What Is A Turnkey Home? A Guide For Investors And Home Buyers

Whether you’re house hunting for a home or a property for real estate investment, learning real estate terminology can help improve your experience.

If you’re new to real estate, “turnkey” may be one of the words you haven’t encountered yet. Turnkey essentially means move-in ready – no repairs or renovations necessary. But the definition of turnkey is broad and includes a few other descriptions.

Let’s talk about turnkey homes and whether they’re right for you.

What Is A Turnkey Property?

A turnkey home is a move-in ready property that requires no renovations. Turnkey properties are typically bought and sold by companies specializing in real estate investment. They’re considered immediately ready to rent out or live in. The homes may have been recently renovated or flipped. Some homes are sold fully or partially furnished.

How A Turnkey House Works In Real Estate

Just because the listing says the home is turnkey doesn’t mean buyers shouldn’t scrutinize it as diligently as they would a lived-in property. No standard or certification designates a home as turnkey. A REALTOR^® can add turnkey to a home listing to attract potential buyers. Turnkey may be added to the listing, but it doesn’t necessarily mean the home is brand-new or freshly renovated.

What You Should Look For In A Turnkey Property

Always inspect a property described as turnkey to ensure it’s actually move-in ready. Examine the paint and any other cosmetic work to vouch for the quality of work and rule out sloppy shortcuts to flip the house quickly. All appliances, plumbing and electrical should be fully functional. Have a professional inspector inspect the house from its foundation to its systems to ensure everything under the shiny new exterior works.

Who Should Buy A Turnkey Home?

Certain types of buyers would benefit from buying a turnkey home, including:

Home Buyers Who Want To Move Right In

Turnkey homes may appeal to buyers who want to buy a house. The house can be new or refurbished, but the key is not having to make home improvements or renovations – at least not at first. Turnkey homes are often enticing because they’re usually beautiful, on-trend and spotless. However, these upgrades come at a premium because you’re paying for the convenience of not putting a lot of cash into the home immediately after buying it.

Real Estate Investors

Real estate investors looking for a rental property may want to buy a turnkey home if the priority is immediate cash flow. Investors won’t need to put any time or energy into the property upfront. They can work with a property management company to start generating revenue immediately.

Pros And Cons Of Buying A Turnkey House

You should evaluate the pros and cons before you buy a turnkey home. Let’s discuss a few below.

Pros

Here are some common advantages to buying a turnkey house:

• Turnkey homes are move-in ready for home buyers or tenants, saving buyers time, money and energy.
• Buying a turnkey home can save home buyers and investors time they would have spent making renovations and repairs.
• Buyers who don’t want to make design decisions can buy a predesigned home that’s likely on-trend.
• Investors with investment properties out of state will have an easier time with a turnkey property because they’re easier to manage than renovations across state lines.
• Investors can increase their ROI by earning income immediately.

Cons

Here are some possible disadvantages to buying a turnkey house:

• Turnkey homes can be expensive because sellers and companies fold renovation costs into the list price.
• Buying a home at a higher price increases an investor’s risk if the real estate market cools.
• Using a turnkey home as a real estate investment can generate lower returns than a home an investor renovated.
• Buyers and investors have less control over a home’s appearance, layout and style.
• Some turnkey homes are finished sloppily and show signs of poor workmanship. Always have a licensed home inspector examine a recently flipped property.

How To Find A Turnkey Home

Turnkey homes are available across the country. You can find them through online real estate websites or the multiple listing service (MLS). Whether you want to rent or buy a turnkey home, work with a local real estate agent to find a property that suits your needs and financial goals.

To get a turnkey home for a good deal, keep an eye on real estate market conditions and make an offer as soon as you detect an increase in value or demand. Look for areas with high rental demand, such as growing cities, areas with low vacancy rates and areas where the average monthly mortgage payment is cheaper than rents.

FAQs On Turnkey Homes

Let’s look at some frequently asked questions on turnkey homes to learn more about how they work.

Are turnkey homes worth it?

If you want to buy an affordable, low-maintenance property you can move into ASAP, a turnkey home may be the answer. Home buyers and investors don’t spend time or money updating a turnkey property. Because the property doesn’t require renovations or repairs, an investor can generate passive income sooner, making turnkey homes a good option for new investors.

How do you use a turnkey property to generate revenue?

You can generate revenue by renting out the property. Because turnkey properties are “key in the door” ready, it may help attract potential tenants. You can also generate revenue by selling the property. Because the properties require less or no work upfront, investors can sell them sooner.

The Bottom Line: Ensure A Turnkey Home Is Worth The Price

Turnkey homes can be a great way for buyers to get a dream home or investors to get a dream rental property. If you can handle the higher price tag, it may make more sense to buy a ready-to-go home than one you need to spend time and money rehabbing. Work with a real estate agent to learn about turnkey homes in your desired areas.