A ‘turnkey property’ is often referred to as a fully renovated apartment building or home that a real estate investor can buy and immediately rent out. In other words, turn-key is just a popular adjective that is used to describe a rental property which is ready for a renter or buyer to move in. All they need is to literally turn the key, unlock the door, and start living in the property. To most people, turnkey signifies property that is in good condition, requires little or no maintenance at all, and has basic living amenities, for example, a corporate rental or vacation rental with everything a person needs to live, say towels, pots, dishes, internet, cable TV and more.
Turnkey properties gained popularity after the housing market decline of 2007-2008, when it became cheaper to purchase homes than rent them in many parts of the U.S. This type of investment is attractive to many investors who desire exposure to the real estate market but lack the time or ability to renovate properties or handle maintenance issues. In most cases, turnkey properties are purchased from companies specializing in the restoration of older properties. The same companies are also likely to offer property management services to the investor.
When planning to invest in turkey properties, here are 3 crucial aspects of this investment approach that you need to know.
The term "turnkey property" may be implied differently by different sellers
As an investor, you have to be very keen with this one. You will find different dealers interpreting the term differently so you have to ask questions about specifications. What is the state of your turnkey property? How do you interpret the term turnkey property? Can I view and inspect the property myself? One seller or broker may use the term turnkey to mean only that the property is newly painted and cleaned, while another may use it to mean that the house is indeed furnished with all the essentials that a renter will need to typically use on a daily basis (such as bedding and cookware).
For example, in the western U.S. turnkey generally means that the rental or vacation property has furnishings and kitchen amenities installed. In the eastern U.S however, the term is often used to describe a home that requires no immediate work or repairs. Be very keen when investing in a turnkey property. Ask the agent or seller what they exactly mean!
Dealing with a turnkey company
Turnkey companies can prove to be a great asset in your investment on turnkey properties. If you are new to this type of business, it’s best to deal with a professional who has been in the trade and knows the tricks on how to profit from it. Professional turnkey companies have taken the time to study the details when buying turnkey properties which makes their buying decisions easy and sound. If you are too busy for details on due diligence, then turn-key properties are going to be a very risky venture for you! Deal with a professional company.
Benefits of buying a turnkey property
- Service even from afar - rely on turnkey properties to manage your properties, no matter where they are.
- Market insight - turnkey companies have an in-depth understanding of their market with far more precision than an outsider would.
- Management experience and professional staff- turnkey providers have the experience in dealing with turnkey renters. They also hire professional staff to ensure that your property is well managed. This can be quite difficult for you especially if you are investing in a market that you hardly have experience with.
- Marketing machines - turnkey companies know how to market their properties so as to get both motivated sellers and tenants coming to their business. They stand a better chance of getting you a better deal or bringing you tenants faster.
- Simplicity - with a good turnkey company, the whole investment process is simplified and you can just wait for the profits to come in.
All in all, turnkey properties are a lucrative investment approach that continues to grow in popularity year by year. Just be keen to do your research and know what and who you are investing in. Remember, due diligence is key in any turnkey investment!