Series: The Basics

What is a Turnkey Rental Property?

Posted on Oct 26, 2020

The roses are perfectly arranged on the kitchen table. A fresh coat spread of paint is spread on the outside of the house and the white shutters. The appliances are sparkling, and the fridge is ready to be stocked by a new, eager renter.

Essentially, what a turnkey rental property is, is a rent-ready property. In most cases, it needs minimal work or no work at all. It may be already rented out to tenants and produce steady cash flow, or it may be ready to get new tenants quickly.

In the past, a turnkey seller was a real estate investor who purchased a property, worked on it to make it appealing, then flipped to a rental investor. These types of regional turnkey resellers can still be found all around the county today. However, some turnkey rental homes are now sold via “sale-by-owner” listing services, corporate companies, or property investing marketplaces. There’s a lot to cover in the wide world of turnkey rentals, so let’s take a look at the details of what is a turnkey rental property and how it all works.

From there, you can decide whether this rental option is the right way to go for you.

Where to Find Turnkey Rentals

There are many turnkey rentals out there, all with their own unique appeal and unique process. Here are some of the most common places you’ll find a turnkey investment property. This is just a handful of the thousands that are out there, but it will give you an idea of how they work.

Roofstock

Roofstock rose to fame in the turnkey rental world because of its simplicity and convenience. It’s not a seller, but instead, a marketplace that connects buyers and sellers. Roofstock certifies each property before they list it and offers a substantial amount of details for potential buyers. On their website, you’ll see things like market rent, tenant payment history, and project returns. You can also see five-year cash flow projections, property appreciation data, and find info about the surrounding neighborhood. With two billion completed transactions, Roofstock is one of the most popular turnkey rental companies out there.

States Where Roofstock Operates:

  • Alabama
  • Arkansas
  • Arizona
  • California
  • Delaware
  • Florida
  • Georgia
  • Illinois
  • Indiana
  • Michigan
  • Minnesota
  • Missouri
  • Mississippi
  • North Carolina
  • New Jersey
  • Nevada
  • Ohio
  • Oklahoma
  • Pennsylvania
  • Tennessee
  • Texas
  • Wisconsin
Regional Turnkey Rental Companies

Many turnkey rental companies operate regionally. Sometimes called “mom and pop” turnkey property sellers, these companies are often started by real estate flippers. Flipping is a real estate investment strategy where a buyer purchases a house, fixes it up and sells it to make a profit. When dealing specifically with a turnkey rental, these companies and investors will flip the house to a long-term rental investor.

Corporate Turnkey Rental Companies

Today, larger real estate companies are investing in turnkey rentals as well. One advantage for the buyer of going this route is that some of these sellers offer seller financing. Howard Hannah is one example of a corporate company offering turnkey rental services. They’re the third-largest real estate company in the U.S. and offer in-house financing, title, escrow, and relocation services. They purchase properties in suburban, urban, and rural areas and are an excellent choice for “Homes of Distinction” (otherwise known as luxury properties).

Advantages of Turnkey Rentals

From convenience to income, there are plenty of benefits to investing in a turnkey property. Here are a few top reasons why real estate investors turn toward this type of rental.

Convenience

When people ask what does turn key rental mean, they’ll often hear the word convenience. A turnkey rental doesn’t require the typical landlord experience, which can feel daunting to some. If you’re an avid real estate market investor, looking to add to your investment portfolio, or if you just want to start with one property, a turnkey rental will save you time and energy. Many turnkey rentals come with property management from the company you purchase from. Though this is an extra fee, in the long run, it allows you to be hands-off while still enjoying the perks (like passive income).

Immediate Income

With any real estate investment, the idea of an immediate income is exciting. What is an extended stay with renters if it’s not bringing in some cash flow, after all. This is one of the main advantages of a turnkey rental, and it’s what initially draws a turnkey investor in. If they’re able to invest in the property and rent it out quickly, they’ll soon have a steady flow of passive income coming in. According to Turnkey Blog, John Banczak, executive chairman of TurnKey Vacation Rentals, says that for every $100,000 you spend to purchase a vacation home, you should target a yearly rental income of $10,000 to $12,000. If you’re buying your turnkey rental strictly as a cash-flow investment, this is an excellent tip to follow.

Investing from Afar

Going the path of a turnkey rental is popular among those who are investing out-of-state. There are many reasons to invest out of state like affordability, lower tax rates, and a stronger demand for rentals. It can also help to diversify your rental property portfolio and allow you to be part of exciting new markets. A turnkey rental eliminates the headache that comes with purchasing from afar, like repairs and fixes. Instead, it offers the freedom to invest as you please.

No Major Repair Work

The term “turnkey rental” signifies that—like magic—you simply turn the key to your new home, and your rental is ready. When answering what is a turnkey rental, it’s good to note that most of these rentals do not need any significant repairs. You may want to select some new furniture to go with the midcentury modern vibe or add a tropical wallpaper decal in the bathroom, But in general, a turnkey rental won’t need any major fixes. This will save you time and energy and allow you to focus on the main task at hand (renting the space out and making an income).

Disadvantages of Turnkey Rentals

Like any real estate investment, turnkey rentals can have their downsides, too. When investing, it’s always a good idea to analyze your opportunity from both sides. Between expenses and flexibility, here are some turnkey rental disadvantages to keep in mind.

More Expensive

One of the disadvantages of a turnkey rental is that it’s often more expensive. This is because you’re purchasing a ready-to-go rental, rather than a property that needs work. You’re also most likely paying for professional property management, which can make your investment bill go up as well. The good news is that a turnkey rental can be more profitable than other types of real estate investments, so in the end, you’ll reap the rewards.

Out of State Investing

Although out-of-stage investing is an advantage, it can also be seen as a disadvantage. When considering property investing, it’s important to do your due diligence and know exactly what’s being offered. This can be tough if you’re purchasing from out-of-state and cannot walk through the property yourself. You have to rely on other people to inspect the property for you, which means you have to find people you trust. There are specific questions to ask when renting an apartment. There are also certain questions to ask before you dive into purchasing your turnkey rental.

Less Flexibility

A turnkey rental often comes with less flexibility for the buyer. In some cases, if you’re not daydreaming of a certain paint hue or have your heart set on white kitchen cabinets, this can be fine. In fact, for the hands off buyer, it can be an advantage. But it’s essential to know before purchase a turnkey rental that there’s often not as much flexibility. If you do want a say in the style of the home, look for a place that requires “minimal work” where you can put the finishing touches on.

Now that you’re more familiar with precisely what is a turnkey rental property, you can decide whether this investment option is a fit for you.

At Zeus, we put our own spin on the turnkey rental. When you sign a revenue-share lease with us, you’ll enjoy hands-off, full-service property management and care without lifting a finger. We design, furnish, and rent your home out for long-term stays, making sure to keep it in top shape.
Whether you’re curious to hear more about what is temporary housing? or how long can you stay at extended stay? (or maybe you just need some tips on how to pack for a long trip) feel free to reach out to our team today. We’re always here for you.

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