What Is a Turnkey Property? A Real Estate Investor’s Guide

While "turnkey" has several different meanings depending on the situation it's used in, turnkey properties are almost always move-in ready. If you are thinking of making real estate investments and are exploring your options, turnkey properties offer many benefits. To make sure you select the right investment strategy for your portfolio, you should have a better understanding of turnkey properties and their many pros and cons.

Turnkey Property Definition

A turnkey property is a fully renovated home that can be immediately rented out or may have tenants in place upon purchase. Turnkey properties often come with property management and are sold by turnkey providers like Rent to Retirement. 

Who Should Buy a Turnkey Property?

We're a turnkey provider, so we'd obviously love for you and anyone you know to buy turnkey properties, but this type of home isn't for everyone. These properties are suitable for professionals who want to invest, long-distance landlords, new investors, and anyone looking to diversify their real estate portfolios. For those that like DIY renovations, turnkey properties may not be for you (yet!). 

1. Busy Professionals Who Want to Invest

A great aspect of investing in a turnkey property is that you can start earning income almost immediately after the sale closes. For busy professionals who want to invest but don't have time to manage their properties, investing in turnkey rentals may be the ideal approach. These properties are already managed and may have existing tenants from which to collect income.

2. Long-distance Landlords

While it can be tempting to limit your real estate investments to the city or state you currently live in, geography doesn't need to be a restrictive element. With turnkey properties, you can invest almost anywhere. Since a property management company is in place, you won't need to visit the home, which should allow you to significantly expand the reach of your portfolio. This is extremely valuable if you live in an expensive market or one that doesn’t offer the cash flow you need for financial freedom.

3. New Investors

For new investors, turnkey properties can be highly advantageous by reducing  the amount of work that needs to be done when investing in rental properties. If you're just getting started with real estate investments, you don't need to worry about fixing the property up and managing everything from screening tenants to collecting rent. Instead, investing in a turnkey property should help you become acclimated to the process since most of the legwork is done for you.

4. Those Looking for More "Passive" Income

Investing in turnkey properties allows you to earn truly passive income. If you were to spend your money on a traditional rental, you'd likely need to perform renovations and repairs before it would become move-in ready. When you buy a turnkey rental, all the necessary repairs and upgrades have already been made, which means that you can start earning passive income immediately.

The Turnkey Property Process

The process of buying a turnkey property can be easier than purchasing a traditional home. To get through this process without delay, follow the steps below. 

1. Browse Turnkey Properties

To begin, browse turnkey properties in the locations you're most interested in. Thoroughly read each property description to effectively narrow your options. You can view turnkey rental properties for sale here! 

2. Talk to a Turnkey Provider

The next step in this process involves speaking with a turnkey provider. You can learn more about the property as well as how the company manages it by talking to them before you make an offer. You can schedule a call here!

3. Get Pre-approved for Financing

Once you start looking for turnkey properties, get pre-approved for financing with your preferred lender. The pre-approval letter you receive tells you how much you can afford, which should help you make the right decisions as you search for a property to add to your portfolio. Only pre-qualified? That may not be enough. Make sure you know the differences between pre-qualified and pre-approved! Having solid financials and a high credit score may allow you to afford a high-priced home.

4. Make Your Offer!

Now it's time to make your offer. If you've spoken with the turnkey company and know what price they're asking for, you should have a good idea of how high your offer should be. While the asking price can be negotiated, don't make too low of an offer, especially in high-demand areas.

5. Get Ready to Close

If the turnkey company accepts your offer, you can get ready to close. You can expect this process to last anywhere from 20-60 days, depending on how long it takes for your loan to be underwritten. Once the sale concludes, you'll need to pay closing costs as well as your down payment. 

6. Close and Collect Your Rent Checks!

After getting through the closing process, all that's left is to take ownership of the property and start collecting your rent checks! While more steps may occur when buying turnkey real estate, this guide is a general track of how the process goes. 

The Pros and Cons of Investing in Turnkey Properties

There are plenty of reasons why you should add turnkey properties to your investment portfolio. However, there are also a few reasons why this strategy may not be for everyone.

Pros

From rapid cash flow to passive income generation, turnkey properties can strengthen many portfolios. 

Quick Cash Flow

Most turnkey properties already have tenants living there, which means that you'll start earning rental income and a positive cash flow almost immediately. 

Fewer Repairs

Turnkey properties are move-in ready upon purchase. All the necessary repairs and renovations are made before the property is put up for sale.

"Passive" Income

The turnkey company that sells you the property is usually the one that manages it. Since they take care of maintaining the property and collecting rent, you'll be able to earn passive income.

Easier to Scale

By taking ownership of turnkey properties that allow for passive income, it should be much easier for you to scale your portfolio when using this strategy. You won't need to spend time tending to the property, which frees you up to look for additional turnkey investments.

Less Stress

Buying a property that's ready for tenants/already rented should reduce your stress levels significantly. Investing in a traditional rental often requires dedicating a lot of your time and resources to improving/managing it, which isn't necessary with a turnkey.

Cons

While there are many advantages to purchasing a turnkey property, there are also a few downsides. 

No Renovation Control

Since the turnkey provider is doing the renovations, you can't choose your favorite wall color! While many buyers prefer this approach, some like to invest less money to obtain a fixer-upper that they can improve based on their preferences.

Less Sweat Equity Upside

If you love being a value-add DIYer, turnkey properties probably aren't for you, but they could make a great addition to your overall portfolio in between the more headache home renovations you’re taking on!

Less Location Control

You may not be able to buy a property on the exact street you want, but don't worry. Rent to Retirement only buys in investor-friendly areas. Even though you don't have as much control over the location, you can be confident that the property will increase in value and be appealing to tenants.

How to Find Turnkey Rentals

You’ll have to go through turnkey providers to find turnkey properties. Or, just click the button below! From here, you can narrow your search by selecting specific parameters that display properties within your price range.

What to Look For in Turnkey Properties

While it's not too challenging to find good turnkey properties, you should know what to look for before starting this process. 

Landlord-friendly Investing Areas

Some states and locations are more landlord-friendly than others. For example, the Florida housing market and Texas housing market are considered landlord-friendly states. If you find an area you'd like to invest in, check local landlord-tenant laws to determine if you want to go forward with the investment.

Low Crime

Search for areas that have relatively low crime rates. Compare city crime rates against the state average to identify if it's a good place to invest your money. You can see crime maps here!

Cash Flow

Turnkey property listings often provide details about current rent prices, the down payment you'll need to make, and the cap rate. You can use this data to calculate the property's cash flow, which should help you make an informed decision. Rent to Retirement includes estimated cash flow calculations on all our turnkey property listings!

Appreciation Potential

Consider the current real estate market and economy to estimate a property's appreciation potential. While rental properties usually appreciate over time, you still need to be careful when making this type of investment.

Positive Economic Trends

Look for positive economic trends in the location you're investing in. Check the most recent employment data, education statistics, and industry outlooks to make sure the place has strong investment fundamentals.

Ready to Invest?

Turnkey properties provide investors with passive income, no renovation requirements, and less stress. If you believe that the positives of turnkey investing outweigh the downsides, now's the time to start searching for properties. Schedule your free Rent to Retirement turnkey investing consultation here!

Turnkey Property FAQs

What Is a Turnkey Provider?

A turnkey provider is a company that focuses on renovating properties and making them move-in ready to sell to investors. Many of these companies act as property managers after the sale is finalized.

What Does a Turnkey House Mean?

What is a turnkey property? A turnkey house is a fully renovated property that you can buy and rent out immediately. 

Are Turnkey Properties Worth It?

When you buy a turnkey property, you don't need to make repairs or renovations. You'll also benefit from positive cash flow and being able to scale easily. For busy professionals, new investors, and those looking for passive income, turnkey properties are almost always worth it.