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The Pros and Cons of Turnkey Rental Properties for Real Estate Investors

Part of investing in real estate is the “thrill of the hunt.” You are always searching for the best investment opportunities in the housing market.

You know it’s important to stay aware of every type of investment property, along with what potential benefits and risks they offer.

One type of property investment to consider is turnkey rentals. A turnkey rental is a completely viable option for some real estate investors.

While this is true, you still have to learn more about them before deciding if this investment strategy is right for you.

Turnkey Rentals Defined

If you are new to real estate investment, you may not know what a turnkey rental property is.

Put simply, turnkey properties represent the easiest way to start your investing efforts. All the work of getting properties, fixing them up, and finding tenants is done.

You can also use the services of turnkey property companies, which have expert teams on-site to handle all aspects of the investment strategy.

Now that you know what a turnkey property is, it is time to learn about the pros and cons of this type of investment real estate.

Benefits of Investing in Turnkey Rental Properties

It is good to get to know some of the benefits offered by investing in turnkey rental properties. Some of these include:

Low Vacancy Rates

A turnkey rental is ready for tenants to move in. Because of this, you can see an investment faster because tenants will be moving in right away. This also means you begin to see cash flow immediately.

Some turnkey rentals can be moved into by tenants when they are sold. This makes your job even easier.

When it comes to tenant turnover, usually turnkey properties are more desirable. This is because potential renters know that these properties have modern amenities and features that others may not.

Immediate Income Potential

As mentioned above, when you rent out a turnkey rental property, you immediately have a source of income. That’s because tenants are either there or ready to move in. There’s no waiting for cash to begin flowing.

If you can find someone to rent the property, you can access positive cash flow right away.

No Construction Experience Needed

With a turnkey rental, you don’t have to have construction experience. It’s well-known that foreclosed and distressed properties are readily available in most areas.

The issue is finding contractors and others to fix the properties. In some situations, this is a huge expense.

Many investors, especially first-time investors, want to avoid having to sink money into repairs and updates. A turnkey company will handle all the fixes and repairs before the property is put up for sale.

Portfolio Diversification

When you add a turnkey property to your investment portfolio, you can diversify by location and type.

By choosing a turnkey property, you can invest in areas beyond where you live. This means you can find growing markets elsewhere, even when the local area’s market is declining.

Disadvantages of Investing in Turnkey Rental Properties

While there are several benefits offered when you invest in turnkey rental properties, there are also some potential disadvantages you must know about. Understanding the whole picture will help you determine if this is an investment you want to make.

Some of the disadvantages of making this investment include:

Cost

Since turnkey properties are updated often and usually in premium condition, they are priced higher than other investment properties.

This may make turnkey properties a larger investment. Making a larger investment also means it will take more time to see profits.

Minimal Flexibility

Because turnkey rentals will be ready to rent, you don’t have any say in the finishing touches. This includes things like flooring, wall color, finishings, and more.

However, since you purchase turnkey rentals to rent to tenants, how they look is not as important. The goal is to earn income through the ready-to-rent property.

Long Distance

Being able to invest in areas beyond your local region is helpful when trying to diversify your portfolio. However, making a long-distance investment does come with certain risks.

If you aren’t close to the property, it requires you to hire property management services or another entity to handle issues that arise. If unforeseen issues arise, managing them from a distance can be challenging.

Fewer Options

If you are investing in turnkey properties, you are searching for very specific investment properties. Because of this, the available options are probably going to be somewhat limited.

Not all real estate markets or locations offer turnkey rentals.

While this is true, you still have the option to invest in other markets and other states. Just be sure to do your homework and invest in areas that have the potential to earn profits.

Should You Invest in a Turnkey Rental Property?

As you can see from the information above, investing in a turnkey rental property offers several benefits. Even though this is the case, there are also some potential disadvantages you must consider.

Knowing what turnkey properties are, along with the pros and cons offered, is essential. Make sure you take time to compare different investment opportunities to ensure this is the one you want to make.

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