The turn key home is a property type that maximizes the convenience and immediate value in a home. Let’s take a look at the turn key home and whether it is a good investment for your situation.
What is a turn key home?
A turn key home is defined as a home that is ready to be lived in immediately upon turning the key in the lock. Sellers and buyers both face advantages and disadvantages when preparing and investing in a turn key property. The seller spends money to upgrade a property that will be advertised as turn key. The buyer looking for a turn key property may need to incorporate a contract or hire a specialized real estate agent in order to vet properties that are advertised as turn key.
What are the advantages of a turn key home?
Sellers gain an immediate advantage in the real estate marketplace by upgrading a property to turn key, especially properties that are in high value areas and marketed to established families. This segment of the market usually prioritizes convenience above price, meaning that they do not want to deal with upgrades and structural problems just to save a few thousand dollars at closing. Buyers gain the immediate advantage of being able to live in a home that is a turn key property. Having this kind of a property is also a time saver, as the buyer does not have to waste time with contractors, utility operators, and municipal officials in order to customize a home to standard.
Sellers may be able to sell a turn key property at a premium because of the convenience that is offered from its immediate livability. Buyers may be able to save money as well if they are rolling over improvement costs into a 203k loan program, for example. Depending on the length of the term, placing the cost of repairs in with the mortgage can quickly compound the interest over the total loan. This cost may be better shouldered by the seller if he has more experience in finding and negotiating with contractors.
Finally, sellers gain additional leverage in the marketplace with a turn key property. Fixer uppers lose more value the longer that the property stays on the market. However, a completely turn key property may be able to withstand more time on the market and even removal from listings in order to wait for a rising market.
What are the disadvantages of a turn key home?
If a seller wants to advertise a real estate property as truly turn key, then he must take on the responsibility of finding and negotiating with contractors. This process can be incredibly time-consuming, especially if the seller does not have any previous experience in this area. There is also the chance that a contractor will not complete the work to standard, causing potential legal ramifications if the house is sold. Buyers lose the potential to customize the home with a turn key property. In most cases, the funds that would have gone into customizing a fixer upper go to the seller in order to cover the costs of contracting a property to turn key status.
Sellers take on a risk when fulfilling potential contingencies of buyers before receiving a specialized contingency list. The improvements made on a home may not necessarily convert into added value on a home. Sellers should definitely research home improvements with a reputable real estate agent in order to vet them for ROI. There may also be a limit as to the amount of improvements that can be placed into a home due to the value of the surrounding properties. For instance, if you place a sauna and Jacuzzi in a section 8 neighborhood, you will not gain much value on that property because of the lower quality of the neighborhood. Most people who can afford a sauna and a Jacuzzi would rather have those amenities in a nice neighborhood.
Buyers will usually pay more for a turn key home. This distinction may place many properties out of the reach of certain buyers. If a buyer has certain do-it-yourself skills, then he may actually prefer a property that is not in turn key shape. He can perform the needed improvements at a lower cost, raising the value of the home much more quickly than if the home was already a turn key property.
What do I have to do to get a turn key home?
If you are a seller looking to sell a home as turn key, then you will need to negotiate with a reputable contractor and a real estate agent. The agent will be able to help you decide the improvements that will actually bring your property up to a turn key standard while maintaining your budget and ROI. You need a reputable contractor in order to implement the work that you decide on in a time and cost efficient manner.
If you are a buyer who is looking into purchasing a turn key property, then you will likely need a specialized agent. You may also need to negotiate with the Federal Housing Administration (FHA) for a 203k loan if you cannot find a turn key property within your budget. The 203k loan program is a specialized loan that will roll the costs of improving the property into your mortgage.
2 Point Highlight
For instance, if you place a sauna and Jacuzzi in a section 8 neighborhood, you will not gain much value on that property because of the lower quality of the neighborhood.
You may also need to negotiate with the Federal Housing Administration (FHA) for a 203k loan if you cannot find a turn key property within your budget.
