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What Is Turnkey House & How Does It Work? – Pros And Cons

What Is Turnkey House & How Does It Work? – The Pros And Cons

Amanda Byford
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About Turnkey House in Real Estate

When you are planning to buy a new property, maybe for yourself or as an investment to rent out, there are lots of factors to consider. 

One of the most important aspects to look for is the condition of the property. If the property needs repairs you know that it would take time for you to move in unless those repairs are completed. 

However, some properties are ready to move in immediately such as turnkey homes. In this post, we will understand what is a turnkey house in detail.

What Is A Turnkey Home?

A turnkey home is a home that is considered “move-in ready” that requires no repairs. 

These properties are usually bought and sold by companies that specialize in real estate investments. It is considered ready for rent or immediate occupancy.

Turnkey properties may have been recently renovated or flipped. Sometimes they are sold fully or partially furnished.

However, buyers should be watchful of turnkey homes and treat them with the same care as any other home. 

There are no specific criteria or certifications to determine a home as a turnkey home. This is what a realtor can use in a home description to attract potential buyers, and may not necessarily be a ready-to-move-in or recently repaired.

Before you buy the property, you must check the condition of the property. You need to inspect your paint and other exterior work to make sure it’s done right and not a quick and cheap way to sell the property quickly. 

Inspecting the house using a certified home inspector would help you ensure that the condition of the house is ready to move in.

How Does A Turnkey House Work?

After the housing market crash of 2007-2008, when homes were cheaper to buy than to rent in many parts of the country, turnkey homes became increasingly popular. 

Nationally, buying is 30% cheaper than renting and even cheaper in many low-cost areas. 

In a market like New York, where real estate is very expensive, investors try to create an income stream by buying rental properties in some areas where real estate is cheap and hiring property managers to manage the rents. This would help the investors to gain more profits.

This investment approach is particularly attractive to those investors or homebuyers who want to enter the real estate market but do not have the time, ability, or interest to repair or maintain their homes. 

In most cases, investors hire private property management companies to manage their properties. When properties are purchased, they often have a tenant, which makes it easier for investors.

However, the term turnkey house is not only used by investors. In the marketing industry, real estate companies sometimes use this term to describe homes that have been renovated and are ready to move and are in the market for sale. 

While some home buyers are attracted to home improvement ideas, those with busy lifestyles or who lack home improvement skills may choose a home that requires no repair.

What Are The Pros And Cons Of Turnkey Houses?

Weigh the pros and cons of this investment strategy before deciding whether to invest in turnkey real estate or deploy resources elsewhere. Below mentioned are the benefits of buying turnkey rental properties:

The Pros:

No Worries Of Renovations: The most obvious benefit of buying a turnkey property is that you don’t have to worry about the time, effort, and cost of renovating the property.

Immediate Cash Flow Generation:  A property may take time to generate income if there are repairs to be completed or finding a tenant. Buying a turnkey house shortens the time between investment and the first rent payout.

Passive income opportunities: Buying a turnkey property could be a good option to earn passive income. A fully managed turnkey property is a great way for the investor to enjoy the benefits of an investment property without taking on the responsibility of managing the property.

Diversify with offshore investments: Instead of limiting yourself to the local real estate market, you can protect the volatility of your investment portfolio by buying multiple properties in different cities.

Comfortable For Tenants Too: Fully renovated apartments will appeal to tenants looking for a modern look and modern appliances, a good turnkey investment won’t be vacant for long if it has a high-quality rental demand.

The Cons:

A real estate investment cannot be considered without looking at its downsides. Below are the disadvantages of buying a turnkey property.

Turnkey houses are not customizable: Real estate investors with a knack for incorporating unique features into their spaces will find that turnkey properties don’t offer much opportunity for creativity because the property is already updated before the investors can purchase.

You don’t have full control over property location: Turnkey companies are responsible for the properties they decide to upgrade, so the investors may not have a choice over the location of the property.

You may pay more for a turnkey house: All these additional management and maintenance costs add up quickly, and you probably won’t make as much of a profit as if you had bought, fixed, and maintained that property by yourself.

An inappropriate manager may impact your business: Real estate property managers have no vested interest in the success of their assets. A bad property manager can have a huge impact on your net business income and the amount your tenants are willing to pay.

Conclusion

Finding a perfect turnkey house could mean saving the time and effort of renovating and maintaining the property. 

Whether this type of property is a good option is based on the type of requirements for the investors and buyers. 

If you are looking to buy a turnkey house for investment or to move in, get in touch with your trusted real estate agent.

Amanda Byford

Amanda Byford has bought and sold many houses in the past fifteen years and is actively managing an income property portfolio consisting of multi-family properties. During the buying and selling of these properties, she has gone through several different mortgage loan transactions. This experience and knowledge have helped her develop an avenue to guide consumers to their best available option by comparing lenders through the Compare Closing business.

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