For those unaware of what a turnkey property is, it’s real estate that an investor can easily purchase and immediately rent out. All necessary repairs, upgrades, or construction would be completed before purchase. In most cases, a property management company and tenant are already in place. The property is generally “rent-ready” when the keys are handed over to the investor.
I know from personal experience that turnkey investment properties are a smart strategy for building great wealth. I’m not alone in this view, though. Over the years, rent-ready real estate such as this has become increasingly popular among investors due to the simplicity of the investment process and its ability to generate immediate rental income.
Now that I’ve sparked your interest, let’s dive in further so you can see why this investment type is such a great option for real estate investors.
1. The Benefits of Investing in Turnkey Properties
If you’ve never bought turnkey real estate before, you might be surprised by how many benefits this type of investment offers – from the ability to invest with no experience, to having all the work done for you, as well as being presented with the opportunity to invest in out-of-state properties. It certainly does have a lot to offer. Below, I’ll cover the main benefits responsible for making these cash flow-ready rentals a wise portfolio piece.
No Experience Needed When Investing in Ready-to-Rent Properties
One of the standout benefits of turnkey investment properties is that it requires no prior real estate experience. These properties are fully renovated and ready to go upon purchase. This places new investors in a position to accomplish their goal of owning a rental property sooner rather than later. I know this to be true because many beginner investors have come to me asking for advice on how to get started right away, and I only have one answer: “Buy turnkey properties.” It makes it possible for those who have a dream of investing in real estate but have no clue how to move forward to make it a reality.
Without experience, an investor would find it very overwhelming to handle everything independently. The process would also take longer than necessary, resulting in a loss of income and delayed equity gains. In this write-up on how to easily buy a rental property before the year’s end, I detail how simple it is to invest, even with zero experience. It’s definitely worth a read and can provide you with invaluable insight on how to become a real estate investor.
Turnkey Properties Allow You to Bypass the Time-Consuming Investment Process
An immediately rentable property is often purchased through a company or an individual specializing in rehabbing old properties, known as flipping. Or through a professional investment company that builds rentals from the ground up. Either path leads to a hands-off approach that can easily place an income-generating rental property in an investor’s hands. How is this possible? Those who provide turnkey investment properties do all the legwork for the investor beforehand – from start to finish. It can certainly save the buyer an enormous amount of time.
Below, I’ll outline a few key steps that go into getting a property ready so that the keys can just be handed over to the investor. It will give you a good idea of how much time is saved and how hands-off the process is when a turnkey property is purchased:
Locating the Perfect Housing Market – Extensive Area Research Conducted
A good turnkey provider will spend at least a year researching a certain market where the profitability factor appears to be on an upward swing. Regarding this, I put an entire article together on why location matters, so be sure to dive into the details. Various factors must be taken into consideration to locate a good market. This includes the crime rate, unemployment numbers, vacancy rates, and more. It takes time to sort through these market stats, and many investors either don’t know what to look for or don’t have the time to do the extensive research that’s needed.
Performing a Property Search – Pinpointing Turnkey Investment Properties that Will Perform Well
Finding a profitable property is time-consuming, and various strategies are used to locate potential rentals that will cash flow. Also, once a property is located, certain calculations must be made to determine if it really is a worthwhile deal. See just how complex this process is by reading over my post that touches on calculating returns on turnkey investment properties with formulas.
I also have a detailed general overview of methods for determining a property’s worth that you can look into by heading over to my real estate valuation write-up. Some people just aren’t good at calculating these things and don’t want to deal with it. Fortunately, turnkey companies take care of this step, so you won’t have to.
You can get some insider tips in the following video if you do decide to take this task on your own – Doing The Math on Rental Properties:
Rehabbing, Renovating & Building – Work Completed to Ensure a Property is Rent-Ready
When investors buy existing turnkey properties where a tenant can move in from day one, all the necessary renovations and rehabbing should be completed beforehand. Rehabs are typically extensive and may involve repairs to the plumbing and electrical, or even include mold removal and structural repair. Renovations, however, include work done to improve the appearance and rentability, such as upgraded countertops. You can get a feel for what type of renovations are typically completed by heading over to our rental property upgrade article, which goes into detail on the topic. Also, you may have to remodel at some point, so you may want to bookmark this resource – National Association of the Remodeling Industry.
As for new construction properties, they’re a whole other ball game. Mostly because they generate a brand new, highly profitable turnkey property, but as you can imagine, it’s a massive amount of legwork. No matter what type of property your investing in – old or new, it’s a time-intensive process that can take many months or even a year to complete. Most investors who want to own a rental property don’t have the time or experience to build, repair, or renovate a rental. This is one factor that really makes turnkey investment properties such a smart choice for real estate investors.
Vetting Property Managers & Screening Tenants – The Convenience of Turnkey Properties
Those who provide hassle-free properties such as these to investors will often have a vetted property manager in place to care for the rental, as well as a tenant. As for the element of property management itself, this is so important that I’ll be discussing it below as a benefit on its own.
As far as time is concerned, a PM can’t simply be picked out from a list of nearby managers. No, it’s more involved than that. They need to be interviewed and provide references that must be checked. Along with this, it’s best to look into their track record to ensure the properties they care for have been performing well.
It’s a lot of work to find a reliable PM, and this is why it’s so helpful when a real estate deal comes complete with a good property manager. I know from experience that it frees up valuable time for the investor. This convenience also applies to the tenant as well. Most times, a turnkey property comes with a screened tenant already in place. Pre-tenant placement saves the investor from having to sort through hundreds of applications, as well as perform credit checks, and interview possible renters.
As you can see, buying this type of investment property is a time saver that opens up an individual’s schedule. It allows them to allocate more time to pursue other investments. This, in turn, can lead to quickly building a lucrative rental portfolio.
Done-for-You Investing Opens Doors to High-Yield Out-of-State Opportunities
Turnkey properties have become a gateway for investing in remote real estate markets. It provides a way for individuals to capitalize on locations that sport a high demand for rentals. They also allow for investing in regions that have a booming economy, which can maximize returns. Investing remotely opens up a world of opportunities. However, attempting this on your own can be challenging and costly.
An investor would have to travel when looking into out-of-state, non-turnkey properties. The process would entail accruing expenses such as airfare, hotel stays, car rentals, and so on. Seeking out profitable rentals in this way takes an enormous amount of time and doesn’t always pan out. In contrast, turnkey investment properties are already vetted, and in most cases, the investor doesn’t even have to travel to make the deal happen. Don’t miss one of my recent articles that touches on how prosperous locations set the stage for high-profit margins.
Serious real estate investors often seek out properties in various states because investing in their own backyard probably won’t yield the profits they’re looking for. To get an idea of the importance of investing in the right market, even if it’s 3,000 miles away, read my article on how long distance investing is a proven strategy for building wealth.
Immediate Rental Income is Possible with Turnkey Investment Properties
With turnkey rentals, the setup ensures that income starts rolling in immediately. This is possible because the investor avoids the typical downtime associated with non-turnkey properties. The downtime includes a few things I mentioned above – renovations, construction, filing for and waiting on building permits, property management placement, tenant screening, and the like.
In contrast, when a move-in ready property is purchased, and the keys are handed over with a tenant already in place, the rent checks roll in like clockwork from that first month. Another aspect of this is that the tenant is paying the mortgage for the investor, which is one reason it’s so advantageous to have that income from the start.
Allows for Reduced Property Management Stress for Investors
I touched on how buying turnkey investment properties can save someone time when it comes to landing that perfect property manager. Now, I’ll discuss just how much of a benefit a PM really is. I’ll begin by stating that if you don’t have an experienced property manager in place, things can end in a financial loss. This might stem from vacancies, evictions, property damage, and so on. If you’re not familiar with the extensive role a property manager plays, see our latest article – Advantages of Using a Property Management Company.
A good property manager can shield the owner from a mountain of stress. What do I mean by this? Well, they will pick up that 2 am call when the heater breaks in the dead of winter. Or when a water pipe bursts and immediate action is needed. They often check on the properties they’re responsible for, making sure everything is on par. Also, they have a system or portal in place that collects rent checks to streamline the collection process. This way, the investor can just sit back and receive passive income.
PMs keep the tenants happy, and this keeps the vacancy rate low. That said, read up on why vacancy rates matter so you’re well informed on the financial implications. I’ve dealt with a few vacancies over the years, and trust me, it can really cut into your profits. The bottom line is that having a manager in place is a huge perk when buying turnkey properties.
2. What to Consider Before Buying a Turnkey Property
When an investor is presented with a property that already has a tenant in place, it can be quite tempting to proceed with the deal immediately. However, as with any significant purchase, several factors need careful consideration. Here are a few that I keep top of mind when looking into a property that I might invest in.
The Condition of the Property Should be Evaluated
Before investing in any piece of real estate, it’s crucial to thoroughly evaluate its condition. While turnkey properties are often marketed as ready-to-rent, ensuring the property’s quality firsthand can prevent future complications. Prospective buyers should inspect for any underlying issues, such as structural weaknesses, leaking pipes, or mold. Also, bringing in a professional home inspector who can highlight areas that might require attention is a good idea. Having the rental evaluated like this ensures you’re buying a financially sound investment. It also helps to ensure the property will be a highly rentable, safe, and comfortable living environment for future tenants.
Consider the Housing Market the Turnkey Investment Properties are Located in
I touched on this topic but would like to stress that finding a profitable market is just as important as making sure the property will perform. Having a fantastic rental that’s in a declining market is a recipe for disaster. When you’re working with a credible turnkey provider, you shouldn’t have to worry about market research. However, if you’ve partnered up with a provider you’re unfamiliar with, doing some research on your own might provide peace of mind – after all, it’s a huge investment.
The easiest way to go about it would be to join a real estate meet-up group that knows the market well. Or, call real estate agents in the area to get their input. Another option is to vet a professional real estate investment company that has a proven track record of providing properties in areas that perform well.
For additional points to consider on your investment journey, see my post – 5 things to Know About Investing in Turnkey Properties.
3. Turnkey vs. Traditional Property Investments
You may have an idea of the differences between a turnkey property vs. a traditional rental real estate deal. Even so, I’ll cover a few line items just in case. But first, I’d like to mention that immediately rentable properties offer great advantages, as mentioned above, and are the top choice for most investors. Now, you might be wondering, why wouldn’t all investors take that path if that’s the case?
Well, there are some who simply prefer traditional property investments. These are the people who enjoy getting their hands dirty, so to speak. They love the whole process: the hunt for the perfect property, as well as the satisfaction of turning an old house into something that has curb appeal. These investors may also have plenty of finances to back them up on their journey, and can take the time to put in 6 months to a year to piece together the perfect rental property.
With that said, let’s look into a few main differences:
Time Investment – Turnkey Properties Come Out on Top
When it comes to the time spent making an investment deal happen, hands down, a turnkey property comes out on top. This is the case due to all the time-related issues we discussed earlier. A traditional rental real estate investment, in contrast, takes a tremendous amount of time because every single aspect of the deal is taken care of and dealt with by the investors themselves. You really have to love the work to find the traditional property path more appealing.
Take a moment to learn about additional reasons why this type of done-for-you rental outperforms traditional investments in my article Are Turnkey Investment Properties a Good Investment?
Cost & Profitability Comparison
As for comparing the costs between the two, turnkey properties can sometimes have a higher price point because everything is done for you. So, you might get a lower-cost deal when buying a traditional rental property. However, keep in mind that in the long run, time is money, and investors can be indirectly affected financially when they undertake all the work required to secure a non-turnkey investment. On top of this, when locating and rehabbing an older property on your own, the repairs and renovations that need to be completed can oftentimes be underestimated, and a loss occurs.
Even if they end up being slightly higher in cost for the element of convenience, at least you know what you’re getting for the price, so no miscalculations will impact your bottom line. And remember, income starts flowing in immediately with ready-to-go property investments, so no money will be lost in rental income like it would be with a non-turnkey purchase during the rehabbing phase. In the end, I feel the potential ROI is higher when you buy an investment-ready property because it’s a more reliable, streamlined process that cash flows from the start.
My Personal Experience with Clients Who Have Tried Both Turnkey vs. Traditional Investing
I’ve been on both sides of the spectrum and have built a business that provides move-in-ready rentals to clients who have traveled down the traditional property investment path. I can tell you that for many of them, after just one non-turnkey deal, they were done. When they started working with me, they were blown away at how every aspect of the deal was taken care of for them. If you want to hear personal stories of individuals who let go by securing investment properties that cash flow at purchase, then make sure to head over to these pages that describe their journey, complete with video interviews:
- A Successful Real Estate Investment Journey – Interview with Bryan
- Zero to 15 Rental Properties in 3 Years – Interview with Don
Those who are interested in getting a head start on finding an investment such as this, see my post that covers how to find turnkey rental properties. In it, I discuss working with full-service real estate companies, which I feel is the best avenue for obtaining a property. I’ll break down this specific topic in detail below.
4. Take Things to the Next Level by Investing in Turnkey Properties with a Full-Service Real Estate Company
I believe that a turnkey investment experience should be truly hands-off, from start to finish. I also think it’s important that investors are provided with the support they need for the life of the rental. This can be accomplished by going through a full-service real estate company that provides immediately rentable properties.
Ok, why do I feel that a full-service experience is the best path to take? Well, full-service is like turnkey on steroids; it really kicks things up a notch for investors. By this, I mean everything is taken care of, and the support continues after the deal is completed. Sadly, non-full-service turnkey property providers hand the keys to the new owner and then say goodbye.
The Difference is Short Term vs. Long Term Investment Support
When the handoff is made, and the investor is left standing alone, what happens if the PM who was placed leaves? What if the tenant also leaves when the lease is up in a year? Will the investor know how to handle these situations, or have time to take care of them? Situations like these can lead to a major loss in income and vacancies.
When properties are purchased from a full-service company such as Morris Invest, the investor won’t have to worry. Why is this the case? Even after the keys are handed over, we continue to make sure things run smoothly. We’re in it for the long haul. If a property manager leaves, we ensure an experienced PM will take their place. If an investor has questions about property taxes or anything else real estate-related, even five years down the line, we take the time to answer those questions.
A Full-Service Provider Should Go Above and Beyond When Providing Turnkey Properties
A full-service real estate company should surpass the set standards of turnkey investment purchases. It means going above and beyond by catering to an investor’s specific needs. Below, you’ll find what Morris Invest provides their clients who are looking for a hands-off approach to investing:
Investors are Taken Care of From Start to Finish:
- Tailored to Specific Needs: We put together a customized investing plan based on your goals, financial situation, and preferences.
- Funding Turnkey Investment Properties: Our team locates funding strategies such as self-directed IRAs, 401(k)s, and unsecured business cards to fund a down payment. For those who want to use an SDIRA, we can set that up for you. If you’re not familiar with this funding strategy, see our post for some insight – Investing in a Self-Directed IRA. Additionally, for traditional financing, we work with over 200 banks to secure loans for our clients.
- Incorporating Your Investment: Purchasing a rental property within a legal entity such as an LLC provides protection if something legally unfortunate were to happen. It will ensure no one can come after your personal assets. Additionally, an entity setup also lowers your tax burden significantly. Know that we work with experts who can easily set you up for incorporation.
- Tax Lowering Strategies: Morris Invest provides a cost segregation study with each property, which can save thousands in taxes, but would cost thousands more if hiring a segregation expert on your own. Not sure what this study entails? Head over to this comprehensive article on new construction cost segregation studies.
- Our Properties Have PMs & Tenants in Place: Our rentals will have an experienced property manager caring for the rental and the tenants. We also place a reliable, vetted tenant, so you won’t have to.
- Continued Support for the Life of the Property: As detailed above, a full-service provider will be there to support you and your investment for the life of the property. This is what really makes Morris Invest stand out from traditional providers.
Here’s a great video on full-service vs. buying through a traditional turnkey investor:
Exceptional Resources for Real Estate Investors
Before we wrap up this article, I’ll share a few essential resources for those who would like to take things to the next level. They provide details on calculating the number of rentals required to become financially free, along with investment guidance, and a comprehensive list of all our programs. I highly recommend diving into these pages because they provide invaluable information that can kick-start a successful real estate journey.
- The Financial Freedom Academy
- Freedom Number Cheat Sheet
- 90-Day Financial Empowerment Bootcamp
- Morris Invest & SDIRA Program Overview
Also, regarding our new construction rentals, check out these two articles to get an idea of which property type would be best for your investment goals – single-family or multi-family turnkey rentals:
- The Advantages of Investing in Single-Family Homes
- The Benefits of Investing in a Multi-Family Duplex
Grow Your Wealth and Portfolio with Turnkey Investment Properties
I’m assuming if you’ve been undecided about whether to add a turnkey property to your portfolio, that you’re now leaning toward this investment type. It just makes sense time-wise and financially. This type of real estate investing really does present a compelling opportunity for investors seeking a hassle-free and time-saving path to generating reliable rental income.
The fact that everything is completed – the construction or renovations, as well as property management and tenant placement, seals the deal for me. I have better things to do and other investment deals to make happen, and this frees up my time. I’m just handed the keys, and the rental is rent-ready, and the monthly checks start rolling in. This is especially helpful for investing in those lucrative out-of-state markets I mentioned.
I know that turnkey properties are the right choice for many investors. The real question is, is this investment strategy right for you? Only you know the answer to that. Ultimately, the answer depends on your individual goals and preferences.
If you’re still on the fence and unsure what direction to go in. Or, if you need more information, have questions, or would like to discuss the return on investment possibilities with our properties, feel free to schedule a call with Morris Invest. We’re here to help you get set up on the path to achieving your financial goals through full-service turnkey investing.
