Loading the player...

DEFINITION of 'Turnkey Property '

A turnkey property is a fully renovated home or apartment building that an investor can purchase and immediately rent out. Turnkey properties are typically purchased from companies that specialize in the restoration of older properties. Those same firms may also offer property management services to buyers, minimizing the amount of time and effort they have to put into the rental.

BREAKING DOWN 'Turnkey Property '

Turnkey properties grew in popularity following the housing market decline of 2007- 2008, when it became cheaper to buy homes than rent them in most parts of the United States.

This investment approach is especially appealing to individuals who desire exposure to the real estate market but who do not have the time or ability/interest to renovate a home or handle maintenance issues. In most cases, the investor will hire a separate company to manage the property. For more information on owning rental property, see "The Complete Guide to Becoming a Landlord" and "The Pros & Cons of Owning Rental Property."

The term turnkey property is not used solely by investors, however. In marketing literature, realty companies sometimes use the phrase to describe any renovated, move-in ready home that is up for sale.

How a Turnkey Property Is Used Generate Revenue

The purchase of a turnkey property is expected to give the new buyer opportunity to immediately make it available for tenants. By acquiring real estate that requires little to no refurbishment, the intent is to quickly generate revenue through renting the property as quickly as possible. The extent of the work necessary to bring a residence to turnkey status can include replacement of electrical fixtures, repairs to plumbing, fresh paint for the interior, and fixes to the flooring where necessary. The shorter the turnaround to rent the property, the faster the new buyer may start seeing a return on their investment.

The effectiveness and worth of fully renovating a home or other dwelling may be questioned if the goal is to put the property up for sale rather than for rent. The expenses that may be put toward repairs and, say, fresh paint might not be a selling point as prospective buys could want to make alterations to the property. That could include tearing out or doing away with the very refurbishment done by the current owner. Also, the money spent making those repairs will likely increase the asking price of the seller. In some instances, particularly for selling a residence, it may be more efficient to see that repairs are done that bring the building up to code, but little more.

RELATED TERMS
  1. Turnkey Cost

    Turnkey cost is the total cost that must be covered before a ...
  2. Turnkey Solution

    A turnkey solution is a type of system that can be easily implemented ...
  3. Turnkey Business

    A turnkey business is a business that is ready to use, existing ...
  4. Property Manager

    A property manager is the person in charge of the day-to-day ...
  5. Income Property

    An income property is property bought or developed to earn income ...
  6. One Percent Rule

    The one percent rule is a rule of thumb used to determine if ...
Related Articles
  1. Managing Wealth

    10 Tips for Buying Your First Rental Property

    Buying a property for rental income is a bit different than buying a home to live in.
  2. Investing

    8 Must-Have Numbers For Evaluating A Real Estate Investment

    These calculations can help you figure out if a particular property will be a valuable investment.
  3. Taxes

    10 Things to Know About 1031 Exchanges

    Real estate swaps grow popular, but traps are many. Here's 10 things to know when considering 1031 swaps. Also: Beware new rules on vacation homes.
  4. Investing

    4 ways to value a real estate property

    Here are several approaches to evaluate real estate properties for investment purposes.
  5. Investing

    Use Real Estate To Put Off Tax Bills

    Find out how you can build wealth and reduce your taxes.
  6. Investing

    Rent-to-Own Homes: How the Process Works

    A rent-to-own agreement, also called a lease option or lease-to-own agreement, offers an alternative way to buy a home.
  7. Insurance

    Can You Make Money Renting Your Property?

    Current market conditions may make your home a tough sell. It could be time to consider renting your property until a profitable sale is possible.
  8. Taxes

    How To Prevent A Tax Hit When Selling A Rental Property

    Rental property ownership has its benefits but when selling you can face a big tax hit. Thankfully there are ways to reduce your capital gains exposure.
  9. Managing Wealth

    How To Properly Invest in Foreclosure Homes

    Investing in foreclosed homes to build wealth is a viable strategy, but it's not a way to get rich quick. Learn proper foreclosure investing strategies.
Trading Center