Turnkey Properties is the ROI worth it?

[Ivan Guillen]

Being a local broker in Indianapolis, I often get asked by clients to search for turnkey properties. I want to start by saying that turnkey can actually be an excellent vehicle for the investor that doesn't have much time on their hands to take on a big project. What I see far too often is low returns on properties like this. This leads investors to either try to go in way too low with an offer in attempt save their cash, or they end up overpaying because the demand is so high, and this further diminishes their ROI.

Like I said there is nothing wrong with buying turnkey, but if my client has a contractor and property manager they trust then I would strongly suggest they go with something where they can add value. In my opinion, turnkey properties are not deals. For someone to acquire something that is considered a "deal," there has to be a problem. Usually once that problem is solved the investor is compensated. Turnkey means that someone has updated the property so issues are almost inexistent. This does not let an investor take on a problem, and due to that the seller receives the majority of the upside. 

Here is my suggestion, build a competent team consisting of a broker, PM, and contractor. Find a property where you can add some value (big or small), and fix the problems that the property has. If this is too time intensive, then turnkey could be your best option. As investors we pick what problems we want to tackle, and if the compensation will be worth our efforts. Do your due diligence and find out what problems you are willing to take on to see a higher ROI.

Would love to hear about your experiences with turnkey properties and what markets you have bought in!