A turnkey property is one that is in livable condition and is move-in ready, meaning that it doesn’t require repairs. Turnkey properties often have tenants already in them and a property manager already managing them. Investors most commonly purchase these properties from turnkey real estate companies, but private individuals can also sell these seasoned units.
If you want to purchase a turnkey property, check out Roofstock. They have custom filters so you can find a property that works for your budget and desired location. Membership on its site is free and investors can find single-family homes that are already leased so you start making money from day one.
How Turnkey Real Estate Works
Properties become “turnkey real estate” when real estate companies buy properties, get them rent-ready, and simultaneously list the properties for sale while securing prequalified tenants. Turnkey companies provide property management services to the new owners. Turnkey properties are typically sold in good condition and have tenants. They’re generally more expensive than properties that need rehabbing.
Long-term investors buy turnkey properties to avoid rehabbing and seasoning investment properties. Owner-occupants buy them because they’re move-in ready. Turnkey real estate can include new construction as well as older homes that have been completely renovated. Investors typically buy the property with a hard money loan or cash and pay the turnkey real estate companies with rental income to manage the properties.
Turnkey properties are generally sold to the turnkey company’s network of investors or to new investors who contact them through their website. The properties are usually not listed on the Multiple Listing Service (MLS) or with real estate agents since the turnkey real estate companies often have their own buyers.
Top 5 Turnkey Real Estate Companies
Turnkey Real Estate Companies
Choosing from properties in 23 states
1-4 unit properties in researched locations
In-house financing, title, escrow, and relocation services
Connecting with local property managers
Socially conscious company; single-family properties in a few locations
Roofstock was started for investors by investors with a focus on ensuring each property is cash positive from the day it is sold. Roofstock doesn’t own the turnkey properties they list, but they vet them based on specific property characteristics and income potential. They offer fully seasoned units with management companies in place or on call.
Roofstock a great choice for investors who are looking throughout the U.S. for turnkey properties, since they currently have listings in 23 states, and are a well-known, reputable company. Most turnkey real estate companies don’t offer properties in that many states or only offer properties in the state where they’re located.
HomeUnion also doesn’t own the turnkey properties they sell. Instead, they find and advertise properties through the Multiple Listing Service (MLS) and directly from turnkey real estate companies. They focus on properties with up to four units and make sure each property is carefully vetted before advertising it.
HomeUnion uses a data collection system called Neighborhood Investment Rating (NIR), which evaluates neighborhoods based on economic, environmental, and demographic features. It is therefore a good choice for investors looking for one- to four-unit turnkey properties in researched locations.
In addition to offering seasoned properties, Howard Hanna provides in-house financing, title, escrow, and relocation services for International investors. They have a separate property management division that covers five of the eight states where they operate.
They’re a good choice for investors looking for luxury properties, which they refer to as “Homes of Distinction.” Since they’re the third-largest real estate company in the U.S., they have a division that is dedicated to finding and marketing luxury properties and have expertise in this niche market.
Norada Real Estate Investments
Norada Real Estate Investments offers single-family homes, multifamily properties, and condos in high growth areas. To help investors secure and maintain turnkey properties, they work with a diverse network of lenders and property managers within the 15 states where they operate.
Norada is a good choice for investors who are looking to minimize risk while maximizing profitability within top real estate growth markets. They also offer property appreciation forecast and data on properties in the areas where they operate.
Maverick Investor Group
Maverick Investor Group focuses on single-family homes in areas with strong job and population growth. They usually work with investors with down payments of at least $50,000. They don’t manage properties but have a network of vetted property managers who only rent to qualified tenants. Occasionally, Maverick Investor Group offers discounts on property management if buyers purchase more than one property.
They are a good choice for socially conscious investors since they donate 10% of company earnings to charities they believe in, including giving back to the communities where they sell properties, creating jobs, and supporting the homeless and working poor who cannot afford to rent a home, in addition to other causes.
Types of Turnkey Properties
There are different types of turnkey real estate to consider. Turnkey properties can be condominiums, single-family homes, multifamily units, or apartment buildings. A turnkey condominium has been renovated and is in move-in condition. It is either already rented to a tenant or ready to be rented. Single-family homes are also considered turnkey properties when they’re in move-in condition.
Multifamily and apartment complexes are considered turnkey when they meet building and safety codes and usually have qualified tenants renting them. Even if these properties are advertised as in turnkey condition, it’s best to have a full property inspection to be sure all systems are working properly. In addition to building and safety code standards, turnkey properties should have certain features such as updated appliances, fresh paint, and flooring.
How to Find Turnkey Properties in 3 Steps
Now that you understand what turnkey properties are and what to look for, let’s consider how to find them. The most popular place to find turnkey properties is through a turnkey real estate company. These companies typically have a portfolio of turnkey real estate that they buy, rehab, sell, rent, and manage for the new owners.
The three steps to find turnkey properties are:
1. Do Your Research
As with any real estate purchase, it’s important to do your homework. During the first part of your research, focus on neighborhoods and home prices using sites like Zillow. Research how much comparable properties sell for to avoid overpaying. After your initial research, you’ll need to visit the property. Drive through the neighborhood and look for signs of distress, such as boarded-up properties, closed businesses, and unkempt streets.
For the second part of your research, investigate turnkey real estate companies. Look for reputable companies with a known track record for selling cash-positive properties with stellar property management services. Read turnkey real estate company reviews to glean their level of experience, what fees they charge, who manages maintenance requests, and how long it takes them to rent vacancies.
Four common fees charged by turnkey real estate companies include:
- Property management fees: Turnkey real estate property management fees range from 10% to 20% of the gross monthly rental income. Sometimes additional fees are charged for maintenance, leasing, advertising, and vacancies.
- Leasing fee: Leasing fees are typically equivalent to one month’s rent, or can be a flat fee up to $500.
- Eviction fees: Eviction fees vary by state and include court filing and legal fees, where applicable. It’s important to make sure the turnkey real estate company thoroughly screens tenants before placing them. Ask to review applications and leases.
- Real estate commission: Real estate commissions to buy or sell the properties are typically paid from the proceeds from the sale. The commission can range from 5% to 7% of the sale price.
Gigi Luu, a real estate agent at Msquared Real Estate, who works with owner-occupants buying turnkey properties in the D.C. area, says:
“Make sure you aren’t overvaluing the property during the research stage just because it is new construction or renovated. Certainly, there is a premium to purchase a new product, but you still don’t want to overpay, so be sure to pull comps. Pay close attention to properties that have sold close by with a similar level of finish.”
2. Work With the Right Turnkey Real Estate Company
Many real estate investors who buy turnkey properties do so because they don’t want to do their own renovations, rental property maintenance, or property management. They prefer rent-ready properties with professional property managers in place who manage everything.
Whether you work with one turnkey real estate company or many, vetting companies beforehand is critical. It’s also important to find the right company to work with since it’s a long-term relationship. Choose a company you have thoroughly researched before looking at their inventory. Review the applications, background checks, and leases the turnkey companies have of the existing tenants.
Many turnkey real estate companies have large inventories of properties in multiple states. Less common, turnkey real estate can be found through local real estate agents and the Multiple Listing Service (MLS), which can be searched by the property’s condition, price, and neighborhood. Most real estate companies don’t manage the properties and don’t sell outside of their area, so it’s best to interview before working with them.
Step 3. Finance Your Turnkey Property
After you’ve done your research on neighborhoods, prices, and turnkey companies, you’ll need to determine how to finance the property. Since these properties don’t need repairs to bring them up to code, they can be financed with many types of loans, including conforming loans, portfolio loans, multifamily and apartment complex loans, hard money loans, and cash.
Turnkey Real Estate Financing
Turnkey properties are easier to finance than other properties that need repairs. Some investors choose to pay with cash, but it’s more common to leverage the properties with financing. Conforming loans, portfolio loans, and multifamily loans are common financing options. Some turnkey real estate companies only work with cash buyers or hard money loans.
Turnkey Financing Options
Who It’s Right For
Buy-and-hold owner-occupants and investors
Investors buying multiple turnkey properties, or building a mixed portfolio
Investors of non-owner-occupied turnkey properties
Investors buying 90-day seasoned properties with 90% occupancy
Investors buying rented or rent-ready turnkey properties
Conforming loans are mortgages that meet certain criteria in order to conform to Fannie Mae and Freddie Mac guidelines. As of 2019, the maximum loan amount for most areas is $484,350. Fannie and Freddie offer some of the best interest rates in the market.
If you’re purchasing in an area that has above average housing prices and a high cost of living, such as San Francisco, the conforming loan limits increase. The same is true for properties with more than one unit. For example, if you purchase an owner-occupied, four-unit property in San Francisco, the loan limit increases to $1,397,400.
Conforming Loan Rates & Terms
Conforming loans offer low-risk, long-term financing for owner occupants and investors looking for single-family homes, condos, and multifamily properties with up to four residential units. This type of financing typically equates to lower monthly mortgage payments and less interest expense over the term of the loan, making it a good choice for turnkey properties.
Conforming loan rates and terms include:
- Interest rates generally from 3.5% to 7%
- 15- to 30-year terms
- Typically 80% loan-to-value (LTV); owner-occupied can be 97.5% LTV
- 2019 maximum loan amounts of $484,350 for single-family in most areas
- Regions with higher costs of living and higher property values have higher loan limits
Conforming Loan Qualifications
In order to qualify for a conforming loan, borrowers must meet certain lending criteria. This criteria is standardized and must meet federal guidelines. It includes a minimum credit score, PMI (private mortgage insurance) for loans with less than a 20% down payment, holding up to six months of cash reserves, and a down payment.
Conforming loan qualifications include:
- Minimum credit score of 620 (check your credit score for free here)
- Mortgage insurance, which is required for loans above 80% LTV
- Having three to six months of cash reserves for non-owner occupied properties
- A down payment of 3.5% or more depending on the type of property, loan product, and borrower profile
Where to Find Conforming Loans
Conforming loans are readily available and can be found at local banks, credit unions, and other lenders, except for private lenders. These loans are government-backed loans that are guaranteed by the Federal Housing Administration (FHA), Freddie Mac, or Fannie Mae. Most banks and credit unions have mortgage lending departments and will be able to provide information about their loan products.
Portfolio loans are offered by private lenders who lend to investors and hold the mortgage in-house to receive interest income. Portfolio loans can be used to finance single-family, multifamily, vacation rentals, and apartment buildings. They are often used to finance more than one property at the same time, aiding investors in building a real estate investment portfolio.
Portfolio Loan Rates & Terms
Portfolio loans offer higher maximum loan amounts than conforming loans. They can be used to finance properties in turnkey condition and properties that need rehabbing. Some portfolio loans may carry additional fees and prepayment penalties. Make sure to understand how the variable interest rate works and be sure to understand all loan features before borrowing.
Portfolio loan rates and terms include:
- 5.2% to 7% fixed and variable interest rates
- One to 30-year terms
- Being able to hold four or more loans at the same time
- Being able to carry a single blanket loan for multiple properties
- A minimum property value of $75,000
- Maximum property limits over $2,000,000
Portfolio Loan Qualifications
Portfolio loan qualifications are more flexible than conforming loans. There are no restrictions on the number of properties being financed at any given time. Portfolio lenders consider the property’s value, debt service coverage ratio (DSCR), and the investor’s experience over the credit score (though credit score may still be a factor for some lenders). Portfolio loans offer a wide range of lending solutions and qualifications can vary.
Portfolio loan qualifications include:
- 640 credit score (check your credit score for free here)
- Must be rent-ready
- Cash reserves of six or more months of rental income and expenses
- Sometimes funded in as little as 10 days
Where to Find Portfolio Loans
Portfolio loans can be found through most private lenders as well as some banks and credit unions. Real estate investors like portfolio loans for the more lenient lending criteria, faster closing time, and the ability to finance larger projects that traditional lenders typically won’t finance. Portfolio loans are great for investors who are buying multiple turnkey properties, or building a mixed portfolio of properties.
If you’d like to review our top choices for portfolio lenders, check out our article on the five best portfolio lenders.
Multifamily loans are primarily used to finance residential properties with two to four units. They can also be used to finance larger properties such as apartment buildings, though commercial property loans are more typical for apartment complexes. There are several different types of multifamily loans, each with varying rates, terms, and borrower qualifications.
Multifamily Loan Rates & Terms
Multifamily loan rates and terms vary depending on the type of loan and the property’s condition. There are both short- and long-term loans available to investors. Multifamily loans do not have to be owner-occupied. As with any loan, the property will have to appraise at or above the sale price, and typically, the debt to income ratio (DTI) will range between 70% and 80% depending on the property’s condition.
Multifamily loan rates and terms include:
- Residential properties with two to four units
- Interest rates between 3.6% and 12.5%
- One- to 30-year terms available
- Loan amounts vary depending on location
- Down payment of 20% to 30% or more
Multifamily Loan Qualifications
Multifamily loans have different qualifications depending on the lender and type of loan. A higher credit score is generally needed to qualify for a multifamily loan and the property needs to be in livable condition for most loans, making them suitable for multifamily turnkey properties, since the rehab work is done. Some multifamily lenders will include some of the rental income from the property in their income qualification guidelines.
Multifamily loan qualifications include:
- A credit score of 640+ (check your credit score for free here)
- Six months of rental income and expenses as cash reserves
- Two- to four-unit building
- Property that is in good condition
Where to Find Multifamily Loans
Multifamily loans can be found through banks, credit unions, and other lending institutions. Private lenders like Lima One Capital also offer multifamily loans. Rates start as low as 6.99% for a turnkey multifamily property with a 25% down payment and no prepayment penalty.
Up to 97% LTV
7.99% and up
Up to 24 months
75% LTV or LTC
Apartment loans are loans that are used to finance buildings with five or more residential units. In order to obtain an apartment loan, there are specific loan requirements that must be adhered to. Interest rates, terms, and qualifications vary depending on the loan. Traditional and local banks treat apartment loans as a commercial loan product. Qualifications are more stringent with these lenders.
Apartment Loan Rates & Terms
Apartment loan rates and terms vary depending on the lender and the property’s condition. There are three major types of apartment loans: permanent government-backed apartment loans, permanent balance sheet loans, and short-term loans. Each loan has its own criteria, qualification guidelines, and loan-to-value (LTV) or loan-to-cost (LTC).
Apartment Loan Qualifications
Apartment loans are geared towards investors looking to finance multifamily dwellings or apartment buildings. They have strict qualifications that must be met in order to qualify, such as higher credit scores, a liquidity requirement, high occupancy rates, and a time period for how long the units have to be occupied prior to funding.
These loan qualifications include:
- A minimum credit score of 650 (check your credit score for free here)
- Nine or more months of liquidity
- Occupancy rate of 90% to obtain permanent financing
- Seasoned 90 days prior to funding
Where to Find Apartment Loans
Apartment loans can be found through local and national banks, credit unions, and government agencies. The most common apartment loans are guaranteed by government-backed agencies such as Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA). These government agencies do not lend money, but they will guarantee, or “back,” a loan, lowering risk to the lender.
Hard Money Loans
Hard money loans, referred to as fix-and-flip loans, are generally used to purchase properties that need rehabilitation. They aren’t a common source of funding for turnkey properties since these properties can be financed through lower rate, long-term loans. Some turnkey real estate companies will only accept cash or hard money loans. They may be used if an investor purchases a vacant turnkey property and needs to season it before refinancing to a long-term loan.
If you decide to buy turnkey real estate and need to season it before refinancing, contact LendingHome. They provide competitive rates that start at 7.5% and they qualify you online within minutes.
Who Turnkey Properties Are Right For
Turnkey properties are good for hands-off investors looking for long-term, flexible, and passive wealth building strategies. They offer the opportunity to own investment property without having to be actively involved in property management. Turnkey properties are also right for owner-occupants who want a move-in ready property.
Ideal buyers of turnkey properties include:
- Landlords who want to buy properties in a different location from home
- First-time landlords who want to get started in real estate investing
- Busy landlords who don’t want to manage their properties
- Investors who want a long-term investment strategy with steady cash flow
- Low-risk investors who don’t want the risk of potential income loss from flipping a property
- Owner-occupants who want a move-in ready property
- Investors reinvesting gains through a 1031 exchange since turnkey properties can be purchased quickly
Turnkey properties aren’t ideal for investors who enjoy DIY repairs or want to rehab a property with a fix-and-flip loan. They’re also not suited to investors who want to use a rehab loan to purchase and restore a buy-and-hold distressed property. Landlords who prefer a hands-on approach and want to engage with their tenants also aren’t a good fit for turnkey properties since most of them have a management company.
For those landlords who want to manage their own properties, check out our landlord tips article. If you don’t want to deal with the turnkey real estate company and are instead looking for a deal, you can buy properties at auction or purchase a bank-owned property.
Turnkey Property Mistakes to Avoid
Three turnkey property investing mistakes to avoid include:
Pros & Cons of Investing in Turnkey Real Estate
Investing in turnkey real estate can be a great wealth building strategy, but it has pros and cons. For example, buying turnkey real estate is generally a long-term investment with fewer risks, but the returns aren’t typically as quickly realized as they are with fixing and flipping properties. Still, turnkey properties are easier to buy, maintain, and manage since they often have a management company in place.
Some of the pros and cons of buying turnkey properties include:
Pros of Investing in Turnkey Real Estate
The pros of investing in turnkey real estate include:
- No rehab costs: You won’t have to spend more money or time on renovations since the work has already been done for you.
- No contractors: You don’t have to find and deal with contractors and a rehab timeline.
- No tenant searching: These properties are often fully rented with qualified tenants, so you don’t have to locate and screen applicants.
- Built-in property management: If you hire a turnkey real estate company, you don’t have to spend time managing the property, since many come with property managers.
Cons of Investing in Turnkey Real Estate
The cons of investing in turnkey real estate include:
- More expensive properties: You will spend more money to acquire the property since it doesn’t need to be fixed up.
- Can’t choose first tenants: Your cash flow depends on tenants, who you did not choose, to pay the rent.
- Giving up control to property managers: You have less control over the property if you use a management company.
- Limited locations: Turnkey investment properties aren’t as easy to find and turnkey real estate companies don’t operate in every state.
After reading this article, you should have a better understanding of what turnkey properties are, what features to look for, and where to find them. You also have the tools to evaluate turnkey real estate companies and choose one that is right for you. Turnkey financing can vary, so check with various lenders for property types and loan qualifications.
If you want to purchase turnkey real estate from a reputable, nationwide company, check out Roofstock. They were created by investors for investors and they exclusively invest in single-family homes that are generating positive cash flow and already rented to qualified tenants. Sign up for an account for free.