For beginners, real estate investing can seem like a high-risk way to make passive income. For those that don’t have the time, experience, or risky appetite for real estate investing, turnkey real estate can be a simple solution. Turnkey properties are ready to go as soon as you buy them—the seller has done all the work for you. That means less time spent fixing a house and more time enjoying your profits!
What Are Turnkey Properties?
Turnkey properties are rental properties that come ready to rent as soon as you purchase. These properties could be single-family homes, duplexes, or even Airbnbs. A turnkey property, by definition, is “turn-key.” So you don’t need to do any work to start making money, unlike most rental properties that require repairs or significant renovations upon purchase.
Advantages of Turnkey Real Estate
- Quick Cash Flow: As soon as you buy the property, you can rent it out to a tenant without having to wait around for repairs or renovations to get done.
- Fewer (Immediate) Repairs: Turnkey property providers have most likely fixed the bulk of the problems you’ll experience with a property, so you’ll be left with a lower repair bill at the end of the first few years.
- Lower Vacancy: Since the property is newly repaired or rehabbed, there’s a good chance you’ll find tenants fast. Plus, the tenants who do move in will most likely want to stay.
- Far More Passive: Turnkey properties are designed for passive real estate investors who still want to play the rental property game. You’ll sail smoothly after buying a turnkey property since repairs are finished and property management is often onboarded before you close on the house.
Disadvantages of Turnkey Real Estate
- More Expensive: Turnkey providers (also called turnkey companies) have done the repairs and renovations for you. This will come at a higher price that isn’t reflected by the “average” homes in a neighborhood.
- Lower Return on Investment: Since you’re buying at a higher price point, your ROI (return on investment) will be lower. The high price point increases your monthly mortgage payment, but you could make up for it with higher rent since the property is in great shape.
- Less Personalization: If you have wild design ideas or want your rental properties to have a specific look and feel, turnkey properties might not be your best bet. Many turnkey providers have a very cookie-cutter way of renovating their homes.
- Less Potential Equity: Equity gains are a HUGE reason real estate investors invest in the first place. Since turnkey properties are often sold at a higher price point, you won’t see a stark amount of equity potential on a turnkey property compared to a regular fixer-upper or BRRRR property.
How Turnkey Real Estate Investing Works
Turnkey real estate is an end-to-end solution for passive real estate investors. Here’s how the turnkey process often works:
- The turnkey provider finds an old, outdated house in a solid rental market.
- The turnkey provider uses their team to repair and renovate the home to renter-grade standards, updating the appliances, flooring, kitchens, bathrooms, etc.
- Once the renovation is complete, the turnkey provider lists the property for sale but will often offer it on their website or through an email list first.
- An investor views the property, calculates their numbers, and makes a bid on the property.
- Often before closing, the turnkey provider will either offer their own turnkey property management services to the investor or find an appropriate property manager within the rental area.
- The investor closes on the house and may choose to use the offered property management to find a quality renter.
- Once the renter is in place, the investor collects rent checks and gets passive income!
TL;DR: Turnkey providers buy outdated houses, fix them up, sell them to investors, and often provide property management after the property is sold.
Is a Turnkey Real Estate Investment Right for You?
Turnkey real estate is often a wise investment for new real estate investors or those looking to buy a rental property out of state. It allows you to learn about property management, tenant screening, property maintenance, and other crucial landlord skills WITHOUT having the risk of doing it all yourself. In addition, turnkey real estate is a far quicker, more passive way to make passive income and should be seriously considered by investors who have the money, but not the time, to build a real estate empire.
