Buying an investment home is not an easy decision to make. You have to do your due diligence and make sure you are getting the best deal possible. This is an investment that needs to give you a positive ROI (Return on Investment) as soon as possible. You don’t want to invest in a home that will keep eating into your finances. The word turnkey is used a lot, so what does it mean for you and your investment?
Definition of Turnkey Real Estate
Turnkey real estate by direct definition means a home that is ready for occupation. All you have to do is hand over the keys to the immediate occupant. Once the relevant paperwork is finalized, the new occupant will just turn the key.
Why You Should Consider Turnkey Real Estate
There are several reasons why you should consider a turnkey investment:
- Since a turnkey home is ready for occupation, it makes the process of handover to your tenant easy. There is no need for delays such as painting, or renovations if the home needed any. Before the home is put up for sale, all these details are taken care of and the house is ready by the time you purchase it.
- All repairs are done prior to the sale, and you do not need to carry out any repairs for a while. By the time the need for repairs come up, you will have had enough time for return on investment. Usually, the first several years will bring you a good cash flow before you need to dip into your pocket for any repairs.
As with any investment, there are bound to be shortcomings. Turnkey real estate has a few cons:
- Turnkey investment properties tend to be more expensive than regular real estate investment. This is because turnkey real estate requires more cash upfront due to the high costs of repairs and rehabilitation.
- The high cost of a turnkey investment leaves little or no value past the down payment. Some investors often choose to do any repairs themselves.
- Owing to the fact that you as the owner have no authority on the design and construction, the project might not be built to your expectations. Where you buy an already completed property, it might take quite a bit of hunting to get a property you are satisfied with.
Types of Turnkey Companies
There are two types of turnkey properties to choose from: traditional and non-traditional companies. The traditional companies buy properties for rehabilitation and fix the main systems such as plumbing, electricity, roof, flooring, and other major repairs. They market and sell the homes, and also manage the property for the buyer.
Nontraditional companies are similar to their traditional counterparts, except they don’t market the properties, but rely on traditional companies for that. They, however, do connect buyers with a trusted property manager.
Should You Choose Turnkey Real Estate?
Some people prefer to choose turnkey real estate for the relative comfort of zero repairs for a while. Such individuals need to have a home they can let out immediately. They can start earning rental income immediately and have the money, ready to invest.
Some people prefer to do the repairs themselves so that they keep the buying price low. The choice is ultimately yours to make after weighing all the pros and cons. If you are looking to buy a property in New Jersey, consider getting hold of a local real estate agent who can guide you through the process.