Turnkey investment properties are frequently presented as the ultimate solution for rental property investors, boasting features such as move-in ready status, a low-maintenance design, and the promise of steady rental income. At first glance, these properties seem like the perfect investment. However, hidden realities and hidden risks of turnkey properties can catch even experienced investors off guard. These risks—from unexpected maintenance costs to issues that can eventually impact your bottom line—underscore the importance of understanding the potential pitfalls of turnkey properties and knowing how investors can avoid costly mistakes.
What Are Turnkey Properties?
A turnkey property is a fully renovated home or apartment building that an investor can purchase and immediately rent out. Usually, these properties are sold by companies that specialize in the restoration of older properties. Thanks to their ready-to-go status, turnkey investments hold considerable appeal for rental property owners because they require little extra work to prepare them for tenants. With such properties, investors can start enjoying immediate cash flow without the need for additional renovation or major repairs, positioning them as ideal investments for rental property owners who want to avoid lengthy and expensive renovation costs.
Hidden Risks of Turnkey Properties
On the face of it, turnkey properties are ideal investments for rental property owners who want to avoid lengthy and expensive renovation costs. However, even newly renovated properties can have hidden issues that may result in unexpected maintenance costs.
For example, the quality of the renovations may be questionable, especially if the work was done without the proper permits or licenses. Some turnkey properties will complete renovations that are not up to code, which can create many headaches for property owners down the road.
Another potential risk of turnkey properties is hidden issues with property values. Some turnkey properties are sold at inflated prices that don’t align with current market values. Because the property is renovated, sellers may want prices higher than other properties in the area.
Due to higher price points, turnkey properties rarely offer the same potential for appreciation and equity growth as buying a fixer-upper. If investors are not careful, they could find themselves overpaying for a property that is slow to gain in value, driving down cash flows.
How to Mitigate the Risks of Turnkey Properties
While there may be hidden risks when buying turnkey properties, there are ways to mitigate those risks and continue investing wisely. One key way to reduce risk is to do your due diligence.
No matter what property you are considering, it is essential to thoroughly assess the property’s history and condition. In your assessment, go beyond cosmetic upgrades. If possible, have a professional inspection and pay close attention to potential issues with the property’s structure or significant systems.
It is equally important to conduct a thorough market analysis and ensure that the property you want to buy aligns with long-term market growth potential. Engage a reputable real estate agent and enlist the help of other local market experts to gather the data you need to make an informed decision about the property. Having professionals with experience in turnkey properties is especially ideal.
Finally, if you do decide to move ahead with your purchase of a turnkey property, be sure to budget for hidden maintenance and repair costs and set up a proactive property maintenance plan. Being prepared this way can help you avoid expensive surprises and ensure that your investment offers solid returns for as long as you own the property.
Weighing the Risks and Rewards of Turnkey Investments
While turnkey investment properties can be profitable for many investors, it is essential to approach these properties with caution and a clear strategy. By doing your research and enlisting the help of qualified professionals, you can better weigh the risks and rewards of investing in turnkey properties.
Are you thinking about adding a turnkey property to your rental portfolio? Reach out to Real Property Management Abound office to discover how we can assist you in developing an innovative and profitable investment strategy in Broken Arrow and nearby. Contact us online or call us at 918-984-4433 today!
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
