Turn key homes seem like the best option for everyone; after all, who doesn’t want a house that comes ready to live in? However, a turn key property is not always the best investment for a real estate buyer. Here are the pros and the cons of taking on a turn key property versus another type of real estate.
What are the pros of investing in a turn key property?
The immediate advantage of a turn key property is its immediate utility. Whether you are investing in a turn key property as a primary residence, a mixed use property, or a completely commercial rental property, there is a certain peace of mind and financial incentive to having real estate ready to go.
The definition of turn key properties means by definition that no repairs or maintenance are needed on the property. Not only do you save money on the repairs as mentioned above, but you also save money on the contractors you would need to fix the property. All of the construction that is necessary to repair the property is done before you buy the home.
Turn key properties are the easiest to invest in. If the property does not require any repairs or maintenance, a buyer can skip over many of the appraisal and inspection rigors that normally accompany a real estate acquisition. The cost of finding attorneys and researching title properties, among many other things, can slow down a negotiation, and turn key properties are less likely to need these things.
If you are investing in a commercial property so that you can have tenants, then a turn key property gives you the ability to instantly create income from the property. If the property requires repairs, then it may not be in legal compliance with the municipality. There is always a legal risk that you take bringing in tenants if your property has not been recently maintained, and you face fines and penalties that far outweigh the cost of repairs that you would have if you chose to fix up the property. For this reason, many first time commercial buyers look only for turn key properties.
What are the cons of investing in a turn key property?
The turn key property is the most expensive type of property. If everything comes ready to go in the home, you will likely be charged a premium for that by the seller. The cost of any repairs and maintenance is passed along in the price of the home. Also, if you focus specifically on turn key properties, then you will have much less choice in the market.
The turn key property will be priced especially high in a seller’s market and in high value markets. Many of these properties will have turn key companies to raise the selling price on the property in order to
If you are a do it yourself (DIY) kind of person, then you may actually lose money on these premiums. If you have the time and the willingness to do the repairs on your own, then you automatically save money on the premium that the seller would probably charge you for the same repairs. The value of that premium then becomes yours to sell if you are trying to flip the property.
The turn key property is also customizable. Even if you are not a DIY person, you may want to participate more in the architecture and the layout of the house than a turn key property allows. If you buy a property as is, you may even spend more money taking down the interior design that you do not like.
Should I invest in a turn key property?
The turn key property seems like a great investment up front, and for many people, it is. However, there are plenty of reasons that a buyer or an investor would invest in a DIY property. Make sure that you pick your property based upon your personal needs.
If you are not a commercial investor, then you may prefer a house that you do not have to fix yourself if money is not an issue. Keep in mind that you will probably pay a premium for that privilege. Make sure that you have your agent check comps so that you can pay at parity for the house that you get. Commercial investors may also prefer a turn key property because of the fact that you can immediately move in renters.
However, DIY properties are nothing to completely forget about. There are plenty of advantages to paying less up front for a property, especially if you have the ability to fix certain things yourself. Take a look at the home inspection report and see if the needed repairs are things that you can handle. Also, create an appraisal report with a reputable real estate agent to see how much your repairs will improve the value of your home. Once you run the numbers, you will be able to make a better decision about the type of property that you want, and you will see if you have the resources to afford it and make it the home of your dreams.
2 Point Highlight
There is always a legal risk that you take bringing in tenants if your property has not been recently maintained, and you face fines and penalties that far outweigh the cost of repairs that you would have if you chose to fix up the property.
Whether you are investing in a turn key property as a primary residence, a mixed use property, or a completely commercial rental property, there is a certain peace of mind and financial incentive to having real estate ready to go.
