The Definitive Guide to Turnkey Real Estate


February 13, 2020

If you’re interested in investing in real estate, but don’t have the time, ability or interest in renovating a home or deal with maintenance issues, worry not! There are various options available out there. One path to consider is settling on a niche, turnkey real estate property. 

So, what exactly are turnkey properties? In the simplest terms, they are houses or apartments that are move-in ready and do not require any major repairs or improvements. The term comes from the idea that you can simply “turn the key” and walk right in. These types of properties often have tenants already living in them and are handled by professional property management companies.

 

How turnkey real estate works

Properties are coined “turnkey real estate” when real estate companies buy them. They then get them rent-ready, list the properties for sale, and secure pre-qualified tenants. Most turnkey companies also provide property management services to the new owners. This is to keep the process as streamlined as possible. However, because it is less work for the investor, these properties often tend to be more expensive than those that need renovations.

 

What’s the catch?

The main problem with turnkey real estate is that it’s very subjective and can be interpreted in different ways by different people. Normally, turnkey means that everything in the house is new, rehabbed, or in excellent condition with no visible signs of wear. The reality, however, is that a house might be clean but needs substantial updating. So, the best thing to do is to pay great attention to detail when looking at turnkey properties. Ask for a list of items that have been repaired or replaced, and carefully inspect the quality of work that has been done. Nevertheless, there are so many benefits of turnkey real estate. 

 

Who turnkey properties are right for

As mentioned, turnkey properties are most suitable for hands-off investors as it is an opportunity to own an investment property without the responsibility of being actively involved in property management. Owner-occupants who are looking for a move-in ready property might also be attracted by this option.

female real estate investor staring out of a large glass window at the city

Ideal turnkey property buyers include:

  • Landlords who want to buy properties in a location far from their permanent residence
  • First-time landlords who are looking to get into the field of real estate investing
  • Landlords who are too busy to manage their properties
  • Investors who are looking for a long-term investment strategy and a steady cash flow
  • Low-risk investors who don’t want the risk of potential income loss from flipping a property
  • Owner-occupants who want a move-in ready property

 

Pros & cons of turnkey real estate investments

The benefits

  • No renovation costs: because the work has already been done for you
  • Contractors aren't needed: you don’t have to look for and deal with contractors and a rehab timeline
  • No tenant searching: these properties are often fully rented with qualified tenants
  • Built-in property management: many furnished homes for sale come with property managers
  • Ideal for out-of-state investors: your local market might not have the price point you need or offer exactly what you’re looking for, but turnkey real estate is a safe option
  • Passive income: your investments are taken care of by a highly professional management team
  • Portfolio growth potential: investments are passive meaning you have more room to capitalize on new opportunities
  • No rental gaps: the property is move-in ready from signing and you won’t miss out on renting a temporary property for yourself or stalling a tenant’s move-in

The drawbacks

  • More expensive properties as the properties don’t need to be fixed up
  • You can’t choose first tenants: your cash flow depends on tenants, who you did not choose, to pay the rent
  • Giving up control to property managers: resulting in less control
  • Limited locations: turnkey investment properties aren’t very easy to find and turnkey real estate companies aren't available in every state

 

How to find turnkey properties

Do Your Research

As with any real estate purchase, it’s important to first do your homework. First, focus on neighborhoods and home prices. Compare similar properties in the area, both conventional and turnkey to set benchmarks. After your initial research, you’ll need to visit the property and inspect the neighborhood.

For the second part of your research, look into turnkey real estate companies. Make sure they are reputable companies that come with top-notch property management services. 

Common fees that turnkey real estate companies charge include:

  • Property management fees: between 10% to 20% of the gross monthly rental income (there may be additional fees for maintenance, leasing, advertising, and vacancies)
  • Leasing fee: usually equivalent to one month’s rent but it can also be a flat fee 
  • Eviction fees: depend on the state and include court filing and legal fees
  • Real estate commission: typically paid from the proceeds from the sale (commission can range from 5% to 7% of the sale price)

Work with the right turnkey real estate company

It’s imperative to find a company that fits your wants and needs. Look through the applications, background checks, and leases the turnkey companies have with the existing tenants.

blueground apartment san francisco living room

Blueground offers a turnkey housing solution for renters looking to stay for a month or longer. For property owners and investors, we offer an attractive alternative to the typical turnkey housing model. If your unfurnished, ideally located apartment qualifies, Blueground will sign a multiyear lease with you, all while furnishing, sourcing tenants and offering property management services. Properties are then leased to business professionals and individual renters who seek a turnkey space to settle into. A company as such is a lucrative solution that makes sense for someone who already owns an unfurnished property. You get the turnkey experience and stable revenue while owning an unfurnished unit. All that’s left for you to do is to enjoy a truly passive income thanks to your turnkey home.

Finance your turnkey property

After you’ve done your research and chosen the right turnkey company, you’ll need to decide how you are going to finance the property. Since these properties don’t need repairs, they can be financed with many types of loans. Typical financing options include conforming loans, portfolio loans, and multifamily. 


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