Buying Turnkey/furnished STR vs creating one from the ground up

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Buying Turnkey/furnished STR vs creating one from the ground up

Rental Property Investor · Minneapolis, MN · Member since 2023 · 6 posts · 0 votes

Looking for thoughts/experiences on if it makes sense from a long term wealth building perspective to purchase a turnkey/ready to go Airbnb or other STR vs creating one from scratch. Thinking of doing this from afar/remotely. It is very tempting when I consider the time/cost involved with rehabbing a property and furnishing it, vs buying one that already is doing well (with good data on occupancy rates and expected income) and hopefully picking up from there.

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Leslie Anne Morris

Real Estate Agent · Smoky Mountains, TN · Member since 2022 · 1k+ posts · 984 votes

I prefer turnkey. You’re right. It cuts down on the time to get to cash flow.

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Paul Erickson
Realtor · St Paul, MN · Member since 2022 · 20 posts · 15 votes
3y
Depending on the market you are looking to get into, there may ne some great turnkey options however I have seen much better results from buying Single family homes not marketed as STR and then setting then up. The home itself isn't what makes a STR profitable. It is the marketing, pricing strategy, the ability to over deliver to your customers, capture positive reviews, prevent negative feedback, etc. So trying to take over an existing VRBO or AirBNB property could have results different than what you may expect, as your strategies and effort may differ from the previous owner/investor
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Michael BaumPro Member
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
3y
So that all depends on the place and area @Dana Thilges. If you are buying a currently running STR that is fully ready to go, that can be a bonus if it is already performing well.
The flip is you might buy something that needs a bunch of sprucing up and that requires you to toss a bunch of stuff and replace it which adds to your setup cost.
It is a fine line to walk. I will say that every furnished place we have looked at needed some major updates to bring it up to our 5 star standard. I don't mean fancy stuff, but consistent design and the like.
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Leslie Anne Morris
Real Estate Agent · Smoky Mountains, TN · Member since 2022 · 1k+ posts · 984 votes
3y
I prefer turnkey. You’re right. It cuts down on the time to get to cash flow.
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John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
3y
Something in the middle would be ideal.
New construction is expensive, stressful and time consuming.
Get something not turnkey that you can make a STR. That's is how we did our Lake house.
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Dana Thilges
OP
Rental Property Investor · Minneapolis, MN · Member since 2023 · 6 posts · 0 votes
3y
@Leslie Anne Morris My concern with buying turnkey is the lost opportunity for increasing equity (and of course wouldn't be able to do BRRR method and get that cash back out). But if there is something with high enough cash flow potential, sounds like you think it's worth it?
On another note, any advice on best way to find turnkey places? I've perused a few websites, just curious if anyone has had good experience with one vs another...or of there is another way!
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Leslie Anne Morris
Real Estate Agent · Smoky Mountains, TN · Member since 2022 · 1k+ posts · 984 votes
3y
Quote from @Dana Thilges:

@Leslie Anne Morris My concern with buying turnkey is the lost opportunity for increasing equity (and of course wouldn't be able to do BRRR method and get that cash back out). But if there is something with high enough cash flow potential, sounds like you think it's worth it?
On another note, any advice on best way to find turnkey places? I've perused a few websites, just curious if anyone has had good experience with one vs another...or of there is another way!
Depends on the market. My market is mostly all turnkey. Some still can use work. I’ve done rehab on turnkey properties and forced appreciation. Look at existing vacation homes. Or vacation markets in general.
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Brooklyn McCarty
Investor · Member since 2022 · 1k+ posts · 754 votes
3y
Turn key should be used loosely. Because my turn key might be different from your turn key.
But yes, “turn key” is easier tk buy remotely. Typically a few personal touches and maybe a few minor upgrades and you’re ready to roll
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Andrew SteffensBusiness Member
Tampa, FL · Member since 2022 · 4k+ posts · 3k+ votes
3y
There is little to no premium for fully turnkey no matter how much sellers try to achieve that. Especially if using financing the bank will only loan on appraised value. Furniture will not count toward appraised value, although sometimes you can work it in creatively. You will likely not have any equity with this strategy but you will have an asset that can cashflow nearly from Day 1. The strategy for equity is to buy a fixer upper, remodel, furnish/set up, then rent. This is time consuming but that is how to force appreciate into an equity position, and you will be paying the mortgage the whole time not to mention all the other costs out of pocket until the refinance. This is a lot if you are not local. Most of my clients are out of state and prefer turnkey. Over time you will build equity using OPM.
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Michael BaumPro Member
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
3y
Exactly what @Brooklyn McCarty said. Turnkey to me means it is ready to go with some updates needed to furnishings etc but no new decks, roofs etc.
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