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Turnkey Properties: A Better Way to Invest?

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Real estate investors are searching for ways to profit passively from rental properties, without the midnight maintenance calls and tenant headaches. Turnkey providers promise a solution: fully renovated and managed properties ready for absentee ownership. But how does the turnkey process really work, and are these hands-off investments worth the premium price?

Reputable turnkey properties take the work out of investing. Instead of scouring listings and taking on costly renovations yourself, you buy a fully rehabbed, tenant-ready property from a turnkey company. They’ve already fixed up and ready to be leased out (usually with a tenant in place) before you even close.

The investor simply provides the capital to buy the turnkey asset and then sits back to collect rental income with minimal effort. But this convenience comes at a cost. Turnkey properties can be priced at a premium and fees for services can eat into profits.

In this guide, we’ll take an objective look at the turnkey real estate model. We’ll examine the process of working with a turnkey provider to buy, finance, and manage an investment property. We’ll also analyze the pros and cons of this hands-off approach to generate a full picture of what turnkey investing entails.

Turnkey vs. Traditional Real Estate

Turnkey and traditional rentals represent very different approaches to real estate investing. With traditional properties, the investor purchases, upgrades, and self-manages the asset. Turnkey properties are bought move-in ready with a built-in property manager.

There are pros and cons to each strategy. Turnkey investing offers passive ownership but at a premium price. Traditional rentals allow for more control but require significantly more time and effort.

Why Do People Invest in Real Estate?

Real estate is a popular investment choice due to the many potential benefits it offers investors. There are several key advantages that explain why so many people allocate part of their portfolio to real estate.

Cash Flow

One major attraction of real estate investing is its ability to generate steady cash flow. Rental properties provide a stable stream of income as tenants pay their rent each month. This income can be used to cover expenses, mortgages, maintenance, and repairs on the property. If managed properly, rental properties can also produce strong profits above and beyond these costs.

Appreciation

In addition to cash flow, real estate investors can benefit from the appreciation or increase in value of their properties over time. As neighborhoods improve and demand for housing rises, real estate values tend to go up. Appreciation is a key source of equity and long-term wealth accumulation for rental property owners.

Tax Benefits

Owning investment property comes with several tax advantages. Investors can deduct expenses like mortgage interest, property taxes, operating costs, and depreciation from their annual taxable income. Strategies like 1031 exchanges also allow investors to defer capital gains taxes when selling one property and reinvesting the proceeds in another.

Inflation Hedge

With inflation leading to higher costs of living, real estate is often viewed as a smart inflation hedge. As overall prices rise, property values and rents tend to increase too, potentially resulting in higher incomes for rental investors.

Control

Unlike passive investments like stocks or bonds, real estate allows investors to exert significant control over their returns. Investors get to choose the specific property, location, tenants, amenities, and improvements. This ability to actively manage assets enables investors to boost their performance.

Long-Term Wealth

Real estate is known as the most reliable and best used investment vehicle for building long term wealth. Those who invest get cash flow and build equity over time.

Real estate offers investors the ability to generate cash flow, benefit from appreciation, gain tax advantages, hedge inflation, control outcomes, and build lasting wealth. These powerful benefits explain the enduring popularity of real estate as an asset class.

What is the Traditional Rental Property Investment Model?

When people think of real estate investing, the traditional model of owning and managing rental properties probably comes to mind. This is your straightforward, old school approach to real estate investment that has existed for generations.

The traditional rental strategy works like this: you buy an investment property, fix it up, find tenants, and become their landlord. As the owner, you’re responsible for funding repairs, communicating with renters, collecting monthly payments, dealing with vacancies, paying the mortgage, and handling all the nitty gritty management yourself.

It’s a hands-on process where you fully control your asset. The upside is that you retain full freedom over decisions like who to rent to, what renovations to make, and when to sell. The downside? All that control comes with a huge time commitment of researching markets, sourcing properties, renovating, and property management.

The traditional approach gives experienced investors full control over their property. But for passive investors or those new to real estate, the model often demands more time and effort than expected. Still, if done correctly, traditional real estate investment provides usually offers the highest investment returns.

Understanding Turnkey Property

If you’ve spent a little time searching investment properties, you’ve probably come across articles or forums that discuss the merits of turnkey properties. People are pretty passionate on both ends of the discussion.

First, what is a turnkey property?

A turnkey rental property refers to a home that is ready for immediate occupancy upon purchase. The term “turnkey” means that the property can be “turned over” to the buyer without any additional work needed. A reputable turnkey company will acquire distressed or outdated properties, renovate them to maximize rental appeal, find a qualified tenant, and then sell the turnkey investment to an investor as a hands-off rental.

FeatureTurnkey Real Estate InvestmentsTraditional Real Estate Investments
Initial InvestmentHigher initial cost due to property being move-in ready and often renovated.Lower initial cost, but may require significant renovation and repair costs.
Time CommitmentMinimal time investment; properties are managed by professionals.Requires significant time for management, renovations, and tenant issues.
ManagementProperty management is often included or available, reducing landlord responsibilities.Owner is typically responsible for property management, unless they hire a property manager.
Cash FlowCan generate immediate cash flow as properties are rent-ready.Potential delays in cash flow due to needed repairs or finding tenants.
ControlLess control over property choices and renovations; properties are often pre-selected and pre-rehabilitated.More control over property selection, renovations, and management style.
Skill Level RequiredLower; ideal for investors who prefer a hands-off approach.Higher; best suited for those with experience in real estate or willingness to learn.
Geographic FlexibilityHigh; investors can purchase properties in different markets more easily.Often limited to local properties or areas familiar to the investor, unless using a management company.
RiskReduced risk due to properties being vetted and managed by experienced firms.Potentially higher risk depending on property condition and management decisions.
Return on Investment (ROI)Potentially lower ROI due to higher initial costs and management fees.Potentially higher ROI if the investor effectively manages costs and increases property value.
Market DependenceDependent on the performance of selected markets and management company effectiveness.Dependent on local market conditions and personal management effectiveness.

Turnkey Real Estate Investment Advantages

When evaluating different real estate investing strategies, a popular approach for beginners is turnkey rental properties. Investing in turnkey properties provides a more accessible, convenient way to get started with rental real estate compared to traditional house flipping or fixer-uppers. For those seeking passive income with minimal effort, turnkey real estate investing can be an excellent choice.

Turnkey properties offer a number of financial and logistical benefits for investors:

Financial Benefits

One of the main appeals of turnkey real estate investing is the strong financial upside these properties can provide. Turnkey investing offers several key financial benefits that make them an attractive option for passive income investors:

●  Immediate rental income – Since turnkey homes come move-in ready with a tenant, rental payments start as soon as the property is purchased. There are no delays for renovations.

●  Lower expenses – The major updates are already done by the turnkey company, so there are fewer maintenance costs and repairs needed upfront.

●  Tax benefits – Turnkey rentals qualify for tax deductions like depreciation, mortgage interest, etc. which help offset rental income.

●  Market appreciation – While lower than a fixer-upper, turnkey investing can still gain value as the overall real estate market appreciates.

Logistical Benefits

In addition to the financial incentives, turnkey investing also provides some major logistical benefits that simplify the investing process:

●  Completely hands-off – Turnkey companies manage the full process from rehab to tenant placement to ongoing property management.

●  Passive income – Investors avoid having to do any landlord duties like showings, repairs, collections, etc.

●  Accessibility – It allow investing in other markets by leveraging local turnkey companies’ expertise.

●  Convenience – Streamlined process compared to coordinating contractors and vetting tenants yourself as a landlord.

●  Risk mitigation – Properties renovated to high standards and prescreened tenants lower chances of issues.

The trade-off is that profit margins on turnkey properties are typically lower than fixer-upper deals. But for passive investors, the convenience often outweighs the reduced returns.

Compared to fixing up a property yourself, the hands-off convenience of a turnkey property is tough to beat. You don’t have to find contractors, deal with permitting, or manage construction projects. The turnkey company handles all of that. They also take care of tenant placement and ongoing property management. This frees up a lot of time and headache for the investor.

The trade-off is that appreciation and ROI may be lower with a turnkey unit  versus a traditional fix and flip. But for investors focused more on passive income rather than creating capital gains through renovations, turnkey homes can provide solid monthly cash flow with minimal effort. The equity also builds over time as the mortgage is paid down.

Turnkey investing offers a nimble way to start building a rental property portfolio. They provide immediate income and require very little day-to-day management once rented.

Turnkey Real Estate Investment Disadvantages

Turnkey real estate investing provides an easy path to owning rental properties, but some drawbacks exist. While turnkey investing simplifies landlord duties, investors give up control and pay premium pricing. Performing due diligence helps avoid pitfalls.

You Don’t Control the Renovations

One disadvantage is that you don’t manage renovations with a turnkey rental. The turnkey company makes all rehab decisions, which means you have no input on materials or design. This requires finding an experienced turnkey operator you can trust to make smart, cost-effective updates suited for rentals.

Reliance on Third Party Property Management

Another potential issue is relying on the turnkey’s property management, especially if they use a third party. Vet any recommended management company thoroughly before buying and using a turnkey provider’s management company. The best turnkey companies will offer in-house property management to ensure the profitability of your investment from start to finish.

Higher Purchase Price

Turnkey properties usually come at a higher purchase price than buying and renovating yourself. You pay for the turnkey company’s expertise and convenience. However, higher upfront costs can yield better long-term returns with the right turnkey partner.

Risk of Disreputable Providers

Be careful of turnkey providers that sell low-quality properties, overstate investment returns, or provide poor management. Vetting the turnkey company through reviews, testimonials, licensing checks, and getting examples of past projects can help avoid disreputable operators. Do your due diligence.

While turnkey investing has some drawbacks, an informed investor who does sufficient due diligence can avoid pitfalls. For passive real estate investors, the convenience often outweighs the tradeoffs.

Why Choose Turnkey Properties

Investing in real estate can be a great way to build wealth, but it also requires a lot of time, effort, and expertise, so why choose turnkey properties?

Turnkey investing provides several key benefits that make it an appealing option for many real estate investors. If you’re aiming for passive income from rental properties with less efford and cash flow on autopilot, then turnkey real estate investing is for you.

Low Barrier to Entry for Beginner Investors

With turkey properties, you can benefit from the turnkey provider’s expertise in identifying promising markets, evaluating properties, overseeing renovations, securing financing, screening tenants, and handling ongoing management. Beginners can start building a rental portfolio with minimal industry knowledge through turnkey model.

Passive Income Stream Without Active Management

The turnkey operator or their management company fully maintains the properties while sending you regular rental checks. Investors avoid spending nights and weekends on showings, repairs, tenant issues, and other management headaches.

Immediate Rental Income After Purchase

Turnkey properties provide rental income almost immediately after closing since the provider sources qualified tenants prior to the sale. Cash flow after the acquisition, without a long vacancy period. A quick income stream gets your investment returns started faster than traditional DIY rentals.

Geographic Diversification Across Multiple Markets

Turnkey investing enables you to own rentals across different cities, states, or even countries. You aren’t limited to purchasing only in your immediate area, where you can manage a renovation or property management. Turnkey providers grant access to top real estate markets across the nation and globe, allowing true geographic diversification.

Professional Property Management Included

Having the right and reliable property management companies is an important part of your success in turnkey investing. The good news is, reputable turnkey providers handle all aspects of management, from tenant screening to maintenance. Having professional management maximizes returns and minimizes headaches.

How Ohio Cashflow Does Turnkey Investing Best

In order to maximize returns and minimize headaches with your investment property, ensure you’re working with an experienced, reputable turnkey provider. Ohio Cashflow is proud to be one of the best in the industry.

At Ohio Cashflow, our intimate knowledge of the Toledo market allows us to deliver an optimal turnkey real estate investing experience for our clients.

  1. Our team locates each potential property off-market, leveraging our extensive local real estate expertise. We only select properties poised for strong returns based on market fundamentals.
  2. We ensure quality renovations by using a vetted list of contractors. Our longstanding relationships and renovation volume allow us to complete upgrades at an economy of scale. We pass on cost savings to our investors.
  3. Additionally, we oversee every rehab to institutional standards using top-grade materials. Our experienced project managers ensure efficient, value-maximizing renovations.
  4. For tenant placement, we thoroughly screen applicants by working with our sister management company, Oz Realty. Their property management experience helps us fill properties with reliable, long-term tenants.
  5. Finally, our market familiarity enables responsive maintenance and attentive management. We handle any issues promptly to keep your investment running smoothly.

As local turnkey experts invested in Toledo’s growth, Ohio Cashflow delivers optimal turnkey real estate investments.

Turnkey Investing Simplifies Real Estate for Busy Investors

While traditional real estate investing can provide strong returns, it requires significant time and effort on the part of the investor. For those with limited time or experience, turnkey properties offer a more accessible entry point.

Turnkey rentals come renovated and tenant-ready, with property management included. We make it possible for anyone to invest in real estate. We don’t dance around the fact that there are some downsides to turnkey investing, but it can be an optimal real estate investing strategy for the right investor. Turnkey properties provide a streamlined approach to earning passive income from rental properties.

For a comprehensive guide on succeeding in today’s hot turnkey market, download our free turnkey property investment guide, “How to Remote Invest in America’s #1 Real Estate Market”. This investing resource provides creative tactics for finding hidden deals in Toledo, step-by-step instructions for each stage of the turnkey process, a property analysis checklists, and pro tips to maximize your profits. Whether you’re a seasoned pro or a total beginner, this turnkey property investment guide will equip you with specialized knowledge to build your turnkey portfolio.

If you’re ready to start earning truly passive income from turnkey real estate, the time to act is now. At Ohio Cashflow, we make it simple to secure your first turnkey rental property and put your cash flow on autopilot. Fill out our investor application today to get started with turnkey investing the easy way.

Let us simplify your path to financial freedom through turnkey real estate. Apply now to invest in your future!

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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.