turnkey properties are run by a third party and are purely considered a source of income for the owner. When investing in turnkey properties, the investor knows that it won't require much work and that future tenants can just be able to rent and move directly in. Because of this, income from turnkey properties is usually very high for the first few years since recent updates and renovations should have lowered the need for many repairs.
Turnkey Real Estate Investing Explained
1. Renovation and Repairs
Turnkey properties have been recently renovated and updated. This includes repairs, replacements, and upgrades to essential systems such as plumbing, electrical, roofing, and HVAC. Cosmetic improvements such as new paint, flooring, and modernized kitchens and bathrooms are typically included.
2. Immediate Occupancy
The property is ready for immediate occupancy, meaning it is clean, fully functional, and does not require any further work. This is particularly appealing to buyers who do not want to deal with the hassle and time involved in renovations.
3. Rental Ready
For investors, a turnkey property is often fully equipped and ready to rent out immediately. This may include furnished units, essential appliances, and even initial tenants in place.
4. Managed Services
Some turnkey properties come with property management services provided by the seller or a third-party company. These services can include tenant screening, rent collection, maintenance, and repairs, making the investment truly hands-off for the owner.
Turnkey Real Estate Investing Pros
- Service From a Distance
- Simplicity
- Passive Income
1. Service From a Distance
The most attractive part of investing in a turnkey property for most people is the fact that they can make money from a property without having to live nearby. Many people who might want to invest in prime real estate don’t live close to the area where they wish to purchase. Being a landlord is difficult enough without the added pressure of being far away from your property. That’s why many people who use Turnkey companies live in different states or even in different countries.
2. Simplicity
The ultimate goal of using a Turnkey company is to make the investment property less of a strain on the owner. Investing in real estate alone, especially if you have never done it before, can be extremely difficult and overwhelming. There’s a lot of moving parts to keep track of that can easily overwhelm an inexperienced investor, even one who owns several properties. By using a turnkey company, you can reduce a lot of the pressure and make it much easier on yourself to manage.
3. Passive Income
If you choose wisely and partner with a trustworthy turnkey company, you can stand to make a lot of money passively. That is, you could end up making a paycheck from your property without ever having to lift a finger since a good turnkey company should be doing all the heavy lifting for you.
After reading through the pros, turnkey properties sound like a fantastic idea! But there are some downsides to using a turnkey company that you should be aware of before you decide to invest your money.
Turnkey Real Estate Investing Cons
- High Upfront Costs
- Fewer Profits
- You Might Not End Up With The Best Property
- Finding Good Property Managers Can be Tricky
1. High Upfront Costs
Because turnkey properties tend to be on the pricier side of real estate investment, they cost a lot of money upfront to purchase and get up and running. This leaves you with very little equity in the property after the down payment and paying the turnkey company.
2. Fewer Profits
Since you’re paying a turnkey company to help you with your property, you lose out on a lot of money that you would be able to pocket if the company wasn’t involved. Don’t forget, turnkey companies are in it to make money, and because of that, it means less cash flow directly to you as the investor. You’re often paying someone else to do the work for you, from renovations to managing the property, and that doesn’t come cheap! The turnkey company might buy the property initially for a discount, then sell it to you for a higher price to make money. And on top of that, you’re going to be paying them a lot of money every month to manage the property for you without you needing to do any work.
3. You Might Not End Up With The Best Property
Buyer beware, especially if you are going through a Turnkey company and trusting them to purchase a property for you. This comes with a lot of risks! Firstly, you don’t have the advantage of looking at properties yourself, picking a good location, and doing lots of research before you invest. You might get suckered into purchasing a mediocre property in a poor location that doesn’t have a lot of potential. Beyond the risk of ending up with a property in a bad location, if you let the turnkey company take care of the renovations, they might not be done to a very high standard. Remember, the turnkey company is in it to make money, so the chances are that they aren’t going to be big spenders when it comes to rehabbing. You need to make sure you find a turnkey company that prides themselves on the quality of their work and not necessarily the affordability of their services.
4. Finding Good Property Managers Can be Tricky
This is probably the most significant risk when it comes to purchasing a turnkey property through a company; can you trust them with your investment? The entire process takes a lot of trust between investor and company, and because the company is taking on so much of the work, this is a big risk to take. It’s a big deal to completely trust a company to do right by you when they end up getting paid whether or not you are successful.
How to Find Turnkey Investment Properties For Sale
If turnkey real estate investing sounds interesting to you, you are probably asking yourself: Where would I even find a turnkey investment property for sale? Nowadays, the internet makes finding such properties easier than ever.
1. Search for Turnkey Homes Online
A quick google search can help you get started. Try simple search terms such as ‘turnkey properties for sale in New York’ or ‘best turnkey sellers in Chicago’. Adding a location will help you narrow down the results. Companies such as Norada Real Estate Investments or Roofstock are also great places to look as well.
2. Consider Major Portals like Zillow
When sorting through the results, you can even use sites such as Zillow, Realtor.com, Yelp, or even Airbnb to find reviews, images, and more information. This can be especially useful if you are unable to visit the property right away.
3. Work With an Agent
While searching for turnkey homes, you can be a good way to find some investment opportunities; having connections in the real estate industry and being in the right location can make a major difference. Find an agent that specializes in turnkey homes and work with them to get the best access to new turnkey investment properties.
Turnkey Real Estate Bottom Line
Turnkey properties offer a convenient, time-saving solution for both investors and homeowners looking for move-in-ready homes. While they come with higher upfront costs, the benefits of immediate occupancy, professional renovations, and potential rental income can make them an attractive option for those seeking a hassle-free real estate investment or a new home without the renovation stress. Conducting thorough due diligence is crucial to ensuring a sound investment and avoiding potential pitfalls.