Investing in real estate can be exceptionally profitable when handled correctly. But, like all investment processes, not every method is right for everyone. Researching and understanding each type of real estate investment is the only way to ensure you find the method that works best for you.
What is Turnkey Real Estate?
Turnkey is a form of real estate preferred by a multitude of investors. Turnkey homes are essentially homes that are ready to go—that the new owner can “turn the key” and begin to use right away. This means that a turnkey property is renovated and rehabbed before the owner takes possession.
Turnkey properties allow investors to be a little more hands-off during the beginning process. With a traditional property, the owner would have to purchase the property and then begin rehabbing or renovating.
This delays the new owner being able to put tenants into the property right away. If the owner is investing in a property out of their living area, then renovating and rehabbing a property can be quite difficult and time consuming. After the property is finished, the investor will then have to market the property and find a suitable tenant. From there, they will be responsible for managing the property—another difficult feat for out of area investors.
Turnkey properties are generally purchased through investment companies who specialize in turnkey rental homes. They find and analyze the best local listings, vetting each deal to ensure it meets their stringent return on investment standards. The property is purchased and fully renovated by an experienced crew. Once renovation is complete, the investment company will market the property and find a high-quality tenant.
At this point, the property is made available to any investors looking to purchase a property that is already creating a monthly cash-flow. Once the investor takes ownership of the property, they have the ability to keep the investment company on as property managers, allowing the investor to remain hands-off through the entire process.
Turnkey properties are the best way to collect a passive income—an income that requires little to no input from the investor.
Who Invests in Turnkey Rental Homes?
The best part about turnkey properties is that literally anybody can invest in them! Turnkey properties are good for beginners, who need a helping hand learning the business. They are also good for those looking to increase their monthly income quickly, allowing investors to add properties to their portfolios much faster than by purchasing traditional properties. Out of state or country investors are able to purchase properties in areas with higher return on investment rates by purchasing turnkey properties, as they do not have to be as involved as they would if they were purchasing through traditional methods.
Why Invest in Turnkey Rental Properties?
Rental properties are a great source of additional income, however, they can be time consuming—especially when you’re just getting started. Turnkey rental properties are a great way for first-time investors to get started in the industry, as you’re helped every step of the way by a licensed, experienced professional. For those who are looking to add to their income without investing much time, turnkey properties make it easy to build a portfolio without much input as the investment company handles the majority of the process for you.
Turnkey rental properties are usually fully vetted by the investment company. This means they have done the legwork for you—they have analyzed the property and the surrounding area, evaluated the property, and determined it to be a viable investment venture.
Turnkey properties have a great advantage. As mentioned, the work is essentially done for you. The property is vetted, renovated, marketed, and rented. It allows you, the investor, the ability to begin collecting an income immediately instead of having a period while you renovate yourself and look for tenants.
Having a turnkey property also gives you access to an experienced property management company that has prior familiarity with both the property and the tenant. Utilizing them after the sale will also give you access to their tenant pool, should you find yourself facing an upcoming vacancy.
Perhaps the greatest perk to utilizing turnkey properties for real estate investment is that it is a hands-off process, allowing you to maintain your day job or hobbies without having to be actively involved in the investment process. You simply sign the papers, sit back, and allow the property to generate money for you.
Despite having numerous advantages, turnkey investing—like all investing formats—isn’t without its downsides. For individuals who like to be in total control, turnkey investing may not work out. When you invest in turnkey properties, you have no control over the acquisition of the property. This means, you’re not involved in the haggling of the sales price, the area in which the property is located, et cetera. You have no control over the construction process during the rehab and renovation, so you may not like the layout, the additions, or the décor chosen for the property. You buy it as is, meaning everything is complete when you take ownership. Tenants are often placed in a turnkey property prior to the owner taking legal possession, meaning you have no say in who is currently living in the property, either. If you want to be in charge of all aspects of the process, turnkey investing is not for you.
As a first-time investor, learning the industry can be a challenge. While purchasing through a turnkey investment company can be helpful for those getting their feet wet, there are some malicious companies looking to take advantage of naïve clients. It is still vital to do the research before agreeing to do business with an investment company strictly to make sure you are not being taken advantage of.
Turnkey investments can be a great source of income for many types of investors. However, they aren’t always a simple walk in the park. Before making any financial investment into real estate—turnkey or otherwise—it is important to do your due diligence. Understanding the industry inside and out will be the only way to ensure whether turnkey investing is the right method for you.