Are turnkey real estate investment properties worth it or not from an investor’s perspective?
Here you come to another major reason for debate in real estate investing. As usual, many experts and professionals will jump right away to say that turnkey properties are the worst because you cannot benefit from real estate appreciation (after fixing them up) and have to rely on rental income as your only source of profit from your real estate investing business. These same people will argue that you should only buy real estate investment properties under market value, unlike turnkey ones. While it is true that not ready rental properties come at a lower price, this is the case only because they are actually worth less. If you buy an income property that needs lots and lots of fixes, you will spend so much time and money on bringing it to a rentable state that it will end up costing the same or even more than a turnkey property. From this point of view, turnkey real estate investment properties are worth every dollar (unless you simply buy an overpriced property) and totally make sense. Let’s see why in specific.
First, before looking at the reasons why turnkey properties are an excellent choice for any real estate investor, let’s make sure that it is clear what this type of properties are:
What are turnkey real estate investment properties?
In simple words, a turnkey property is one that an investor can rent out immediately after purchasing. This is a property in a state that allows it to be inhabited right away, without requiring any fixes. While usually turnkey real estate investment properties are sold by companies specializing in the restoration of older properties and also offering professional property management services later on, they can also be purchased from individual sellers – homeowners or investors.
Related: What Are The Best Real Estate Investment Properties?
Why do turnkey real estate investment properties make sense?
1. Turnkey real estate investment properties save time and energy
Whereas a turnkey income property will generally cost you more than one that needs some serious work before being rented out, the extra money is worth it because you will not have to waste any of your precious time (work time at your 9-to-5 job, after work, weekends, or vacations) to bring the property to a rentable state. Real estate investing is actually a very demanding enterprise (being both a part-time job and an investment), so a real estate investor should try to save up as much time and energy for the important investment decisions as possible.
2. Turnkey real estate investment properties minimize stress
Imagine buying an income property that requires fixing the roof (due to leakages), changing the tiles, painting the walls, maintaining the kitchen and the bathrooms… Unless you possess a wide range of skills related to these fields, you will have to hire contractors and/or a range of handymen and supervise their work. Now that’s some very stressful work, especially for someone who is not a full-time real estate investor. On the other hand, if you go for a turnkey rental property, you can start looking for tenants – instead of handymen – right away, in a stress-free manner.
3. Turnkey real estate investment properties bring down risk
Fixing up an income property is related not only to a lot of money, time, energy, work, and stress but also to unnecessary risk. By choosing to invest in a turnkey property, you avert a great amount of risk which stems from such a heavy work load.
4. Turnkey real estate investment properties make sense financially
It is absolutely true that turnkey rental properties cost more than other income properties, all else equal (location, type of property, size, etc.). However, it is not true that you will be able to do all the necessary fixes to a non-ready property with the same quality at the same price as a professional company. Above we said that turnkey real estate investment properties are usually sold by companies specializing in restoration and management. This means that they have access to needed services at preferential rates which you cannot access. Thus, it will be significantly cheaper for such a company to prepare a turnkey property than for you.
5. Turnkey real estate investment properties can be rented out right away
This means that you can start making money from your new income property immediately, instead of having to fix it first.
Related: 4 Different Ways of Renting Out Your Property
6. Turnkey real estate investment properties make out-of-state real estate investing more feasible
Sometimes there are these great opportunities to invest out of state, which investors feel compelled to reject because of the traveling they will have to do while preparing them for renting out. Well, turnkey properties eliminate this inconvenience as all the traveling you will need to do is to see the property, buy it, meet potential tenants, and then keep an eye on it. However, you will not need to go there in order to do the fixes yourself or supervise the process.
Related: Investing in Out of State Rental Property: How to Manage Multiple Out of State Properties
7. Turnkey real estate investment properties are an excellent choice for any real estate investor
While certain types of income properties are only appropriate for seasoned real estate investors, turnkey real estate investment properties are good for all: new or experienced investors, part-time and full-time investors, investors with lots of free time and such with no available time. They generally make real estate investing much easier.
What should you consider when deciding in favor of or against turnkey real estate investment properties?
- Investment strategy: One of the most important factors to take into consideration when deciding whether turnkey is the right property for you is your investment strategy. If, let’s say, you are interested in fix-and-flip, then turnkey is definitely not the right choice. However, if you are going for long-term real estate investment for traditional or Airbnb, then buying a turnkey income property makes lots of sense as you can rent it out right away.
- Budget: Another thing you have to think about before going for a turnkey rental property is the budget you have available. If you are quite limited financially, you might decide to invest in a not ready property and do only the minimum fixes, at the cheapest price possible. Just keep in mind that this might not be optimal because then you will be able to rent out the property for only a fraction of the rental income that you would be able to receive from a better maintained income property.
Every income property is different, and generalizations should be avoided. However, it is safe to say that turnkey real estate investment properties make a lot of sense because of the multiple benefits which they bring. Once you are ready to search for your ideal rental property, make sure to check out Mashvisor for thousands of available properties across the US.
