Investing in properties that can be rented as vacation homes or permanent housing can be a smart and lucrative way to earn passive income. Owners enjoy a reliable source of monthly income and can quickly start earning a return on their investment. For some real estate investors, the goal is to find the most affordable property and go through home improvement and repair projects on their own. On the other hand, not everyone wants to go through this hassle and would prefer to purchase move-in-ready, turnkey properties. Learn more about this type of real estate investment and whether it may be the right choice for you.
What is a Turnkey Home?
Essentially, a turnkey home is totally move-in-ready. In many cases, the homes have been purchased by a renovation company, refurbished, and put back on the market. This type of house flipping became especially popular during the housing marketing crisis of 2008. Property values plummeted and while this was unfortunate for many who lost their homes to foreclosure, it also flooded the market with older, affordable homes.
Today, the country is facing another housing crisis, but in this case, there is a lack of affordable housing. Rental properties are in high demand and for those who can invest in purchasing rentals, it can be a great way to increase cash flow.
Turnkey Investment Properties
Many people prefer turnkey investment properties because they simply don’t have the time or resources necessary to make repairs and create a marketable home that will attract renters. This approach also means that investors can live anywhere in the country and own properties in other states that are looked after by property management companies. New investors looking to learn more about real estate can buy housing in places where the prices are lower, live wherever they want, and supplement their income.
Another advantage of turnkey investment properties is that they are immediately ready to be rented. There isn’t a delay where you will have to be making mortgage payments, making repairs, and not collecting any rent. As soon as you find a suitable resident, they can move in, and you can be making money. While purchasing a home and making renovations with the goal of reselling it for a profit can be a solid strategy, this approach doesn’t always make sense with the goal being to rent out the property.
While turnkey rental properties are popular among both veteran and rookie real estate investors, they are an especially good choice for those new to the market. You can get your toes wet and learn more about the ins and outs of investing in and managing properties without having to deal with the hassle of renovations or the constant need for repairs that can come with older properties. This helps create a relatively easy owner experience. Once you get some more experience, you may feel more inclined to take on additional risk and responsibility.
Turnkey Vacation Rental
Turnkey vacation rentals are another way to earn income. However, it is important to keep in mind the amount of work that will be necessary to clean and prepare the property for each new renter. There is more opportunity to earn profits, but there will be more work involved. If you want to go this route, you may want to consider hiring a property management company. For a fee, they can handle all the tasks associated with marketing, renting, and cleaning your vacation rental and you can still make a nice profit.
Remember that with this strategy, you will also have less control over the residents. Long-term renters must go through a more extensive application process that can include a background check, credit check, and submitting references and employment information. These precautions help to protect the owner and hopefully identify a resident who will pay rent on time and take good care of the property. With vacation rentals, oftentimes, the only requirement is payment, and you never know who may be staying in your rental property.
Another option when it comes to turnkey properties is to buy land and build the home from scratch. While this will take some work, you will have the opportunity to choose every aspect of the home, from the layout to details like flooring and countertops. This is also a good way to ensure that you won’t have to worry about repairs for some time. With all the new components, it will be years before you have to think about replacing the roof, installing a new water heater, or investing in other typical maintenance and repairs that happen with time.
Turnkey rentals certainly present a lot of clear advantages, but there are also some potential disadvantages you should consider. Perhaps first and foremost, there will be a higher upfront cost. Of course, paying more also means that you won’t have to worry about repairs. Be sure to conduct a careful analysis of your rental property earning potential to help hone in on the properties that will be the most profitable. If you will be working with a property management company, you will be forfeiting some of your profits, but all the work will be completed by professionals, and they are often able to offer highly affordable rates because they work on a larger scale.
Another disadvantage worth considering is that you won’t have a say in the property’s decor. The key is to remember that not everyone has the same taste, and you want to be able to market a property that has more mass appeal. The renter can give the home their personal touch with furniture and decorations. If you are having trouble attracting residents and you think the decor might be part of the problem, something as simple as a new coat of paint in a neutral color may make the difference. You can also decide to allow residents to paint the walls with the caveat that the walls are returned to the original color when they end their lease.
Depending on the markets in your area, you may have limited options when it comes to finding turnkey properties to invest in. Keep in mind that one of the advantages of turnkey investment properties is that they are much easier to manage from a distance with the help of a property management company. You can capitalize on advantageous markets no matter where you reside.
For anyone new to real estate investing, the thought of putting so much money into a single investment can be intimidating. However, turnkey rental properties can lower the risk, require less maintenance and fewer repairs, and offer a profitable and reliable revenue stream. If you are interested in learning more and discovering all advantages of partnering with property management companies, contact Deca Property Management today.