Turnkey Property Rental (Everything You Need To Know)

Oct 1, 2022 | Short Term Rentals | 0 comments

Turnkey property rental are a new investment trend in real estate that has emerged over the last few years. They have become more popular with people as they don’t require much time or effort to find, buy, manage, and maintain the property. 

Instead, turnkey rentals allow you to rent out a house, apartment, condo, or any other property you own without having to do all those things yourself. 

Generally speaking, if you are interested in investing in turnkey vacation rentals or turnkey rentals, read on further.

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What Are Turnkey Property Rentals?

Many people invest in turnkey vacation rentals, but what are they exactly?

Turnkey are properties renovated by companies into fully functioning homes ready to rent out or move into immediately. 

Therefore, combining that with ‘vacation rentals’  leads to a definition of properties that are professionally designed, renovated, and turned into vacation homes that are fully functioning and can be rented out immediately.

… properties that are professionally designed, renovated, and turned into vacation homes that are fully functioning and can be rented out immediately.

Who Owns Turnkey Property Rentals?

Most vacation rentals are owned by investors or people who want to earn a simple income stream without doing any work or time required to take care of a vacation home. Most of the time, they are managed by a property manager that will handle everything.

How Do Turnkey Property Work?

Flip

First is flip which means that a turnkey company specializing in restoring or flipping older or damaged properties. Investing companies look for houses or apartments under market value usually called fixers.

The company pays for all the labor, raw materials, and other expenses to repair and update the property.

Invest

Soon after being updated, it will enter its second stage, investment.

The turnkey company will look for an investor (individual, a trust, or a company) that will buy the flipped property to increase their property portfolio. 

Rent

Eventually the investor, with the help of the company, find tenants to rent their newly purchased property.

In fact, turnkey companies can even provide property management services to investors.

Professional property managers can handle repairs, tenant relations, and rent collection. While investors can walk away with a profit without being responsible for many of the typical things that go along with being a property manager or landlord.

The tenants can “turn a key” and begin living in the property.

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Is A Turnkey Property A Good Fit For You?

Here is a breakdown of who should invest in turnkey properties.

  • Interested in running a rental business  but not handling maintenance issues or renovations.
  • Busy or have a full-time primary job that does not have time to manage properties.
  • Do not have the proper experience and knowledge in repairing houses.
  • Want to earn a consistent passive income not having the responsibilities of a property manager.
  • Interested in investing in a new market with limited knowledge of the market, market trends, contractors, rental landscape, and neighborhood.
  • Do not want to invest in the market for an extended period or have limited budget to buy more properties.

Turnkey Property Investment Perks

Faster ROI

An advantage of buying a turnkey property is that you can start operating and renting it out immediately, generating passive income.

Investors can earn a return on their investment in a short period.

Remote Investments

Turnkey investments allow for remote real estate investing. Investors are not confined to buying a property in one area alone.

These properties are ideal and low maintenance that don’t need in-person upkeep in contrast to vacation homes.

Hands-Off Property Management

Investors, that don’t have experience with property management skills, usually delegate their properties to companies.

These tasks include:

  • Rental management
  • Operational tasks
  • Tenant Management
  • Construction and repair

Professional Management

Most turnkey vacation properties, are managed and maintained by a property management company.

These property management companies have certified and trained staff that guarantees low vacancy rates and rental profit.

Lower Expenses

Most experienced turnkey companies usually have an extensive portfolio and committed teams that ensure the correct renovation process. Having a good turnkey company entails fewer maintenance issues or repairs on your property. Therefore, these properties are considered a vital source of income in their first several years.

Turnkey Property Investment Downsides

Higher Purchase Price

Typically turnkey properties have a higher price than properties that need renovation, as prices already include all costs.

Many investors usually like to buy fixer and rehab properties themselves.

Associated Risks

Real estate investments can be risky, and turnkey rentals are no exception with risks such as property tax increase, reduced property value, bad tenants renting, and property damage.

Investing in remote turnkey properties is much riskier for you if properties are not delivered as promised.

Lower Return

Although hiring a property management service gives you more freedom and guidance, these services charge a high rate that can cut a significant amount of the profit you can receive.

Less Control

If you rely on services from turnkey companies or property managers, you won’t be able to gain any experience or knowledge of the market in which you are investing.

As a result, less control over your property and how it is handled.

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How To Invest In Turnkey Property

Now that you know if investing in a turnkey property is the right fit for you, here are the steps you need to take to ensure that you are on the right path.

1. Find A Market

First thing you would like to do is find areas or city that are considered landlord friendly and contain affordable properties that will yield a positive cash flow. Doing the proper research in finding a market will be vital to your turnkey property’s profit. 

Factors to look out for in your market research:

  • Employment rates
  • Population growth
  • Income levels
  • Rent and housing prices
  • Business diversification

To summarize, it is better to find a turnkey property in a growing market. .

2. Choose An Investment Company

Second thing that you would need to do is to find an investment company. Finding a good and trustworthy investment company will save you from having trouble later on.

Research and evaluate all the companies you think are a good fit for you. Look for red flags such as subpar renovations, lack of experience, and rejecting property inspections.

Here are some characteristics that a good investment company must have:

  • Transparency
  • Certification
  • Experience
  • High success rate
  • Good Reputation

3. Pick A Property

Finally it is a good idea to travel and meet turnkey real estate agents. It is better to have first-hand experience with how your investment company works and how property management operates.

Building a relationship and mutual trust between you, your investment company, and the property manager is better.

Having good relations will benefit you when you plan to invest in more turnkey properties. Once they know your preferences, it is much easier to look through their presented portfolio and pick a property you want.

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