What is a turn key property?
In the simplest terms, it’s a home that doesn’t need any major repairs or restorations. A tenant can just turn the key in the lock and move straight in. Investors can rent the property immediately after purchasing it. Therefore, a turn key property can sometimes be an extremely lucrative real estate asset.
Turn key properties also come with fewer outlays. You don’t have to pay for expensive repairs or improvements for a fully renovated home. For example, you won’t have to paint the interior and exterior walls or update the floors. (However, you will still need to appraise the property.) You can also use a property management company to manage a turn key asset, making it that much easier to look after the property over time.
Turn key properties became popular after the 2008 recession, which decimated many aspects of the property market in the United States. Back then, it was just as profitable to purchase renovated homes than foreclosures that required a lot of repairs. This trend has continued, and key properties now make up many investment portfolios. Although foreclosed properties are cheaper to buy, you don’t have to spend thousands of dollars on turn key homes before renting them out to tenants. Some turn key properties are in such a good state of repair you don’t need to pay for appraisals or inspections, which further reduces costs.
One of the benefits of purchasing a turn key property is its simplicity. Unlike other types of homes, there are fewer outgoings when preparing the property for the rental market. You can even invest in cheaper rental markets remotely because you don’t need to travel to fix a property. If you use a property management company, you can rent out your property from a location hundreds of miles away. The downside of a turn key asset is that you can’t add your personal touch or design style to the property because it has already been renovated and decorated.
Turn key property case study
An investor in Seattle looking for real estate opportunities decides to purchase a fully renovated home in a cheaper market. The home is in an excellent state of repair and doesn’t require any improvements or renovations. The kitchen and bathrooms look amazing in photos, and it has brand-new carpet. Even the windows are upgraded to dual-pane. It is move-in ready.
The investor puts the property on the rental market a couple of days after purchasing it and quickly finds a tenant that matches their requirements. The tenant moves into the property and pays rental payments every month, generating instant cash flow for the investor. After a year, the investor has enough money to use as a down payment on a second turn key property, expanding their investment portfolio.
The bottom line
When a tenant moves into a fully renovated home, that home is known as a turn key property. These properties allow investors to rent out homes quickly without spending money on improvements. Investing in a turn key asset can work out cheaper than purchasing a foreclosed property because you don’t have to pay for repairs.