Investors need to consider all options and choose the one that best suits their goals and lifestyle. As part of the turnkey property revolution, investors are quickly sweeping the nation by buying up turnkey homes because of their finished and move-in condition.
So you’re pursuing investments with real estate, but you prefer a passive option. What can you do? Enter turnkey properties.
Fortunately, there’s a strategy for all sorts of real estate investors out there even if you’re just getting started. This strategy in particular narrows in on turnkey properties, where you can literally “turn the key” and start living without any updates.
Turnkey investing is becoming increasingly popular with shifting demographics. It provides great opportunities for flippers (to sell updated properties) and buy-and-hold investors alike. Here’s what you need to know.
What is a turnkey property?
A turnkey property means that it is ready for move-in immediately after somebody closes. No extra time is spent doing work on the home from the furniture to the foundation. It’s a broadly used term, but turnkey could be described when a home needs no major renovations. In other instances, turnkey could mean no renovations at all, not even a new coat of paint.
It’s a subjective term that home listing marketplaces use, so investors should always be careful about making sure the property is actually ready to move-in. If you’re walking through a turnkey property, make sure that the foundational aspects are in good condition and that the home is to code with an inspection. The plumbing and electrical should be safe and functional, but they are often the hardest problems to spot. A real turnkey home should be more than just a freshly painted home with a clean appearance.
Why are turnkey houses so popular with buyers?
The beauty of turnkey properties is that they appeal to both residential homeowners and investors. It doesn’t matter what your motive is for purchasing a turnkey home. If somebody has the capital to afford a quality turnkey property, it has all sorts of benefits.
Consider, for example, a flipper who renovated a house in an up-and-coming neighborhood. This may appeal to millennials, the largest age group in their prime home buying age who just so happens to value convenience. They would rather live in the property and not worry about a rehab or updates.
Another group interested in turnkey properties are investors. They commonly look for turnkey properties if they have a passive investing style, especially with larger scale operations. Individual investors with busy lifestyles may also prefer a turnkey solution as it requires less maintenance. There are even property management companies that specialize in helping investors find and manage properties like these.
Should you invest in turnkey real estate?
Since buying turnkey properties is one of many strategies in real estate, it will always depend on your goals and lifestyle. If your investment style is more passive, turnkey sounds like a better option. For example, you might not have an interest in getting gritty in real estate such as painting or renovating a kitchen on your own.
Not to mention it takes time, additional money spent on labor, and trust to hire somebody to make renovations. Instead, a turnkey property provides you with the luxury of time. You might enjoy aggressively selecting the right tenants and setting your rent price which is time better spent than renovations. On one hand, you’re giving yourself more freedom to pursue your investment strengths instead of working on upgrades. On the other hand, turnkey properties tend to be more expensive because of the convenience.
Buying turnkey properties and renting them out
Turnkey rentals are fortunate for investors because of the simplistic model in place. Purchasing a rental property is often a complex situation because of the skills and knowledge it takes. You have to do research and find a neighborhood that’s landlord-friendly, but also have great potential for growth. Value-add properties require further research when it comes to rehab and maintenance and you have to make sure that you aren’t investing into a money pit.
When you buy a turnkey property, you can take away half of the battle. Since the rental is already in good condition, you can imagine who your ideal tenant demographic is and focus on what happens after closing. Double down on studying the unemployment rate in the market, trends in rent prices, and popular attractions nearby to make sure that your targeted area is a good return on investment. To further avoid delay, you can even select turnkey properties that already have a tenant in place which will eliminate your search.
The BRRRR strategy
If you don’t prefer to buy turnkey, you can always use the Buy, Rehab, Rent, Refinance (or BRRRR) strategy to invest. This strategy at a glance, is when you look for a property that needs some work with the intention of renting it out. Once renovations are completed, the value of the home is increased substantially. Equity is gained with the newly renovated rental property and the investor can then refinance. At this point, the money is then used to repeat the cycle and find a new property to purchase and rehab.
Realizing the revolution
Turnkey property searching is a legitimate strategy for investors because of its minimal hassle and hands-off structure. However, in this limited inventory environment, flippers play a crucial role in creating turnkey opportunities.
That’s where Sundae comes in. You can find houses to renovate and turn into turnkey properties by utilizing Sundae’s Marketplace, where thousands of buyers and sellers engage every day. You can review listings with high quality photos, title reports, and inspection reports already completed. Your next turnkey property’s journey starts with Sundae.
Rob Marini is a content writer for Sundae who also produces content for real estate agents, investors, and prop tech companies across the country. He works as a digital marketing specialist in Connecticut, where he resides. When he’s not designing content or learning about real estate, you can find him podcasting, playing the guitar, or watching the Philadelphia Eagles.