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Turnkey Property



Definition

A ‘Turnkey Property’ is a fully renovated home or apartment ready for immediate rental or occupancy, often purchased from a company that specializes in the restoration. The term ‘turnkey’ implies that the new owner will only need to turn the key and enter to start living or renting out the property. These properties are especially attractive to investors who want to rent or sell the property right away without doing any renovation work.

Phonetic

The phonetic spelling of “Turnkey Property” is: /ˈtərnˌkē ˈprɑːpərti/

Key Takeaways

  1. Turnkey Property is Hassle-free: Turnkey properties come ready to rent, which makes them ideal for investors who want a simpler way to acquire rental properties. They’re fully renovated, furnished, and, in some cases, already have tenants in place.
  2. Professional Management: Many Turnkey properties include professional, property management, meaning the landlord responsibilities such as finding and vetting tenants, regular maintenance, and addressing tenant concerns are handled for you, allowing you to focus on your investment strategy.
  3. Instant Cash Flow: Another essential feature of turnkey property is the immediate cash flow. Since these properties are already rented or ready to rent, the investor can start earning rental income as soon as the deal is finalized.

Importance

A turnkey property is an important concept in the business and finance field, especially in real estate investment. This term refers to a property that is fully renovated, equipped, and ready for immediate occupancy upon purchase. It is important because it provides an efficient and hassle-free solution for investors and homebuyers, eliminating the time, effort, and additional costs typically needed for repairs or improvements. For investors, particularly in the rental business, it allows them to generate income almost immediately since the property can be rented out as soon as it’s purchased. The convenience and speed offered by turnkey properties can therefore contribute significantly to a faster return on investment.

Explanation

A turnkey property serves an important purpose in the real estate sector, specifically catering to investors looking for relatively hassle-free opportunities. Its primary function is to facilitate an easy entry into real estate investment for those who may lack time or expertise to undertake property renovation. As a fully renovated property that is ready to rent out immediately after purchase, a turnkey property eliminates the need for the investor to get involved in the demanding process of rehabilitating or managing the property.Furthermore, turnkey properties are widely used as a method of generating passive income. Investors can buy these properties and then rent them out, thus creating a steady flow of income. They are also popular among individuals looking for diversification in their investment portfolios. Because these properties are often sold by companies that also offer property management services, the investor can take advantage of a hands-off investment while the company takes care of maintenance, tenant issues, and rent collection, further easing the investment process.

Examples

1. Residential Homes: Developers purchase a block of land and build homes on it. These homes are fully functional and equipped with all necessary facilities like interiors, appliances, and a landscaped garden, ready for homeowners to move in, acting as a turnkey property. This is common in suburban developments.2. Commercial Real Estate: An investor purchases an old office building, renovates it, and leases it to a company. The company can move into the building and start its operations right away without any further modifications. The investor provides a ‘ready-to-operate’ property, thus acting as a turnkey provider.3. Franchise Businesses: Many franchisors offer a turnkey package to their franchisees. This means they will select the location, build the store or restaurant, supply the equipment, and even train the staff. The franchisee can come in and start operating the business immediately. McDonald’s, for example, offers a turnkey solution for entrepreneurs looking to open a franchise, making it a real-world example of a turnkey property.

Frequently Asked Questions(FAQ)

What is a turnkey property?

A turnkey property is a fully renovated home or apartment building that an investor can purchase and immediately rent out. The term turnkey implies that the owner would only need to turn the key to open the door to begin operations.

Who typically invests in turnkey property?

These properties are typically sought after by investors who want to avoid the drawbacks and effort associated with buying a property that needs renovation. They are also preferred by individuals who wish to invest in real estate but live too far away to manage and maintain a property.

Are turnkey properties more expensive than other real estate investments?

Not necessarily. While turnkey properties can sometimes be pricier due to their ready-to-rent condition, investors should also factor in the amount they would have potentially spent on renovations and upgrades.

What are the potential risks of investing in a turnkey property?

Some potential risks for investors include overpaying for the property, not fully understanding the rental market in the location of the property, or dealing with unreliable turnkey companies that may not have done the promised quality renovations.

Can I get financing for a turnkey property?

Yes, you can absolutely get financing for a turnkey property. Many investors purchase turnkey rentals with a conventional mortgage loan.

What is the role of a turnkey provider?

A turnkey provider locates, buys, renovates, and manages a property on behalf of an investor. They essentially handle all the work involved with the property, allowing the investor to collect rental income with minimal effort.

Does the turnkey property investment require property management?

Since turnkey properties are usually handled by turnkey providers, they come with property management services. This means that the day-to-day responsibilities of managing a rental property will be handled by these professionals.

Related Finance Terms

  • Real Estate Investment
  • Property Management
  • Buy-to-let Properties
  • Rental Income
  • Renovation Costs

Sources for More Information


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