What Is a Turnkey Property?
Let me explain directly: a turnkey property is a fully renovated home or apartment building that you, as an investor, can buy and start renting out right away. You often purchase these from companies that focus on restoring older properties, and those same companies might provide property management services to you, which cuts down on the time and effort you need to invest in the rental process.
How a Turnkey Property Works
You should know that turnkey properties became more popular after the 2007-2008 housing market decline, when buying homes got cheaper than renting in most parts of the United States. In fact, nationwide, buying is about 30% cheaper than renting, and it's even more affordable in low-cost-of-living areas. If you're in an expensive market like New York, you might look to buy rental properties in cheaper regions and hire managers to handle them, so you can just collect the profits from a distance without much involvement.
Key Takeaways
- Turnkey properties have often been renovated and repaired.
- Turnkey homes have become popular investments.
- New buyers usually rent out the properties to generate revenue.
Why This Appeals to Investors
This approach works well if you want real estate exposure but don't have the time or interest in renovating or maintaining a property. In most cases, you'll hire a separate company to manage it, and often there's already a tenant in place when you buy, which makes things even simpler for you. Remember, the term isn't just for investors; real estate companies use it in marketing for any renovated, move-in ready home. If you're a buyer with a busy life or no DIY skills, you might prefer a turnkey property that requires no work.
How a Turnkey Property Is Used to Generate Revenue
When you buy a turnkey property, the idea is to make it available for tenants immediately, so you can start generating revenue quickly without much refurbishment. The work to get it to turnkey status might include replacing electrical fixtures, fixing plumbing, applying fresh paint, and repairing flooring as needed. The faster you can rent it out, the sooner you'll see returns on your investment.
That said, if your goal is to sell rather than rent, fully renovating might not always be worth it. The costs for repairs and updates like fresh paint might not appeal to buyers who want to make their own changes, potentially undoing your work. Plus, those expenses will raise your asking price. In some cases, especially for selling, it's more efficient to just ensure the property meets code requirements and stop there.
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