{"id":122013,"date":"2020-02-17T12:00:55","date_gmt":"2020-02-17T19:00:55","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=122013"},"modified":"2023-11-06T14:17:51","modified_gmt":"2023-11-06T21:17:51","slug":"6-pros-cons-turnkey-properties","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/6-pros-cons-turnkey-properties","title":{"rendered":"6 Pros &#038; Cons of Investing in Turnkey Properties"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">You\u2019ve likely seen the term \u201cturnkey\u201d used in property listings before, but many wonder if this is just a savvy marketing buzzword or a legitimate selling point. The definition of turnkey can be subjective, but generally speaking, it refers to a fully renovated or move-in ready property that an investor can purchase and immediately <a href=\"\/renewsblog\/2013\/01\/04\/how-to-rent-your-house\/\" target=\"_blank\" rel=\"noopener noreferrer\">rent out to tenants<\/a>. Turnkey properties customarily won\u2019t require any upfront costs to make updates or bring the property up to code.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">How do you know if <a href=\"\/renewsblog\/2015\/12\/15\/turnkey-real-estate\/\" target=\"_blank\" rel=\"noopener noreferrer\">turnkey property investing<\/a> is the right strategy for your portfolio? Weighing the pros and cons of any real estate investment decision is a critical step in determining if you will have a profitable return on your investment.<\/span><\/p>\n<h2>Pros and Cons of Turnkey Properties<\/h2>\n<h3>Pros of Turnkey Property Investing<\/h3>\n<ul>\n<li style=\"font-weight: 400;\"><strong><em>Lower vacancy rates:<\/em><\/strong> <span style=\"font-weight: 400;\">Since turnkey properties are move-in ready, you\u2019ll likely see a return on your investment more quickly because tenants can move in right away and the property can start producing cash flow without requiring upfront funds for renovations and repairs. Some turnkey properties are even occupied by tenants upon sale, making your job even easier. When you do deal with tenant turnover, turnkey properties can be more desirable to potential renters because they typically are updated with more modern features and amenities.\u00a0<\/span><\/li>\n<li><b><em>Diversify your portfolio:<\/em> <span style=\"font-weight: 400;\">Adding a turnkey property to your investment portfolio will allow you to diversify by type and even location. Turnkey properties make it much easier to invest in areas outside of where you live, looking for markets of growth even if your local market is in decline. Diversification across different markets can mitigate the effects of an isolated local downturn.\u00a0<\/span><\/b><\/li>\n<li><b><em>Hands-off investment:<\/em> <span style=\"font-weight: 400;\">Because a turnkey property doesn\u2019t require much (or any) work to get your investment up and running, it is usually a solid \u201cpassive income\u201d investment. All of the parties involved prior to your investment have likely handled the time-consuming processes like inspections, appraisals, and title search and procurement. You can even turn the property over to a management company for a completely hands-off investment.<\/span><\/b><\/li>\n<\/ul>\n<p><strong><em>Related: <\/em><\/strong><em><a href=\"https:\/\/www.biggerpockets.com\/blog\/5-faqs-turnkey-rental-properties\" target=\"_blank\" rel=\"noopener noreferrer\">The Top 5 FAQs About Turnkey Rental Properties \u2014 Answered!<\/a><\/em><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-115732 size-main-slider\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/09\/fourplex-main-702x336.jpg\" alt=\"close up view of upper level windows and roofs on four row homes\" width=\"702\" height=\"336\" title=\"\"><\/p>\n<h3>Cons of Turnkey Property Investing<\/h3>\n<ul>\n<li><b><em>Less personalization:<\/em> <span style=\"font-weight: 400;\">As an investor, you will have less control over appearance, layout, appliances, landscaping, and similar items without incurring additional costs because the property has already been renovated and updated (and therefore reversing the turnkey status). If you plan to live in the home yourself at some point (or have another specific purpose in mind), this may be an issue for you. Vintage, specialized, or other unique homes also might not be included in the turnkey property category.\u00a0<\/span><\/b><\/li>\n<li><b><em>Price:<\/em> <span style=\"font-weight: 400;\">Because turnkey properties are often updated and in premium condition, they will be priced accordingly and in line with market value. This could potentially make a turnkey property a higher initial investment for you, and it will take you longer to realize an increase in overall property market value.\u00a0<\/span><\/b><\/li>\n<li><em><strong>Long distance:<\/strong><\/em> <span style=\"font-weight: 400;\">While the option to invest in markets outside of your local area is helpful to diversify your portfolio, investing in any sort of property long-distance presents its own set of risks. Being away from your investment property requires more effort in terms of <a href=\"\/renewsblog\/due-diligence-ultimate-guide\/\" target=\"_blank\" rel=\"noopener noreferrer\">due diligence<\/a>, both before and after purchase, and often requires the help of other professionals. If there are any unforeseen issues that were not disclosed (structural, electrical, etc.), this can prove to be difficult to manage from far away.<\/span><\/li>\n<\/ul>\n<h2>Who Sells Turnkey Properties and Why?<\/h2>\n<p><span style=\"font-weight: 400;\">Generally, there are two situations where a turnkey property is listed for sale:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">1. The first is <strong>real estate agents or brokers who represent\u2014or even specialize in\u2014the sale of turnkey homes<\/strong> on behalf of property owners. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">2. The second is <strong>investors who purchase fixer-upper, foreclosed, or <a href=\"https:\/\/www.biggerpockets.com\/blog\/ultimate-beginners-guide-real-estate-wholesaling\" target=\"_blank\" rel=\"noopener noreferrer\">wholesale homes<\/a> and perform renovations<\/strong> and repairs to bring the property up to turnkey status. Then, they list it for sale.<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-110157\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/04\/keys-home-mod.jpg\" alt=\"investor-real estate\" width=\"702\" height=\"336\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/04\/keys-home-mod.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/04\/keys-home-mod-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<p><span style=\"font-weight: 400;\">You will likely encounter many different scenarios in your search, and doing your due diligence prior to making an investment will help mitigate your risk.\u00a0<\/span><\/p>\n<p><strong><em>Related: <\/em><\/strong><em><a href=\"https:\/\/www.biggerpockets.com\/blog\/how-to-vet-turnkey-provider\" target=\"_blank\">3 Ways to Vet a Turnkey Provider<\/a><\/em><\/p>\n<h2>Is Turnkey Property Investing Right For You?<\/h2>\n<p><span style=\"font-weight: 400;\">Turnkey property investing is typically part of a long-term investment strategy. Investing in a property that needs work is known as a <a href=\"\/renewsblog\/2014\/01\/07\/flipping-houses\/\" target=\"_blank\" rel=\"noopener noreferrer\">fix and flip<\/a> or a <a href=\"https:\/\/www.biggerpockets.com\/guides\/brrrr-method?itm_source=ibl&amp;itm_medium=related&amp;itm_campaign=guide\" target=\"_blank\">buy, renovate, rent, refinance, and repeat (BRRRR)<\/a> investment and is more commonly used in quick \u201cresell for profit\u201d situations. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Weighing the pros and cons of your investment and educating yourself as much as possible will help you make the right choice when it comes to your next rental property.<\/span><\/p>\n<p><a href=\"https:\/\/www.biggerpockets.com\/store\/rental-property-investing-physical\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-94639\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/12\/rental-property-investing-book-ad.jpg\" alt=\"\" width=\"800\" height=\"130\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/12\/rental-property-investing-book-ad.jpg 800w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/12\/rental-property-investing-book-ad-300x49.jpg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/12\/rental-property-investing-book-ad-768x125.jpg 768w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/><\/a><\/p>\n<p><em>What other questions do you have about turnkey investing?<\/em><\/p>\n<p><strong>Ask in the comment section below!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>How do you know if turnkey property investing is the right strategy for your portfolio? Weighing the pros and cons of any real estate investment decision is a critical step in determining if you will have a profitable return on your investment. Here&#8217;s what you need to know.<\/p>\n","protected":false},"author":132929,"featured_media":114641,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7363],"tags":[],"class_list":["post-122013","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-reits-passive-investing"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/122013","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/132929"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=122013"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/122013\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/114641"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=122013"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=122013"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=122013"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}