If you are a real estate investor, it is only natural that you are on a constant hunt for the best investment strategies and options available in the housing market. You must be aware of all types of investment properties, including their pros and cons. One of these investment property types is turnkey rentals, which are a fully viable option for many real estate investors. But before you can decide whether that’s the right investment strategy for you, you have to learn about its main advantages and disadvantages. To do that, just keep reading:
Turnkey Rentals: Definition
Maybe you are relatively new to the exciting world of real estate investing and still have no idea what turnkey rentals refers to? No worries, we will tell you all about them. Turnkey rentals are basically investment properties which are in a fully rentable condition when you buy them as a real estate investor. One major drawback of real estate investing is having to prepare your income property before you rent it out, which delays the time when you can start making money from your real estate investment. Well, turnkey rentals eliminate this problem as you can start renting them out and collecting rental income as soon as you purchase them. Moreover, many of them come with readily available professional property management services, which means that you will have quite a problem-free experience as a landlord.
Now that you know what turnkey rentals are, let’s take a look at their main pros and cons:
Turnkey Rentals: Advantages
Turnkey rentals indeed have some serious advantages over other types of investment properties. Here they are:
Related: Why Investing in Turnkey Real Estate Investment Properties Makes Sense
1. No need for fixes
As the name suggests, turnkey rentals are investment properties that are ready to be rented out upon the turn of the key. There is no need to do any fixes or repairs, which will save you lots of money and energy and headaches. You might need to add some furniture to make the income property more attractive for tenants, but not having to perform major repair work is a huge plus.
2. Immediate rental income
The fact that you can start renting out turnkey rental properties right away brings another important advantage: the possibility to start making money immediately. As soon as you buy a turnkey investment property, you can find tenants and start collecting rent from them, which is your rental income. As long as you are able to rent out your rental property for enough rent, you will have positive cash flow immediately.
Related: The Top 6 Strategies to Boost Your Rental Income as a Real Estate Investor
3. Headache-free landlord experience
As mentioned before, most turnkey rentals come with professional property management services, provided by the company that sells them. While such services come at a price, they will save you lots of time and efforts as a landlord, which you can invest elsewhere, in buying and managing another investment property, let’s say.
4. Require no previous experience
Because turnkey rentals are ready to be rented out and because you don’t have to engage in property management, these income properties are ideal for anyone, even people with zero previous experience as a real estate investor and/or a landlord. Thus, if you have not dealt with real estate investing before, these might be your key to this exciting world.
5. Make out-of-state real estate investing feasible
Sometimes you just don’t live in the best rental market at the moment. That’s a reason which might prevent many individuals from buying and owning a rental property. Out-of-state real estate investing is always an option because it increases significantly the opportunities to find a profitable investment property. With turnkey rentals, out-of-state real estate investing is made easy, regardless of how far your selected housing market is from your own home. Since you will not have to deal with fixes, repairs, maintenance, and tenants’ requests, you are free to invest in real estate in any part of the country.
Related: How to Go About Buying a House Out of State for Rent
Turnkey Rentals: Disadvantages
Unfortunately, just like any other type of investment property, turnkey rentals are not all perfect; they do have their drawbacks. Here are the major ones:
1. Higher cost
Because turnkey rentals are prepared for renting out and because they offer professional property management services, they cost more to real estate investors. Nevertheless, you should conduct your investment property analysis carefully – preferably with the help of a rental property calculator like Mashvisor’s – as turnkey real estate properties might end up being more profitable – in terms of cash flow, cap rate, and cash on cash return – than other types of properties. Since all maintenance work is done by professionals, it will probably cost you less than if you do it yourself. After all, these professionals have access to discounts and economies of scale.
2. Less flexibility
Since your turnkey rentals will be readily available for you to start renting out, you will have no say in deciding on the finishings, the color of the walls, the floor tiles, etc. But since you are buying these properties to rent out to tenants, does it really matter exactly how they look, as long as they provide you with enough rental income and cash flow?!
3. Less options
Because you are looking for a specific type of investment property, your options might be a little bit limited. Not all locations and real estate markets offer turnkey rentals. However, since out-of-state real estate investing is not an issue in this case, you have the freedom to find and select a turnkey real estate investment property in any part of the country. In any case, you should engage in diligent real estate research and investment property search to find the best local markets for turnkey rentals and the most profitable properties within them.
The beauty of real estate investing is that anyone can find something appropriate for his/her situation. Even the busiest of people with no previous knowledge of real estate can become real estate investors and landlords with turnkey rentals.
While considering whether this is the most appropriate property type for you, keep reading on Mashvisor for more advice on real estate investments.