What is a turnkey property?
Turnkey properties are appropriately renovated so that they’re immediately ready for occupation. Homes and apartments are often bought, renovated, and sold by companies who specialise in selling such turnkey rental properties, while also delivering a property management service, allowing each investor the opportunity to raise a passive income with the least amount of work.
How does a turnkey rental property investment work?
Where buying is typically cheaper than renting, turnkey investment properties offer a healthy return for those who buy and let properties and immediately placing a tenant. Where investors live in more expensive regions, turnkey operators allow buyers to make long-distance investments that deliver the ROI they couldn’t possibly achieve locally.
Each investment will grow over time in the real estate market, while earning revenue through its rental income. Utilising specialists in the field and property management services handling the daily workload, many investors have little more to do than collect the profits at the end of each month.
The advantages of turnkey property rentals Passive income
We don’t have to spell out how much time and effort each turnkey passive income saves their investors. It’s one of the best ways to invest in property without taking on a great deal of additional work and without years of experience or knowledge of the industry. This makes turnkey properties a realistic investment choice for first-time investors.
Very little work – especially renovation and building variety
The amount of construction work needed when rehabbing a tired old property won’t surprise anyone. If flipping homes is your passion, then dive in, but for most investors looking to hit the ground running with an instant income stream, having a property that a tenant can move straight into is far more important than the preparation required to get there.
Simplified long-distance property investment
There are advantages to both local and long-distance investment opportunities. Locally, you’re never too far away to meet any problems that arise head-on and in person. However, the most lucrative investments could be cross-state or in another country altogether.
The best turnkey properties are those that achieve the return you want with the least amount of involvement—and that means ensuring your property management team are everything you need them to be.
Speaking of your property management team, if you’re investment involves buying from one of the many specialist turnkey real estate companies, then they’re likely to include their property management services as part of the transition. Of course, you should carry out thorough research into both property and partnership,but there’s less chances of inferior quality construction work when the same company is set to take over the management of that building.
There’s often a tenant already in place
Another advantage of a turnkey rental investment is that with many there’s already a tenant in place. It’s fairly commonplace for a turnkey property group to buy and sell an existing rental property, creating an instant income for the new investor.
Fewer surprises along your investment journey
With the building work, décor, and paperwork all part of the turnkey process, there should be a lot less chance of those niggling surprises that crop up to throw a spanner deep into the works. With your appraisals and documentation of upgrades firmly in hand, and an appropriate legal representative in place, minimising problems is part of the process.
Working with the best turnkey investment companies means that they’ll also have insurances and guarantees in place to protect you, your investment and your income.
Know your property, area, manager, figures, and, of course, the pitfalls
So, you’re eager to understand more about the process of investing in turnkey properties. Here are the basics every investor should engage with.
1. Know your new turnkey property
Despite it coming with a seal of approval and the expectations that come with the term ‘turnkey’, it’s still requires your greatest due diligence. You’re investing a healthy sum into your venture, so, just like any other investment, you should check the assets of your investment.
Visit the property and explore the location. Consider its geography and the type of tenant it will attract. Also, a professional appraisal/valuation is seen as a must to ensure the quality of the renovation and the true state of the building.
2. Understand the rental area
As we touched on, each location offers advantages and its up to you to consider what they are, their long-term applications, and how they affect your returns. Comparing property prices and rental incomes is only the start. Contemplating the type of tenant, the work opportunities, schools, all add to the marketability and the resale when, far further down the road, it’s time to sell.
3. Get to know your property manager
Every property management service is unique, and that’s just as true of your turnkey property managers. Understanding exactly what constitutes their full service is imperative. Don’t assume they cover the items another company does, as you’ll come unstuck pretty quickly making those kinds of assumptions. Understand all of their terms and services. Anything that’s missing is up to you to source, and also to make sure those things overlap seamlessly. You’ll also need to be sure how their finance and payment systems work, who pays for what, and when.
4. Make sure the figures add up
Moving on from your property management payment systems, the next thing you need to be sure of is aht the numbers add up. You’re going to hear all kinds of terms as you venture deeper into turnkey real estate: cap rates (capitalisation rates), cash-on-cash returns, investment alternatives and options, and so much more.
As an investor, you must be sure that your speculation will pay the dividends you need. Yes, the long-term investment in property is fairly safe, but the income raised while that investment grows can be affected by all kinds of things.
5. Be aware of the possible pitfalls and all that can go wrong
Along your turnkey journey you’re likely to experience tax hikes, inflation issues, wear to the property, accidents and emergencies that come with their own unseen costs, and even problem tenants that impact your rental income along with the added costs of evicting them.
Nothing is risk-free, so be sure to have safety nets in place, both financial and insurance-wise to keep your journey as smooth-sailing as possible.
Buying turnkey rental properties
If you decide to take the plunge, you’ll need to carry out far more research into the process, but to give you basic overview, the following simplified steps should provide an idea of what’s ahead.
Locate your market
The ideal market is a landlord-friendly area with good-value properties. You need a healthy rent-to-value ratio and an area that attracts quality tenants likely to respect and take the best care of your investment during their stay.
Find your property
Finding the right property will involve a great deal of research both independently and with the best turnkey real estate companies you can find in your chosen area. Are they reliable? Do their ratings, reviews, and feedback match up to what you need and expect? Your partner’s and the bank or financer’s appraisal need to match, too, to be sure that you’re getting exactly what you think you are.
Choosing your partners
The final step is to ensure that your partners in this transaction—the property management service running your investment—are reliable, trustworthy, and exceptionally good at their job.
Tips to make the most of a turnkey property investment
Of course, before you start to tick through your list of turnkey investment properties, you’ll need a plan that leads you to success. Here are a few tips to include as you draw up your all-inclusive checklist.
- Set realistic goals and stick to them.
- Examine all possible markets and investment opportunities. No two markets are the same, and grow and fall at different rates and times.
- Show equal due diligence to the turnkey property and the property management company—they’re both incredibly important to your ROI.
- Get appraisals on the property, the state of the building and the quality of the latest work.
- Research your preferred markets and run your figures.
- Run your turnkey real-estate investment business like any other business. Set up all financial and practical accounts, lines of communication, schedules, and principles you need to ensure the best running and awareness of each investment element.
- Local or long distance? Which will pay off better: ease of access or the most advantageous opportunities?
- Communicate with your turnkey property managers. We can’t stress enough how important continued transparency and communication is with your partners.
Turnkey investment with UpperKey
UpperKey takes the best care of everyone’s investments. UpperKey is a leading iRenting and PropTech organisation. It runs property management services for investors all over the globe. They manage hundreds of properties for just as many delighted clients, tenants, and guests.
Those who invest in turnkey properties may not have the time to manage tenants (short/medium term), and by working with UpperKey, they can be sure the property is in good hands with routine maintenance and deep cleanings. At the same time, they’ll receive a guaranteed monthly rent, ensuring their ability to make mortgage payments on the investment property—all without having the headache of dealing with tenants or guests.
Utilising the latest advances in hospitality and real estate technology, they’re the perfect partners for your turnkey income property.