Many terms will be new to you when you enter the real estate market. A turn-key home might be one term you hear, but what does it mean? It is not uncommon for a buyer or seller to ask a real estate agent what does turnkey mean.
Before you decide to invest your money into a turn-key house, you need to be aware of the advantages and disadvantages of this type of property.
Essentially, the turnkey definition in real estate is a home ready to move into with any significant changes. Hence you can turn the key in the lock and move right in. It’s the exact opposite of a home sold as-is.
Turnkey is one of the more common real estate terms a real estate agent will use in their marketing when the home is in mint condition.
Real Estate listings will often say “turnkey home for sale.” Potential buyers know they shouldn’t be facing many home improvements or a home inspection that will reveal lots of problems.
It is an excellent option for those who can’t stand the thought of doing a lot of work.
You can have a turnkey single-family home for sale or a turnkey rental property. A turn-key home is the type of listing real estate agents love to have because they often go under contract quickly with significant buyer interest.
It should come as no surprise that a turnkey house is often part of a bidding war with very few days on the market in a strong seller’s market.
Far more buyers will find turnkey houses appealing vs. buying a fixer-upper. The purchase price is always higher because there are no significant repairs involved.
Buyers also avoid using special home improvement financings such as the FHA 203k loan and others like it.
While this type of property can appeal to many buyers and renters, there are some disadvantages to consider.
What is The Meaning of “Turnkey” in Real Estate?
A property that doesn’t require serious repairs or upgrades to make it livable could be called turnkey. Sometimes properties that have been newly renovated are marketed as turn-key houses. It is also not uncommon for turnkey rentals that are fully furnished to be described this way.
It might refer to any type of property, as long as the new owners can move straight in with little work. A new home would almost always be considered a turn-key house. Buying new construction is considered highly desirable because of this aspect.
If you see a listing that calls a home turnkey, make sure you do your due diligence to find out what they really mean by that. Unfortunately, it is not uncommon for a real estate agent or property manager to exaggerate the condition. The turnkey definition can have different meanings to some folks.
Turnkey Rental Properties Are Move-in Ready
Turnkey housing isn’t just homes for sale. They can be residential rental properties or even those with commercial use.
Often turnkey properties refer to homes ready to rent out to tenants. A turnkey rental means investors can purchase the property and quickly begin generating income.
Sometimes, turnkey specialists market these properties, businesses that buy and renovate properties to sell to landlords.
A specific type of investor or builder who invests their own money into renovating the property then hires a property manager to find tenants, and then sells to an investor is known as a turnkey provider.
Having a turnkey property such as this benefits the investor, allowing them to begin earning money on their investment quickly. Sometimes these businesses also offer property management services to landlords, allowing the investor a hands-off approach to managing their property.
Turnkey companies such as this provide an easy source of passive income for investors moving forward. They have already done all the heavy lifting, so the investor can start collecting monthly income. Turn-key properties such as this obviously appeal to a specific market segment.
When looking for rentals, many potential renters will specifically be looking for a turn-key home.
Is a Turn-Key Home Right for You?
Though anyone can buy a turnkey home, two main groups benefit from this property type.
Certain Investors Like Turnkey Housing
Turnkey real estate investing is perfect for a particular market segment that doesn’t want to do much work.
If you are looking to buy a property that you can quickly rent out, turnkey houses make a lot of sense. Turnkey real estate investments give investors a faster route to gain rental income without organizing renovations yourself.
They are an ideal investment when you have a hands-off approach.
Some Real Estate Investors Are Less Likely to Buy Turn-Key Houses
Some real estate investors, like house flippers, will steer clear of a turn-key home. Companies like We Buy Houses or We Buy Ugly Houses prefer to pick up properties in rough shape so that they can buy cheaply, renovate, and then resell for a significant profit.
An iBuyer, on the other hand, would prefer to purchase a turn-key home.
Buyers That Don’t Want to Make Home Improvements
If you have no interest in personalizing or renovating your property, turnkey homes could be what you’re looking for. While it might cost you more upfront, it does mean you won’t need to put time, effort, and money into improving the home.
While you might pay a higher price, as long as you take good care of the home and keep maintenance issues to a minimum, you’ll likely see a higher return on investment. Property values tend to be more stable in down markets and rapidly increase in a seller’s market.
Move-in ready homes are more appealing to millennial buyers who work long hours and don’t want to be a slave to their homes.
The Advantages of Buying a Turnkey Property
Whatever your reason for choosing a turnkey home, there are some clear advantages.
No Renovations Needed
If you don’t want a renovation project on your hands, a turnkey house will save you time and money.
Speeding The Entire Process Up
If you want to get settled into your house as quickly as possible, a turnkey home helps. It’s also great for landlords who can quickly begin getting a return on their investment.
Easy Investing
For investors who want the benefits of renting out homes without the hassle, turn-key makes it more accessible. You can buy a property that is ready to rent and use a property management company to deal with the ongoing responsibilities.
Having turnkey housing is an excellent way to potentially have positive cash flow out of the gate. New real estate investors often like this approach.
Out of State Investors
Property investors looking to buy properties in different markets can easily do so when purchasing turnkey houses.
A turnkey solution will be less risky. It can safeguard your investment against volatility in the local real estate market.
The Disadvantages of Buying a Turnkey Property
The potential disadvantages of this type of home shouldn’t be ignored.
Things Might Not be to Your Taste
Since you were paying for a home that has already been renovated, the money has already been invested in making changes to the home you might not like.
If you love personalizing your space or investment property, you might have to spend money re-doing things already repaired or renovated recently.
Higher Costs
If you buy a home from a company specializing in turnkey homes, you could pay more than you would otherwise. If you are an investor and use a company’s management services like this, it will also mean fewer profits.
Less Control
If you leave the property management up to someone, it could hurt your income if they don’t do a good job. This can be more of a problem if you don’t live near the property and can’t check for issues.
How to Make Your Property a Turn Key Home
Given that turn-key houses are so appealing, you may be wondering about the steps to make your property more eye-catching. Here are some different things you can do to become more turn-key.
- Start by decluttering the property. One of the best ways of doing so is by hiring one of the best junk removal companies to take away things you no longer need or want. Make sure you focus on both the interior and exterior. If there is a 1-800-Got-Junk in your area, they come highly recommended.
- Once the junk is removed, donate any unwanted value items to a local charity. Many excellent organizations will do donation pickups. Some companies specialize in furniture donations.
- If there are other things in your home preventing the property from looking its best, put them into a local storage unit nearby.
- With more of a blank state, you should focus on practical improvements. Some of the better-returning items will be painting and replacing old worn carpets. If you have hardwood floors, having them refinished can bring some serious bang for the buck.
- Consult with a local real estate agent to see what areas of the kitchen and baths can be upgraded without breaking the bank. The kitchen and bathrooms are some of the essential rooms in a home for getting top dollar.
- Upgrade any major systems in the home, such as the HVAC or roof.
- Make sure the lawn and landscaping are manicured and tidy. Look at the deck, siding, and trim to ensure no areas need touching up with staining or painting.
The extra work you’ve put in to make the property turnkey should pay dividends. You might even need to focus on what you’ll need to pay in capital gains taxes.
How to Find Turnkey Homes?
If you’re looking for a turnkey investment property, location is all-important. Some areas will be more profitable than others, and traditionally, it is better to find a place where monthly mortgage payments are lower than rent.
Areas with rental property demand can be good, but growing cities also offer profitable possibilities. If you have low vacancy rates and inexpensive properties, your investment should be sound.
Turn-Key Homes Near Me
If you do a Google search for turn-key homes near me, you may see some results. Given how good Google is, they will probably find some online listings marketed as turn-key houses.
You can also try turn-key homes for sale or turnkey house rentals if you need a property to rent.
Things to Check for When Buying a Turnkey House
When buying this type of home, you need to check the details even if you have paid more. It might be the case that corners have been cut during renovations to save money.
To guard against these problems, you need to be sure everything is working as it should. This includes appliances as well as plumbing and electrical systems. A home inspection will find things that most home buyers would never notice and is essential when buying this type of home.
It is always a wise investment to have a professional home inspector look over the property, whether it is turn-key or not.
Check The Turnkey Company You’re Using
If you’re using the services of the turnkey company to buy your property, make sure you check them out in advance. Some companies have been known to rip off investors who were out of state.
Even if the company assures you that the property is in perfect condition, make sure you have an inspection. It never hurts to check customer feedback, so you can avoid companies with a history of scamming investors.
Should You Choose a Turnkey Home?
While buying a turnkey house isn’t going to be for everybody, it does offer many advantages. It is a simple solution if you don’t want to worry about renovations when moving into a property. As an investor, a turnkey house ensures you earn money from your rental property as quickly as possible.
You should now have a much better understanding of everything to know about a turn-key home.
About the author: The above Real Estate information on what is a turn-key home was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for 35+ years.
Are you thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
