If you want to purchase a home, you’ll likely find yourself perusing real estate listings. If you look at enough of them, odds are you’ll see one described as a turnkey home. But what does that mean?
We’ll explain what turnkey properties are, who they’re a good fit for and the pros and cons of investing in one.
What Does Turnkey Mean in Real Estate?
In real estate, a turnkey property is a move-in ready home. Traditionally, these properties are appealing to investors because they can immediately rent out the property without needing to renovate the home.
Turnkey can also be used to describe a property that’s been recently renovated or one that comes furnished. They’re usually priced higher than fixer-upper homes to account for the work that’s already been done.
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Who Should Consider a Turnkey Property?
If you’re interested in becoming a landlord, purchasing a turnkey home to rent out can be a good way to get started – especially if you don’t want to worry about fixing up a home. However, while investors are drawn to turnkey homes, they can also be a hassle-free transition for people looking to live there themselves.
Here are some groups that generally find turnkey homes appealing:
- Investors: Turnkey homes are ready for tenants as soon as the closing process wraps up. This makes them appealing to real estate investors who want to start making a profit fast.
- First-time landlords: The move-in ready condition of these homes makes them ideal for first-time landlords who want to focus on gaining experience working with tenants without the stress of big renovations.
- Far moves: Relocating across the country involves significantly more change than moving down the road. To minimize the initial stress, many people in these situations opt for turnkey homes.
- People with limited DIY resources: Not everyone is equipped to renovate a home. A lot of work, skill, time and money goes into it. Many people would rather pay more upfront to avoid the renovation process as much as possible.
Turnkey House Pros and Cons
With any potential home purchase, there are upsides and downsides that need to be considered. Here’s a list so you can make the best decision for your situation.
✅Faster timeline
Whether you plan on renting out the home or living there yourself, these homes are move-in ready, so you can put your plan into motion as soon as you finish closing.
✅Less stress
Renovating a home or making major repairs can add a lot of stress to moving in. With a turnkey home, you don’t need to worry about managing contractors or ordering out while your kitchen is out of commission.
✅Budget predictability
Because these homes have already been renovated and are in good condition, there shouldn’t be many large or additional upfront costs. You should be able to predict your costs more accurately compared to undertaking major renovation projects.
⛔More expensive
Because the home is in good condition and has already been renovated, you’ll likely have to pay more for it.
⛔Less personalization
Buyers will have less control over the home’s layout and appearance because the work has already been done.
⛔Risk of poor workmanship
Anyone can describe their listing as turnkey, but it doesn’t ensure that any repairs or renovations were done well. It’s still a good idea to get a turnkey home inspected before moving ahead to closing.
How To Find Turnkey Homes
Turnkey homes can come in different styles, and there are many ways to find them. Here are some of the most popular methods.
- Work with a real estate agent: Real estate agents can be an invaluable resource while house hunting. If you tell them you’re interested in turnkey properties, they should be able to help find viable options for you. They’ll also have access to the multiple listing service (MLS).
- Contact turnkey companies: There are companies that specialize in acquiring and renovating turnkey homes. Search online for both local and national companies operating where you’re interested in purchasing.
- Search online listings: Most major platforms will allow you to filter by property condition or terms like “move-in ready.” They also usually provide the listing agent’s contact information in case you want to tour the property or submit an offer.
Financing Options for Turnkey Homes
Just because these homes are popular with investors doesn’t mean you need a cash offer. Mortgage loans are a common method for purchasing these properties, including:
Each of these loans comes with unique requirements, so make sure to speak with your mortgage lender about your options.
If you plan to finance multiple properties at once, you’ll be limited to loans with higher down payment requirements.
How does a turnkey home work?
Turnkey means the home is move-in ready. Because of this, investors gravitate toward these properties because they can usually get tenants in quickly and start collecting rent. But buyers planning to live in the home can also purchase turnkey properties and move in quickly.
Does turnkey mean furnished?
No. A turnkey home can be furnished, but that isn’t a requirement. Turnkey means move-in ready with regard to the structure and condition of the home.
Are turnkey properties worth it?
It depends on your circumstances. They usually cost more, but you can still potentially turn a profit if you rent it out. And if you plan to live there, the extra cost might be worth avoiding the hassle of renovating the house while you’re living there.
Should you consider a turnkey home for your first home?
They can make great homes for first-time home buyers, but it depends on your personality. Homeowners who don’t possess DIY skills or have the inclination to undertake major renovation projects are attracted to turnkey homes. Busy professionals also find these homes appealing.
Final Thoughts on Turnkey Homes
Turnkey homes can be a great option – whether you plan to live there or want to rent it out. While they come with convenience and less stress, you’ll also pay more and have fewer options for personalization. Take the time to weigh your personal preferences, including your appetite for DIY projects, when considering if the extra cost is worth it for your situation.