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The Ultimate Guide to Buying Turnkey Rental Properties

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Building a rental real estate portfolio can set you up for long-term wealth. But starting your own portfolio from scratch involves major work and due diligence.

Finding promising properties, renovating them, screening tenants, handling maintenance – it’s a ton of work. There’s always the fear and risk of making a mistake or buying a bad investment.

Plus, as appealing as rental income and long-term wealth sound, taking on all that landlord work probably makes you hesitant. There’s got to be an easier way, right?

Busy professionals or those new to real estate investing need a solution. If that’s you, you may want to look into turnkey rental properties. As the name implies, turnkey rentals provide investors with a fully renovated and tenant-ready rental property with property management in place – it’s an appealing “turnkey” solution.

This article will provide the ultimate turnkey property buying guide for those seeking passive income from real estate. Whether you’re curious about diversifying into real estate or looking to expand an existing rental portfolio, learn the comprehensive guide to turnkey investments and evaluate if this is the right investment for you.

real estate, homeownership, homebuying

What Are Turnkey Rental Properties?

Turnkey properties are homes that have been completely renovated and upgraded to market standard before being sold to investors looking to rent them out. The term “turnkey” means the property is ready for occupancy. When an investor buys a turnkey, it often already has a tenant, allowing the investor to start collecting rental income right away.

In other words, turnkey rentals take the sweat and labor out of rental property ownership. An experienced turnkey operator handles all the heavy lifting upfront, finding the right investment and completing all necessary work. For the investor, it’s like having rental property on autopilot.

Characteristics of Turnkey Properties

Turnkey properties are appealing to real estate investors because they offer a convenient, hands-off approach to generating rental income. But what exactly makes a property “turnkey ready”? There are several key characteristics that define these ready-to-rent homes. When evaluating a potential turnkey purchase, investors should look for properties that exhibit the following features:

  • Updated and renovated – Look for functional kitchens, bathrooms, flooring, painting, roofing, plumbing, or electrical systems.
  • Tenant-ready – A tenant is already placed in the property or the turnkey operator guarantees having a tenant in designated timeframe after purchase.
  • Property management services offered – Investor has the option to have maintenance, repairs and tenant relationships handled by a property management company.
  • Cash Flow – The investor can start collecting rental income from the property right away or soon after buying it.
  • Hands-off for Investors – The turnkey provider handles all the renovation and preparation work upfront so the investor doesn’t have to get involved.

Why Invest in Turnkey Rental Properties?

Turnkey rental properties, with their move-in-ready condition and built-in property management, offer passive income on autopilot. It’s the easy way to start investing in real estate. But should you hand over your hard-earned cash to a turnkey operator? Let’s weigh the potential benefits and downsides.

Benefits of Turnkey Investments

Turnkey properties offer passive investors several enticing benefits that differentiate them from traditional rental real estate.

  • Immediate Cash Flow – The prepped rental likely has tenants already placed or can be leased quickly after purchase. This allows you to start collecting rental income almost immediately.
  • Minimal Effort – Since the turnkey operator handles renovations, maintenance, and tenant management, you avoid the landlord’s workload.
  • Diversification – Turnkey rental properties allow you to expand your real estate holdings into new markets and property types that you may not be able to directly access or manage.
  • Expertise of Property Managers – Established turnkey operators have systems, contractors, and expertise to maximize occupancy and handle issues. This gives you insider knowledge.

Potential Downsides

Before taking the turnkey plunge, be aware that these convenient investments also come with some caveats.

  • Higher Upfront Costs – You’ll pay a premium price to the turnkey operator to account for the renovations and upgraded finishes. This cuts into your potential profits. Traditional rental properties where the investor handles the renovations typically build equity faster.
  • Dependence on Property Management Companies – Problems with the operator’s business, quality of service, or financial stability can quickly impact your investment. Make sure you thoroughly research a turnkey provider’s management company before committing.
  • Less Control – Turnkey operators make the decisions on renovations, tenant screening, rent rates, maintenance issues, and more. You have little input or customization, but instead are buying the property based on the promised return.

Mastering Turnkey Real Estate Purchases: Step-by-Step

Turnkey properties take the “sweat equity’ out of rental real estate. But investors should still commit to research and analysis to find a profitable turnkey investment property. While the turnkey company should do all the work, you want to make sure what they promise meets market expectations. In other words, if it’s too good to be true, it probably is. Follow this comprehensive guide to turnkey investments from start to finish when buying a turnkey investment property.

architecture, house, blueprint

Research the Market

Performing thorough market research is a crucial first step to matching a turnkey purchase with your investing goals. While turnkey investing simplifies the landlord’s responsibilities, you still need to select an area and property type with strong renter demand fundamentals.

Key factors to analyze in your market research include:

  • Rental Demand – Look at rental vacancy rates in the target area over the past 2-3 years. Healthy markets should have vacancy rates below 10%. Evaluate trends in average rental prices – markets with rising rents typically have high demand. Search sites like Zillow and Craigslist to assess lease price ranges for comparable units and make sure they align with the turnkey company’s promise. Drive through targeted neighborhoods to check for rental signs, which indicate active demand.
  • Employment – Growing job centers positively impact rental demand. Review labor statistics and projected job growth for your target market. Expanding companies bring new renters. Analyze the mix of industries and major employers in the local economy. Markets with higher paying tech and medical jobs tend to attract more rental households. Visit sites like LinkedIn and Glassdoor to gauge hiring activity.
  • Schools –  Higher ranked school districts are important for attracting family renters. Compare district ratings on sites like GreatSchools. You can typically count on highly ranked districts to have strong and stable rental demand for years to come.
  • Local Economy – Evaluate overall economic health, looking at median income levels, housing starts, household formation rates, and key industries that drive the local economy. Look for signs of diversified growth industries and business investment. Monitor key economic indicators over time versus relying on a snapshot.
  • Rental Laws – Each area has unique landlord-tenant laws around security deposits, notice requirements, allowable tenant screening criteria, and more. Get familiar with federal, state, and local level rental regulations. Also assess factors like property tax rates, rental licensing requirements, and rental inspection ordinances.

Set Your Budget

Taking a disciplined approach to budgeting is just as critical as with any real estate purchase. Sit down to crunch the numbers and set your budget. When setting your budget, factor in:

  • Purchase price – Research prices for comparable properties in your target locations and investment class. Leave room to negotiate or bid competitively.
  • Closing costs – Inspect a sample Closing Disclosure to estimate typical closing fees and title insurance costs for a property in your state. Budget about 3-5% of purchase price.
  • Repair reserves – Turnkey doesn’t mean there won’t be future repairs. Allocate a portion of your income for any repairs or future capital expenditures like roof replacements or appliance repairs.
  • Vacancy reserves – Budget an extra to cover any periodic vacancies between tenant leases. Smart investors are prepared for temporary dips in rental income. We recommend using the market’s average vacancy rate.
  • Property management fees – If using a property manager, their contracts usually range from 8-12% of monthly rent collected. Verify exact rate before signing a contract and make sure that management costs are factored into the turnkey provider’s promised returns.
  • Taxes and insurance – Accurately estimate property taxes and hazard insurance premiums for budgeting purposes. Don’t underestimate these recurring costs and anticipate for them to increase overtime.

Having a clear budget will help you decide where you should be buying. Real estate markets like Toledo are attractive to most investors because they can buy a rental property for less than $100,000. However, if you have considerably more to spend, you might want to look in other markets.

Find a Reputable Turnkey Provider

One of the most critical steps in your turnkey journey is choosing the right provider to partner with. Not all turnkey operators are created equal – vet potential companies thoroughly before entrusting them with your investment.

Look for providers with a proven track record. Ideally, they should have been in business for over a decade and have completed hundreds of successful turnkey deals. This longevity and volume of transactions demonstrate a proven, repeatable model. Search third-party review sites and landlord forums for candid feedback. Look for consistent praise for service, quality, and value across their client base. Rave reviews from other investors can provide reassurance about your potential provider

Gauge their customer service from the very first interaction. Quality providers are transparent, nurture relationships, and make themselves readily available. This responsiveness is a key indicator of their commitment to customer satisfaction.

You want them to be willing to share detailed acquisition criteria, cost information, and processes upfront. Avoid any operators who are not forthcoming.

While turnkey rentals carry a premium, the costs should still be competitive and offer clear value. Compare sample deals to the broader market to ensure you are getting a fair price for the services provided.

Lastly, ensure that providers have deep knowledge of their target real estate markets. Ask them about their sourcing process and track record. A provider with local market expertise can better navigate the complexities of real estate investment in that area.

Evaluate Properties

Once you’ve identified your target market and preferred turnkey provider, it’s time to start evaluating potential property investments. Focus your analysis on these core areas:

  • Location – Research everything about the neighborhood where the property is located. Look at school rankings, average incomes, population and job growth, infrastructure improvements planned, crime rates, nearby amenities like parks and shopping, and other indicators of desirability. A great location will retain tenants long-term and have greater appreciation over time.
  • Condition – Do not rely solely on photos from the turnkey provider. Hire an independent inspector to thoroughly evaluate both cosmetic and structural aspects of the property.
  • Rental Income – Verify the projected rental income by looking at current rates for comparable active listings in the same neighborhood. High tenant demand supports consistent occupancy and rental growth over time.
  • Check Comparable Sales – Compare the asking price to recent sales of similar properties in the same market to ensure you are not overpaying. Search real estate sites for comparable homes that have sold in the neighborhood within the past 6 months and look at metrics like square footage, bedrooms, bathrooms, lot size, age, and condition.

Conduct Due Diligence

Before moving forward with a turnkey purchase, verify details through your own independent due diligence to make an informed investment decision. Here are some tips:

  • Hire an independent home inspector to provide an unbiased assessment. An inspection report gives you objective data to request repairs from the turnkey provider.
  • Scrutinize current leases to ensure favorable terms and rental rates. Look for red flags like super short lease periods or a rental rate that seems higher than what the market demands. You want to make sure your rate of return continues for years to come and that you don’t have to find a new tenant at a lower rate after 12 months.
  • Verify that any property management agreement conveying the property has competitive fees and cancellation terms. Make sure you price check with other management companies in the area. Ideally, the turnkey provider should have in-house property management, keeping the accountable for the profitbability of your investment.

Close the Deal

Once you have completed your due diligence and decided to move forward, it’s time to close on the property. This final stage of the transaction requires attention to detail. Here is the closing checklist you can follow:

  • Schedule a final walkthrough close to closing date and verify condition.
  • Review closing disclosures for accuracy days in advance.
  • Finalize financing and ensure funds will be available.
  • Obtain an insurance quote and secure coverage.
  • Sign closing documents to complete purchase.
  • Get keys, conveyance of leases, and transfer of security deposits.

Role of the Turnkey Provider

An experienced turnkey company is invaluable for facilitating a smooth property transfer to the buyer. The turnkey company will:

  • Provide all required documentation in an organized and timely manner
  • Properly convey existing leases and security deposits to buyer
  • Disclose any changes to property’s condition since initial contract
  • Oversee accurate distribution of funds on closing day
  • Troubleshoot any issues that arise to keep closing on track
  • Guide buyer through process to ensure seamless transition

Transition to Property Management

One of the great perks of a turnkey rental is getting to hand over operations to a professional property management company after closing for a fully passive real estate investing experience.

The property management team essentially becomes your “boots on the ground” for overseeing and caring for your investment. Here are some of their key responsibilities:

  • Placing quality tenants by marketing available units, showing properties, screening applicants, and signing leases. This is likely the most important service they provide to keep your cash flowing.
  • Collecting rent each month and enforcing payment policies if issues arise.
  • Coordinating maintenance by hiring vendors, supervising repairs, and maintaining property upkeep.
  • Providing ongoing communication with tenants to foster positive relationships.
  • Keeping you informed through periodic statements and reports.

Turnkey Rental Buying Strategies

When entering the turnkey rental market, one of the first decisions is which investment strategy to pursue.

rental property buying

Long-Term Rental Strategy

Leasing out units on long term contracts has its advantages. Long-term tenants provide stable, predictable income. Less turnover means lower management fees and vacancy risk, too. Just be sure to purchase in an area with healthy rental demand and vet tenants to minimize headaches.

Short-Term Rental Strategy

Renting out an investment property on a short-term basis, like Airbnb, taps into the vacation and travel markets. While returns can be higher, so can management duties and overhead. Make sure you’re buying in a market with tourist demand and where short-term rentals are permitted. If this is your strategy, you should specifically seek a short-term turnkey company.

Multi-Property Strategy

Some investors go big out of the gate, buying multiple turnkey properties in different markets to spread risk. A diverse portfolio takes more capital upfront and effort to oversee, but generates more cash flow and appreciation over time. Be realistic about your ability to manage many properties simultaneously or be sure to engage a property manager.

There’s no “best” turnkey rental buying strategies that fits everyone. Assess your own financial goals, risk appetite, and management capacity to choose the path that’s right for you. Do your homework so you can make informed decisions on mastering turnkey real estate purchases.

Expert Tips on Buying Turnkey Properties

Buying a turnkey rental property eases the path to real estate investing. However, you still need smart strategies to find and evaluate the best deals. Here are some expert tips on buying turnkey properties to set you up for success.

Leverage Local Knowledge

Seeking guidance from experts familiar with the target market can provide invaluable insight. They can assess factors like neighborhood growth, rents, demand, and more.

Crunch the Numbers

Run detailed cash flow projections for any property you consider, factoring in all expenses. Avoid dealing with thin margins that leave a little wiggle room.

Plan for the Unexpected

Build contingencies into your budget for maintenance, vacancies, repairs and other unforeseen costs. Turnkey properties still require financial cushions.

Follow news and trends in your target markets. An up-and-coming area or new development could impact real estate performance. Adapt plans accordingly.

Network with Fellow Investors

Connecting with others who own turnkey rentals can provide peer mentoring. You can exchange tips on property management, marketing, contractors and more.

Ready to Become a Turnkey Rental Owner? We’ll Show You How

If you’ve made it this far, chances are you’re seriously considering turnkey real estate investing. And you should be – it’s an amazing path to generating passive rental income without the headaches of traditional rental property ownership.

But the key to turnkey success is finding an experienced and reputable local turnkey real estate company to guide you.

At Ohio Cashflow, we specialize in finding profitable, hassle-free rental properties so you can sit back and collect passive income.

Our team handles the entire turnkey process – from identifying profitable Toledo micro-markets, renovating properties, finding quality tenants, to ongoing maintenance and management.

We customize each investment to match your goals, whether you’re an entry-level or experienced real estate investor. Our deep market insight and hands-on support provide the perfect recipe for turnkey success.

We’ve already helped many new investors, just like you, start their real estate investment journey and build profitable rental portfolios.

If you’re serious about partnering with our team of experts to build your rental property portfolio, this is your chance. Let us find your perfect turnkey rental investment.

Fill out our investor application form or call (844) 289-8876 to connect with us. Discover the easiest way to invest in real estate.

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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.