Turnkey real estate – Everything you need to know before buying a turnkey property

Turnkey real estate. I have spent almost $750K on turnkey properties. Every rental property I own has been “turnkey” to some extent so I’m definitely not here to turn my nose up at it. And yet, I think most turnkey real estate deals are a trap. 

What?! 

Don’t get me wrong. I can appreciate the “done-for-you” business model, especially if you:

  • Really don’t have the time to take care of everything yourself,
  • Want someone to hold your hand while you get comfortable with the ins and outs of real estate investing

But now that I’m older and wiser, I can tell you that there are so many options to get the benefits of turnkey real estate and avoid the costly traps

What is turnkey real estate? 

Turnkey real estate is a property that an investor can buy and immediately rent out. This means that the property underwent recent renovations or updates and will often be sold with a tenant already living in the home. 

Pros to turnkey real estate

  • If you buy a property with a tenant already living there, all the unknowns to investing are gone. All the investment calculations are concrete, and not based on projections. 
  • You don’t have to waste time and energy managing a renovation. 

Cons to turnkey real estate 

  • You might be paying too much. The seller is selling it to make a profit. So if the “reno” to make it rental-ready was just a coat of paint and a new air conditioner, maybe it would be cheaper to do it yourself. 
  • You have no way of knowing if the work put into the home was good. But then again, it’s a rental – it doesn’t have to be top of the line. 

The bottom line for me

Time is money. Almost all the houses I bought were turnkey properties and that’s for a good reason. I don’t enjoy doing renos, and I certainly don’t want to organize them. I’m a busy dude. I’d rather spend a few extra grand than go about vetting piles of contractors. 

Also, none of my houses are particularly close to where I live. I’m not commuting back and forth just to make sure things are up-to-par. No thanks. 

Actually, I have bought one house that I renovated myself. Technically it was my most profitable property, but it was also a miserable three months. Not a do again. Then again, if you’re into the reno stuff, then do it. It can be fun. 

Turnkey real estate – skip the wholesalers! 

However you want to get into the rental market, the one thing I’d recommend against in the whole turnkey chain? Wholesalers! 

Wholesalers or suppliers are websites and services that sell a whole bunch of turnkey properties. (Think Roofstock.) And of course, they take a cut. 

Why are they horrible? They’re not! I actually recommend signing up for their mailing list or membership. Having access to all those properties in one place will give you a good idea of what to expect from an area:

  • How much typical homes go for?
  • How much to expect in rent? 
  • What the rental market is like? 

My issue is the 10% cut. 

What I recommend instead of wholesalers

I recommend treating turnkey wholesaler websites as your “research phase” but then getting a good realtor. Once you understand the area you’ll be buying in, find an agent and fire them an email. 

Boom. You just saved yourself 10%. 

Think a realtor won’t understand your unique needs? Hello? It’s their job! If the agent you’re talking to doesn’t get what you need right off the bat, say goodbye and keep looking! 

I own long-distance rentals that I haven’t even seen, and I relied on good agents to help me find a good deal. They should already know the neighborhoods well and understand the trends, and then I also ask them to:

  • Find me homes that already have a tenant
  • Vet the property manager and recommend good contractors if needed. 
  • Give me the cap rate
cap-rate-definition

Sure, Roofstock vets everyone who comes on their platform, that’s definitely worth something, but they don’t vet that every house is a good deal. Your realtor should. 

Realtor vs. Wholesalers

Here’s a listing I got from my agent in Ohio recently: 

turnkey-real-estate-agent-listing

So to recap, it’s all reno-ed and already has a tenant paying over $1000 in rent. 

And here’s something from Roofstock (no offence, Roofstock.) 

Same price, but it needs $4K in repairs AND it goes for three-quarters the rent. 

No way Jose! 

turnkey-real-estate-typical-listing

Want to go the DIY route when it comes to real estate?

Hey, I don’t blame you! 

I’ll admit I sometimes see the different kinds of flooring and tiles and think “I could do that!” 

I have plenty of friends who’d have way more fun doing the job themselves than paying some contractor and their apprentice. 

If you’re one of those people you could have fun AND save a lot of money. The only thing you need to remember though, is this also might end up costing you, because:

  • Renos cost money
  • You’re not getting any rent while you’re doing the reno
  • You might have a harder time financing if your place is not rent-ready
  • It might be a good idea to pay a manager if you’re not able to do it yourself

So on your path to saving money, remember that it doesn’t come for free. 

As for me, my next plan is to buy a single-family fixer-upper and then hire a project manager. My awesome realtor already recommended a guy. 

Turnkey Properties FAQ:

What does turnkey mean in real estate?

A turnkey property is a home that you can buy and immediately rent out. This means that the seller has completed the necessary renovations and updates. The property may or may not be sold with a tenant already living in the home. 

What does turnkey mean in real estate?

A turnkey property is a home that you can buy and immediately rent out. This means that the seller has completed the necessary renovations and updates. The property may or may not be sold with a tenant already living in the home. 

What does turnkey mean in real estate?

A turnkey property is a home that you can buy and immediately rent out. This means that the seller has completed the necessary renovations and updates. The property may or may not be sold with a tenant already living in the home. 



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