Is there benefit to buying turn-key property?

Question

I am a newbie and am wondering if there is any money to be made in buying a property that is in excellent condition and renting it? I keep hearing that the money is made in the buying, and the properties I have in mind are beautiful new town homes that are pretty inexpensive, but wouldn't have the equity that a fixer-upper would have after rehab. There is a new factory coming to the town that I am looking at and it is supposed to bring a lot of new jobs to the area.

James Wise · Answer

Looks like several of you read the title and not much else.

@Donna Salmiery is looking at some local homes to buy that are in nice condition, she is not buying property from a traditional "turnkey" provider. The argument of traditional "turnkey" being a good or bad investment aside, yes Donna I think buying homes in great condition is a good idea.

Many people get caught up in the idea of cashflow and think a small portfolio of homes is going to allow them to quit their jobs and jetset around the world......It won't. Principle paydown is the biggest and most overlooked benefit of owning rental real estate. Buy yourself a nice property and let your tenants pay your mortgage off and create real long term wealth.

Aaron Mazzrillo · Answer

Yes, if you have too much money and not enough drama and stress in your life, a turn-key house will solve all of those issues for you.

You're in W Virginia. I can't imagine you can't find some affordable real estate anywhere in your state, but you should just start looking around your own city. The deals are there to be discovered. You just need to read a lot more posts and learn what to look for.

Bram Spiero · Answer

I agree with @James Wise, assuming you're looking for long term investments.

I can't imagine why principal paydown's are over looked. To me this is the principle thing that is so attractive about RE investing. Assuming you do the due diligence and find a good property that cash flows and you monitor your property manager so that your tenants are happy, pay on time and your home is maintained, your golden.

Not having to fix up the place may mean you can't make the same kind of returns on the equity, on the other hand you also don't have to fix a place up. It's certainly not for everyone.

Be conservative about expenses, repairs, vacancies, etc. If the numbers still make sense, go for it!

Curt Davis · Answer

@Donna Salmiery

I have never heard of EPIC.  I googled and found their site if its the one I think and it seems like they are focused on selling tickets to their events.  If your looking for cash flow you dont need to be involved with programs like that unless I completely missed the point          ( which is possible ).  Whether you go with a TK provider for the total package or find a nice move in ready home on your own, make sure the management you go with is very good especially if its long distance.

Steve Vaughan · Answer

Over the past week the dominant trending discussions were TK marketer fraud and a yawner of a TK deal ROI-wise.  I would view those threads to get perspective on things to look out for and returns to expect. My take is it's more hands-off but with correspondingly less return.  TANSTAFL is still true!

Not a ton of history to evaluate TKs quite yet, but with a quality provider and management team, an option to consider for some nonetheless.

Whatever you do, physically go see the house and the neighborhood!  Do double DD- on the provider and the asset. Cheers!

William Robison · Answer

my perspective on some investment property terminology:

A Turnkey property is typically like a reconditioned car.  Turn the key and go.  It's not necessarily new, but should have been well renovated.  It should have a solid renter in place on a lease.  You close on the sale and cash checks.

Another option in a Hybrid Turnkey property.  This is where you find a provider that sells a property in distressed condition and provides you with the resources to have the property renovated, then leased and managed.  It's a longer process, but done correctly allows the buyer to capture the available equity in the property rather than paying retail.  "Money is made when you buy"

Other options involve finding deals and locating your own renovation resources and self-managing the renovation process.  Knowledge and time are critical with these.

The first can be bought with cash, mortgage, an SD IRA or any of many other options.

The second can use these same options, but also allow for single close FNMArenovation mortgages, called HomeStyle.  These help preserve cash and fund the renovation process.

Adam Stanton · Answer

Appears turnkey means a few things.  @PeterK is absolutely right, if the numbers work you're good.  Like anything else, it's all about the location.  I'd be cautious with a strategy of buying high end town homes as rentals.  Check out some lower income neighborhoods around you and see what those numbers look like.

I don't have time to buy properties in need of repair, fix them and find decent renters so I focus mainly on properties ready to go.  Also, I purchase for cash flow and never expect appreciation.  If it comes, all the better.

Cal C. · Answer

apparently this is a type investment which is rife with fraud so be very wary.  Here are a few ideas.

Find a company with at least a five year history.

Do not invest in low income areas.  (Most landlords avoid those areas for a reason.)

Hire your own house inspector and walk through the house with him/her.

Hire your own appraiser ensure they have no ties to the tk company.  Don't rely on Zillow, the tk company, or an appraiser working for a bank suggested by the tk company.  If an agent is involved make sure they work exclusively for you.

Talk with another investor with the company who has absolutely no other ties with the company other than owning a tk.

Peter K. · Answer

If the numbers work, the numbers work!  Nothing wrong with buying a property that is ready I rent as is.

Steve Vaughan · Answer

Ok - nevermind all I said then.  A turn-key for you. A quality house that has no value-add still applies to my above.  You are buying the seller's work and will pay more for it. In the end a nice house in a nice area will tend to appreciate more, but have lower cash-flow along the way.

Is there benefit to buying turn-key property?

Most Popular Reply