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Are Turnkey Rental Properties A Smart Investment?

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Have you ever dreamed of owning rental property but felt too overwhelmed to actually make it happen? Most prospective investors have been there. When first considering real estate investing, the idea of buying rental properties for passive income can seem very intriguing. But between finding promising properties, securing financing, overseeing renovations, and learning how to screen tenants, the whole process can appear utterly daunting. And then, there’s the added risk of losing money due to poor choices.

Finding the time to do the research and preparation you need to invest in real estate can seem impossible. You have a full-time job and family obligations already occupying your time. That dream of earning rental income may seem out of reach. But here’s the thing – your goal of becoming a landlord doesn’t have to be so difficult. There’s an easier way, and it’s called turnkey real estate investing.

A smart real estate investment is one that delivers strong returns with reduced risk. Turnkey rental properties are an ideal option for busy people who want to own a cash-flowing investment property without headaches. A turnkey company handles everything from property selection to renovations, so all you have to do is collect rent checks. It’s that simple.

But is this “easy button” approach to real estate investing really a smart move? Or does taking shortcuts come with big risks?

If you’ve been curious about turnkey real estate investing but aren’t sure where to start, this guide will walk you through the basics to find out if turnkey rental properties could be a smart choice for you.

What is a Turnkey Rental Property Investment?

If you want to collect rental income without ever swinging a hammer or dealing with tenants, then, turnkey rental properties can make this a reality.

But what exactly is a turnkey rental property?

A turnkey rental property investment is a fully renovated and tenant-ready investment property that a real estate company has already prepared for an investor to purchase. The “turnkey” term refers to the fact that the property is ready to operate with little effort from the new owner. Either before or after purchase, the turnkey provider sources a quality tenant and provides an easy option for property management.

The investor purchases a property that is actively generating rental income without having to do any of the legwork of finding, financing, or fixing up the property themselves. Turnkey rentals are meant to make the landlord experience completely passive for investors who want hands-off real estate investments. Instead of spending weekends renovating, landlords can spend time enjoying their rental income.

In short, a turnkey rental property provides instant ownership of an updated, occupied rental unit that begins generating cash flow for the investor immediately. It allows busy people to reap the benefits of rental real estate without the typical headaches.

The Two Types of Companies with Turnkey Properties

When considering turnkey real estate investments, it’s important to understand that not all turnkey companies operate the same way. There are two primary models turnkey providers use to source their rental properties.

There are two main types of companies that provide turnkey rental properties to investors:

  1. Distressed Property Renovators
    Turnkey companies that buy and renovate existing properties. This model involves acquiring undervalued or distressed properties, renovating them, and then selling them to investors as turnkey rentals.
  2. New Construction Turnkey Developers
    Turnkey companies that develop new construction build new properties from the ground up specifically to sell to investors as turnkey rentals.

 Both approaches can deliver quality investment properties. The model a company uses often depends on the real estate market conditions where it operates. 

In markets with an ample inventory of older housing stock selling at a discount, like Toledo, buying and renovating existing properties makes the most sense. It’s more sustainable to upgrade existing homes rather than build new ones. Renovating also helps improve aged, deteriorating housing stock in a community. 

Here at Ohio Cashflow, we focus on finding diamonds in the rough – older properties with good bones in viable neighborhoods. We then transform these properties through thoughtful renovations suited for the rental market.

Upgrading existing homes to modern standards provides a win-win – investors get quality turnkey rentals, and communities get improved housing.

Investing In Turnkey Rental Properties

Turnkey rental properties offer an appealing, hands-off approach to real estate investing. But how exactly does one go about investing in a turnkey rental property? Here’s an overview of the process:

  1. Research turnkey providers.
    As a company in this space, we suggest looking for established turnkey providers with a proven track record and happy investors. Vet companies thoroughly. Your investment success hinges on their ability to deliver on returns and ethical business conduct.
  2. Evaluate property options.
    A turnkey provider should provide detailed information on each property, including location, purchase price, projected rents, expenses, and predicted cash flow. While you should use the information provided, you should also perform your own due diligence. Look at comparable properties and rental rates.
  3. Purchase the property
    Once you have completed your research and are confident in your investment decision, it’s time to make your purchase.
  4. Turnkey property management.
    A turnkey provider will give you the option to sign up with their property management service, or you can take it on yourself. At Ohio Cashflow, we have established an in-house property management company to ensure our investors receive the best service throughout the life of their investment. Our partner company, Oz Realty, handles all property management needs like leasing, maintenance, and rent collection.
  5. Collect returns.
    The goal of turnkey investing is to be an entirely passive investor. With the property fully managed, investors can relax and collect their rental income.

The Ohio Cashflow Turnkey Investing Process

At Ohio Cashflow, we recognize that the process of investing in turnkey real estate can seem daunting, especially if you are an out-of-state investor unfamiliar with our local Toledo market. There’s a lot of trust placed in the turnkey developer and you’re investing in an unknown market. That’s why we have streamlined and perfected our system to make turnkey investing simple for our clients.

Here’s a step-by-step look at our process for your turnkey property investment:

Step One: Our acquisition team thoroughly vets neighborhoods and properties to locate suitable investment opportunities that meet our strict criteria. We look for B-Class properties with strong rental demand and cash flow potential.

Step Two: We purchase the selected property ourselves using our own capital. This allows us to secure the deal quickly and get started on renovations.

Step Three: The property undergoes our comprehensive renovation process to transform it into a tenant-ready rental. Our project managers oversee experienced contractors to ensure a high-quality rehab.

Step Four: Our leasing team markets the property and carefully screens tenant applications to find the right tenant. We handle all showings and lease paperwork.

Step Five: Once the property has been purchased, renovated, and leased, the investor can purchase the turnkey rental property.

Step Six: Our property management team then handles all ongoing management, from collecting rent to maintenance.

Step Seven: You get to sit back, relax, and receive your monthly rental income check without any of the landlord hassles.

When working with Ohio Cashflow, you get access to our local expertise. We have been buying, renovating, leasing, and investing in Toledo for ever a decade. Our business is a part of the community, and we are here to be your local guide. Our hands-on experience has led to us becoming Toledo’s trusted turnkey provider.

Turnkey Property Investment Benefits

Turnkey rental properties have exploded in popularity among real estate investors, and for good reason. These fully renovated rentals offer an easy entry point into property investment that minimizes the traditional headaches and risks. Turnkey providers source, renovate, and manage the rentals so investors simply collect passive income. The hands-off convenience of turnkey is unmatched.

But it’s not just about avoiding hassles. Turnkey rentals provide compelling financial benefits as well. Here are the top five advantages that make investing in turnkey properties a smart real estate investment strategy.

Investment Guidance and Confidence

Investing in rental properties far from where you live can seem scary. However, experts can help provide the guidance you need beyond the information you get using online tools. Although buying a property you haven’t seen in person is risky, you can lower that risk and manage rentals smoothly from afar. The combination of boots on the ground and digital tools allows investors to build a portfolio of out-of-state rentals.

Turnkey companies provide the expert guidance investors need to confidently buy profitable rental properties in new markets, even if they lack local expertise. The turnkey provider’s knowledge of the area takes the guesswork out of investing.

Reduced Risk

Since turnkey properties come fully renovated and repaired by the provider, investors don’t need to have the knowledge or expertise if renovating rental properties. Profitable renovations require a knowledge of material and labor costs, as well as relationships with experienced and ethical contractors. Working with a turnkey real estate developer helps you avoid the risk and surprise costs of repairs or renovations.

Save Time & Money

Turnkey rentals eliminate the hassles of finding, purchasing, renovating, and renting a property. Finding investment properties requires time and financial analysis experience. Instead of hunting down and comparing deals, investors are offered investment options that meet their criteria from the start. Investing in turnkey properties allows investors to avoid wasted time and simplifies the investment process.

Immediate Cashflow

With a tenant already placed, turnkey properties begin generating rental income for the investor immediately or shortly after purchase. That means you’re not stuck with a property and it’s expenses for months before finding a tenant..

Convenience

Turnkey rentals make investing in out-of-state or unfamiliar rental markets convenient for busy investors. The turnkey provider handles all the heavy lifting, from due diligence to property management.

By providing fully renovated, occupied rentals, turnkey investments take the stress out of real estate investing. Investors gain the benefits of rental property ownership without the typical headaches.

Are There Downsides to Turnkey Real Estate Investing?

While turnkey real estate investing offers many advantages, there are some potential downsides that investors should be aware of. Doing your due diligence is key to avoiding pitfalls. Let’s explore a few of the possible negatives to keep in mind.

You Don’t Get to Manage the Renovations

When you purchase a turnkey rental property, you hand over decisions about the renovation design and materials to the turnkey provider. As the investor, you don’t have control over the upgrade process. However, you should be able to trust the turnkey provider to make strategic and effective decisions. This requires finding a reputable turnkey company that you can trust to make smart renovation decisions suited for investment properties, not leave you with more work or over improve the property. 

The turnkey operator should understand how to update the property in ways that meet tenant needs and maximize returns for the owner. They aren’t renovating the property for themselves to live in, so the materials and finishes should be durable and cost-effective. Working with an experienced turnkey provider is key to ensuring you get a quality rental renovation without excess upgrades.

You Need a Property Management Company You Can Trust

Ongoing property management is a crucial piece of the turnkey investing puzzle. Most turnkey providers partner with third-party management companies to handle leasing, maintenance, and other operational aspects after selling the renovated rental. This separation can be risky if the management firm they recommend is subpar. 

As the investor, you are heavily reliant on the property manager to safeguard your assets. The ideal scenario is to work with a turnkey company that has expert in-house management to ensure consistent quality service. Beware of turnkey providers who wash their hands of the process after the sale – they don’t care about the long-term success of your investment. If you get referred to a third-party property management company, make sure you thoroughly vet them before buying a turnkey rental.

You’re Going to Pay More

By their very nature, turnkey rental properties come at a higher price point than what an investor could achieve if they bought, renovated, and rented the property themself. You pay for the convenience of the model and the expertise of the team.

Since the properties are fully updated, repaired, rented, and managed, turnkey rentals require less time, effort, and oversight from the investor. There is great value in having an experienced turnkey team handle everything from sourcing properties to placing tenants. But that added confidence and simplicity carries a cost. If you buy directly from a wholesaler and do a full renovation and lease yourself, you likely can acquire it cheaper, but it will cost you a lot of time.

Is turnkey real estate worth it? How much is your time worth? With turnkey, you pay extra for the experience and expertise baked into the product. However, higher upfront costs can yield better long-term returns if investors partner with the right turnkey provider.

You Could Work with a Bad Turnkey Provider

Like any industry, the turnkey space is riddled with subpar operators. If you aren’t diligent in vetting potential turnkey companies, you could end up working with one that sells overpriced or poor-quality rental properties. Extensive due diligence is imperative before choosing a turnkey partner. Research them thoroughly, read reviews from past clients, and ask for references you can contact. As with any substantial investment, you want to confirm you’re working with a reputable, experienced turnkey provider with a proven track record. A disreputable operator could leave you with a bad investment. Do your homework upfront. 

While turnkey real estate investing can simplify the road to rental property ownership, it does come with some potential hazards. However, being an informed investor who does sufficient due diligence can help avoid any pitfalls.

Are You Ready to Buy a Turnkey Property?

Turnkey real estate investing offers an easy entrance into rental property ownership, alleviating many traditional landlord headaches. With an experienced turnkey provider handling the heavy lifting, investors can passively collect returns.

However, proper due diligence in selecting your turnkey partner is crucial. Not all companies operate to the same standards. You want to work with a reputable provider with a proven track record that extends beyond a single property cycle.

If you’re ready to start generating passive income from turnkey rental properties, the team at Ohio Cashflow can help. As an industry-leading turnkey company based in Toledo, Ohio, we have perfected the turnkey rental model to maximize returns for our investors.

Our expert acquisition, renovation, leasing, and management services simplify long-distance investing so you can benefit from hands-off income. We personally manage every step.

Contact us today to learn more and take the first step toward turnkey property investment success!

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About the author

Picture of Kelsey Heath
Kelsey Heath is a real estate content specialist with an extensive background in residential, industrial, and commercial property. She has been involved in the industry for a decade as a professional and personal investor, gaining a deep understanding of the market and trends. With a passion for written communication, Kelsey loves helping people understand the sometimes-complicated concepts behind real estate and is now a sought-out guest and ghostwriter.