If you are a new investor, you must have been curious to see advertisements of turnkey property in the listings on the market. If you do not understand the concept fully or do not know whether it is suitable for you, this article will explain this type of real estate investing and its pros and cons.
There is no clear cut definition of turnkey property in real estate but most experts agree that it is a property that is ready to move in without making any repairs. Also, it may come with existing tenants or it may be totally vacant. For an investor, a rental property that is without any requirement of expenses and even in some cases ready to provide rental income is like a goldmine. There is no wait period involved with turnkey property as is the case with properties that need renovation.
There are available in the market all sorts of turnkey properties. You can buy them with the help of a real estate agent or a broker. They can also be purchased directly from the owners. Some property management companies make available these properties to investors and also provide management services later on. In general, such properties are divided into three different categories that are as follows:
- Home rentals
- Vacation rentals
- Commercial properties
Advantages and disadvantages of turnkey property investing
- Renters find such properties attractive as they are ready to move in and provide better amenities
- Investors find them attractive as there are no repairs and expenses needed up front.
- These properties start to produce income quickly soon after their purchase
- They can be handed over to a property management company for passive rental income straightaway
- Some owners even complete routine exercises like appraisal, inspection, title search etc to make work even easier for the investors
Disadvantages of turnkey property investing
- Such a property is more expensive than other properties so it needs a much higher initial investment
- Investor needs to remain alert for unseen expenses and structural defects that remain hidden from view
- Unique and vintage properties are not available under this category so the types of buildings available for investors are limited
- Buyer has little control over the features and amenities as he is not required to undertake repairs
- Such properties are normally not available locally. This means investor needs to travel long distance every time he has to undertake any exercise related to the property whether it is inspection, appraisal, or even routine maintenance
How to look for turnkey properties?
One can begin his search for turnkey properties over internet. However, for detailed information about such properties, it is necessary to avail service of a broker or a real estate agent specializing in turnkey properties. This obviously means incurring additional expenses, so it is important to keep in mind the money spent in the process before calculating the ROI on such a project. Turnkey properties are often referred to as passive income properties, but you cannot overlook the active effort that goes in the due diligence process.
Factors to keep in mind
- Check out the broker’s or realtors experience with turnkey properties
- Look at their reviews and testimonials provided by actual clients
- Who owns the property and what are his reasons to sell it
- The type of properties available and their prices
- Is inspection and appraisal required and whether you are permitted to undertake it upon request
You can look after the affairs of a turnkey property on your own or you can hand it over to a property management company soon after its purchase. It depends upon your investment goals and the kind of ROI you want from the property.
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