Are you looking to invest in real estate with minimal effort? Perhaps you’re an out-of-town landlord or want something simple for your first investment. Turnkey rental properties might be the perfect investment for you! Today, we explore how to buy a turnkey rental property, the pros and cons, and whether or not it’s a good investment.
Contents of This Article:
- What Are Turnkey Rental Properties?
- How to Purchase a Turnkey Rental Property
- Pros and Cons of Investing in Turnkey Rental Properties
- Are Turnkey Rental Properties a Good Investment?
- Trust the Professionals to Manage Your Property
What Are Turnkey Rental Properties?
Turnkey rental properties are ready-to-rent properties you can buy and immediately rent out to someone. In other words, they require no work before being ready to rent–they’re already in excellent condition. This is generally because the property has recently been renovated or repaired.
This investment type is popular for some investors since they’re extremely low maintenance and generally managed by professional companies. In turn, this allows owners to enjoy passive income while leaving the day-to-day operations to Northern Virginia property managers.
Additionally, since they’re generally sold by companies that specialize in turnkey properties, they’re great for investors looking to expand their portfolios with ease. However, it’s important to note that these properties are typically more expensive than other rentals. Before we go over all the pros and cons, let’s review the steps to purchase a turnkey rental property.
How to Purchase a Turkey Rental Property
Purchasing a turnkey rental property is relatively straightforward. However, don’t skip out on doing your due diligence. You’ll want to thoroughly evaluate the property and its management to ensure a profitable investment. Here are some of the steps to take if you’re looking to purchase a turnkey rental property.
- Research Rental Markets
- Find a Property
- Conduct a Thorough Inspection
- Finance Your Investment
- Find a Management Company
Research Rental Markets
Before buying a property, you’ll want to research different rental markets. Find an area with high rental demand, low vacancy rates, and stable economic conditions. Researching beforehand helps ensure you choose a location where your investment can earn consistent rental income and also benefit from appreciation.
Find a Property
Once you’ve found a good market, start looking for a property. It’s important to look at properties from trusted turnkey providers or find a real estate agent who’s familiar with this investment type. That said, the best turnkey properties are those that have been fully renovated and are move-in ready. Sometimes, turnkey rental properties are sold with tenants already in place, so you can start collecting rental income immediately.
Conduct a Thorough Inspection
Although turnkey rental properties are marketed as “ready-to-rent”, you still shouldn’t skip an inspection. You’ll want to hire a professional inspector to assess the property’s condition, looking for any pressing issues that may require future repairs. It’s crucial to inspect all areas, including the foundation, plumbing, electrical, and HVAC systems–this can save you from unexpected maintenance costs later on.
Finance Your Investment
Once you’ve found the right property and it passes a thorough inspection, decide how you’ll finance it. Whether you use a conventional mortgage or financing provided by a turnkey company, it’s important to have a plan. If you plan to get a mortgage, compare rates and terms from different lenders.
Find a Management Company
Some turnkey rental properties include property management services. However, if yours doesn’t, it’s important to find a reputable property management company to work with. Remember, property managers handle the day-to-day operations, like tenant screening, rent collection, and maintenance requests, so it’s important to have a team that’s reliable, experienced, and reasonably priced.
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Pros and Cons of Investing in Turnkey Rental Properties
Turnkey rental properties can be a good investment for those looking to start renting right away and make a profit quickly. However, while there are plenty of pros, there are a few challenges to consider. Here’s what you need to know about the pros and cons of turnkey rental properties.
Benefits of Turnkey Rental Properties
- Immediate Rental Income- Turnkey rentals are usually ready to rent from day one, and some come with tenants already in place. This allows investors to start earning income right away.
- Minimal Effort for Investors– Investors don’t have to do much with turnkey properties, especially if a tenant and property management is already in place. Generally, the property management team handles vacancies, rent collection, maintenance, and more, making it a more passive investment.
- Diversity Your Portfolio– Turnkey rentals help investors diversify their portfolios, allowing them to invest in markets outside their local areas.
Challenges of Turnkey Rental Properties
- Higher Initial Cost- Since turnkey properties are move-in ready, they’re typically more expensive than properties that may need renovations.
- Dependence on Property Management- The success of a turnkey property relies heavily on the quality of property management. A poor property management team could result in an unsuccessful investment property.
- Less Flexibility With Tenants– Since some turnkey properties have tenants already in place, you may have to abide by their existing lease agreements. In turn, this can limit your ability to adjust rental rates or change lease terms, limiting your control over the property.
Are Turnkey Rental Properties a Good Investment?
If you’re an investor looking to expand your rental portfolio and make passive income, turnkey rental properties may be a good fit for you. It’s also a great option for those looking to buy properties in different locations without being physically there to manage them.
On the other hand, if you don’t want to rely on a management team and would prefer to manage the property yourself, you may want to take a more traditional approach. Or, if you’re looking for an investment project, like a fixer-upper, a turnkey property isn’t for you.
Ultimately, turnkey rental properties can be a great option for a convenient, stable, and passive investment experience. However, it’s crucial to research thoroughly, especially the property management team, to ensure your investment stays aligned with your financial goals.
Trust the Professionals to Manage Your Property
Whether you’re investing in a turnkey rental property or a fixer-upper, you’ll want to consider how you’ll manage it. How will you find tenants, perform maintenance, and collect payments for each of your rentals? Hiring a professional property management company can save you the time and money you’d spend performing all the day-to-day tasks of owning rental properties.
Bay Property Management Group offers comprehensive rental management throughout Baltimore, Philadelphia, Northern Virginia, and Washington, DC. So, if you need help managing your properties, contact BMG today to learn more about how we can help your rental business succeed!
