You’ve most definitely encountered the term ‘Turnkey Property’ before during your searches for new houses or commercial spaces and often wondered what exactly it is, and how does it differ from usual properties which we will answer and elaborate further in today’s blog.
Turnkey Properties are fully-renovated and furnished establishments that potential investors or buyers could get and use right off the bat, just as the term implies – The seller or agent simply ‘turns’ over the key to the property or establishment to you and the only thing you’d usually need to do is actually live at it or use it as needed.
Most of the time, these properties only need minimal upgrades or fixing such as cleaning for sanitary purposes as most appliances or furnishing must be in good and working conditions or otherwise, it can be hardly considered ‘Turnkey Property’. But before you get too excited about Turnkey Properties, let’s look at the benefits and possible disadvantages first.
Convenience and ease of use – As previously mentioned, Turnkey Properties, especially houses, already come equipped with most living essentials and appliances ready for use, cutting you the time and resources in setting the place up for use. You also barely need any experience in interior design or construction and remodeling knowledge as a potential investor.
Low vacancy – And because Turnkey Properties are move-in ready, you can expect a significantly lower vacancy rate as an investor because potential tenants or buyers can always simply move in at any given time and is always a pleasing advertising pitch. People are more driven to choose what’s most convenient for them after all when it comes to real estate and it also saves you a considerable amount of time and effort as an investor.
Requires minimal experience as an investor – Because you’re acquiring a fully-furnished property for your real estate investment projects, this endeavor requires minimal effort and knowledge to execute. For the most part, you simply need the appropriate amount of funding, arrange for the paperworks and that’s it. The place is now ready to be rented out or be used in various other businesses once acquired.
A great diversification plan – Diversifying your portfolio had always been a must for every entrepreneur and businessman. But through the use of Turnkey Properties, you diversify your portfolio at a greater range – you increase your leverage by type and location.
Makes interstate and remote investments plausible – Turnkey Properties allows potential investors to marginalize opportunities between different locales especially when the housing market and rental rates at a particular locality isn’t faring well or there’s simply high vacancy rates in general. And because Turnkey Properties require minimal care and maintenance, you have the freedom to diversify real estate investments at virtually any given location with the help of remote management and real estate agents.
Long-distance issues – As a real estate investor owning multiple Turnkey Properties scattered across different parts of the country, the management aspects might require more effort and diligence than usual. Usual risks such as structural and electrical damages occurring on normal usage can become challenging to address when you’re currently too far from the property in question.
Tenant quality and trust issues – Some tenants might have the tendency to slack off in terms of caring for the property during their stay or use and this can become a problem when you’re away for longer periods of time due to being busy and the distances (as previously mentioned). On such cases, you must rely on the help of property managers.
Less customizations and flexibility – Since Turnkey Properties already come furnished and equipped with the necessary interior and living fixtures, there’s little to no room for further customizations unless you decide to expend more resources than you should to make any desired changes. You also don’t make the decisions when it comes to the actual building and designing process, hence, no custom layout plans and this might definitely be a factor to you, whether you’re a real estate investor or someone simply looking for a new home.
Requires more resources – Because Turnkey Properties are already built with all the things one might need to call it a ‘home’ and are kept in ‘Premium Conditions’, expect these to be priced at higher rates than normal housing due to the fact that services involved to keep these in such states requires professional services. And as an investor, this could also mean more expenditures and the need to rely more on human resources such as property managers to help you with remote management.
Now that you know the usual pros and cons of Turnkey Properties and understood them, which hopefully helped you weigh in the differences and help you decide whether or not to get yourself one either for your investment or personal use, the next thing you should be planning is securing the appropriate funding for the said property as they’re more expensive than usual housing in general.