What Does Turnkey Mean In Real Estate: Pros & Cons for Buyers
While some people have the energy, creativity, and passion for a fixer upper, others want to simply unpack their boxes and settle into their new home without having to make major upgrades. If this is you, you might be the right buyer for a turnkey house.
People looking to buy an investment or rental property might also get excited about the prospect of a turnkey home. So what exactly does turnkey mean? From the definition of turnkey to the pros and cons of buying a turnkey home, we’ll give you all the details of these types of properties.
What Does Turnkey Mean?
The term turnkey refers to real estate that is fully renovated and ready to be lived in. The buyer simply turns the ‘key’ and starts settling in. This might be a single-family home, apartment building, or duplex. Regardless of what the property type is, turnkey means that the home is move-in ready and unlike a fixer-upper, a turnkey property does not require any major renovations or repairs.
Additionally, a turnkey house can be sold to investors by companies who specialize in creating turnkey real estate markets. Some companies or real estate developers also offer property management services to oversee the usual homeowner duties of the buildings or home you own.
Investing in a Turnkey Property
Turnkey homes are a highly sought-after option when it comes to real estate investing and second home buying. Here are some tips and tricks to keep in mind if you’re interested in buying a turnkey home as an investment property or a house for yourself.
Research the Local Market
The first order of business is to research the local real estate market. For instance, is it a seller’s market or a buyer’s market? This research can be done through sites such as The National Association of Realtors or the U.S. Census Bureau, which provides national and regional data on homes sold and properties that are currently on the market. Or if you are signed up on Aalto, you can get real-time data on your local market of interest through Insights and get a deep dive on any home you are interested in learning more about. You’ll also need to decide what type of property you’re interested in purchasing — such as a single-family unit, duplex, apartment building, or condo.
Keep in mind that a turnkey rental property is generally best in areas where there is a high rental population, as compared to a high homeownership population. They are also often optimal in areas where rental prices are higher than the mortgage payments rates would be.
Know Your Budget
As with any real estate purchase, when you’re buying a new home, it’s critical to know your budget — and to stick with it. Having a clear idea of your budget will help as you’re browsing and considering which property to buy. You’ll also want to carefully consider the finance options that are available to you, and whether you’re planning to pay in cash or opt for a mortgage payment.
Pros of Turnkey Homes
If you’re considering whether you should invest in a turnkey home, then it’s helpful to start by looking at the pros and cons.
No Renovations Required
Turnkey homes are an attractive option for buying for yourself or for real estate investing as they do not require major upgrades. Not needing to worry about renovations can save you time and money. Rather than spending months or years making upgrades to the kitchen, bathroom, flooring, layout, electricity, and more, you can simply unload your moving truck and start living (or immediately start looking for a tenant).
Some companies that sell turnkey houses will also manage the property for you. Property management companies will oversee a number of tasks, ranging from managing upkeep to collecting rent. This means less work and maintenance on your end, and can appeal to individuals who are looking to buy in a location that is outside of where they live.
If you’re buying the turnkey home for yourself, you can enjoy newer appliances and fixtures, sound structure, fresh coats of paint and finishes, and not having to make major repairs before your home is livable. Whew!
One perk about investing in a turnkey property is that you can potentially start making money right away. Purchasing a move-in ready home means that you could see a return on your investment more quickly, which will potentially be a faster turnaround time than if you buy a fixer-upper that requires upgrades.
Opting to buy a turnkey home enables buyers to have the opportunity to make passive income and increase their cash flow. Because turnkey properties are often highly sought-after, they typically have a solid resale value if you decide to sell in the future.
Cons of Turnkey Homes
Now that we’ve looked at the pros of turnkey real estate investment, here are some potential cons to keep in mind.
One downside of a turnkey property is that they can lack personalization, which can be a drawback to real estate investors who enjoy creatively transforming a space to be unique to them. As an investor, you could have less control over the appearance of the property, spanning from the landscaping to the layout.
The same goes for homeowners who plan to live in the house — you’re less likely to have original details and historic features that make your home unique. In contrast with a fixer upper where homeowners tend to customize the bones of each space to their personal style, turnkey houses can look a bit more cookie-cutter, at least initially.
Turnkey homes are move-in ready, which can come with a price tag. Because they do not require any serious repairs or upgrades, turnkey properties are usually one of the more expensive types of property to invest in. If you’re considering purchasing a turnkey home for real estate investing or for yourself, you’ll need to make sure you can comfortably cover the monthly mortgage payment and other expenses.
Is a Turnkey Property the Right Choice for Me?
Now that you understand the role that turnkey homes play in the real estate market, you’ll be able to decide if this is the right option for you. Investing in a turnkey property is a great way to make passive income or have a house that’s move-in ready, but be sure to carefully consider both the pros and cons.
Turnkey properties can be found across the country, but it requires some research and due diligence in order to locate the right one. You can start by researching turnkey property management companies in your local area. As a potential homebuyer and investor, it’s essential to start your search with a specific set of features and characteristics that you’re looking for.
Whether You’re Buying or Selling, Aalto Can Help
Whether it’s your first or fifth time buying a house, Aalto is committed to helping you through every step of the process.
Sellers can easily upload their home onto our self-service platform in a matter of minutes and see real interest from potential buyers. Meanwhile, buyers can search for exclusive homes online to see what’s available in their market — all from the comfort of their homes. Individuals who choose to buy through Aalto will save on commission costs and can even look forward to receiving up to 1.5% cash back on the purchase of a new home.
Unlike traditional real estate methods, Aalto’s self-service platform offers a more personalized experience that is based on your individual needs and desires. Our talented team of licensed experts is there to answer questions and provide assistance through every step of the journey, so you won’t need to hire a traditional real estate agent. Get started on your journey to buying when you sign up on Aalto today.
Aalto is a real estate broker licensed by the State of California, License #02062727 and abides by Equal Housing Opportunity laws. This article has been prepared solely for information purposes only. The information herein is based on information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy of the information. Aalto disclaims any and all liability relating to this article.