Should You Invest in a Turnkey Home?

Luna Ruth

A turnkey home basically means there’s nothing to do with the property except turn the key. “Turnkey” can have different meanings, in some cases referring simply to a home that needs no renovations, but is most often used to describe a property that comes fully furnished as well. 

If you’re looking at buying investment properties, turnkey homes can be very attractive because they won’t require sweat equity — and they can be ready for you to move into or rent out immediately. But there are pros and cons to consider before deciding whether this type of investment is right for you. 

Two people sitting in a home in front of a painted wall.

Image source: Getty Images.

Pros of investing in a turnkey property

Here are some of the biggest benefits of buying a turnkey home: 

  • You can begin making a profit immediately by renting out the property: If you buy a property that needs renovations, you’ll have to cover the carrying costs for a while before you can start renting it and bringing in income. This shouldn’t be an issue with a turnkey property, since the definition of this type of real estate is that it’s ready to go right away. 
  • You don’t need to do any work: Making upgrades to a property takes a lot of time, effort, and knowledge. You’ll either need to do the work yourself to earn sweat equity or spend the time to hire people and manage the project. If you buy a turnkey property, you can skip all that, and you won’t find yourself spending as much time getting your investment ready to actually produce income.
  • You face less of a chance of surprise costs: Whenever a property needs repairs or upgrades, there’s always a chance that you’ll end up over budget as surprise costs crop up during the course of the project. If a home truly is turnkey, this won’t be an issue, and you can better anticipate what cash outflows you’ll have before you begin earning money from the property. 

Cons of investing in a turnkey property

Unfortunately, there are also some downsides of investing in a turnkey property as well. Here are some of the biggest ones: 

  • Turnkey homes usually cost more: When you buy a home that’s ready to rent or move into, you’ll pay a premium for it. This can mean that you’ll need to rent it or resell it for more in order for your investment to be a profitable one. You’ll also need more up-front capital to be able to buy the property. 
  • Not all turnkey properties are truly ready to go: Sometimes, homes are advertised as turnkey in order to attract more interest when they really have hidden issues or old, outdated furniture that needs to be replaced. You can usually spot some problems with a careful inspection, but that’s not always the case. 
  • You have less control over the property: If a property is turnkey, you won’t be able to put your stamp on it. This can make it harder to differentiate your space from others. 

Is a turnkey home really right for you?

There are many real estate investment options out there, from REITs (real estate investment trusts) to rehab properties to turnkey homes.  Before investing in a turnkey home, you should weigh the pros and cons and consider alternatives. This will help you make the choice as to which investment is the best fit, given the money, knowledge, and time you have available to you. 

 


https://www.fool.com/investing/2022/04/30/should-you-invest-in-a-turnkey-home/

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