A turn-key investment property is a big hit for investors looking to simplify the investing process. There are many different definitions of turn-key, so let’s clear it up first. A turn-key investment property is in great shape and doesn’t require any rehab work. The property is sold as a rental with a paying tenant, either already in place or will be placed after the sale. Turn-key investing has become a great way for people to invest in real estate when they live in an area that is not conducive to cash flow properties. If you live in New York, San Francisco, or any other locations where it is impossible to buy a house cheap enough for cash flow, turn-key investing may be a viable option. In addition, buying a turn-key investment property allows a long-distance investor to participate in a ready-made cash flow, hopefully with minimal to no work.
Turn-key Investment Property: The Bottom Line
Turn-key companies provide a convenience for investors; and they should want to do business with profitable, successful turn-key companies. These, after all, are the companies investors are asking to manage their investment portfolios; and their success is largely the reason for profits.
Turn-key companies provide a very valuable service for real estate investors, but this does not mean that all investors will find success when buying turn-key properties. Many find themselves in markets where long-term buy & hold strategies are not possible, and they have to look elsewhere for long-term gain. They instinctively begin to look for opportunities and invariably find turn-key companies. An investor working with a good turn-key provider will find success and be able to build a good long-term portfolio.
Diversification with turn-key rental properties
Many people like to spread out their risk when investing, and it is no different with rental properties. If you own all your properties in one location, it would be riskier if something were to happen regionally. We do, however, recommend buying rental properties close to each other so you can leverage the same property manager. It’s ok to buy in different cities as long as the properties within these cities are close to each other. If you invest in an area that is dependent on one industry (Detroit) or prone to natural disaster (hurricanes, earthquakes), then it might be wise to diversify a little.
When should you invest in a long-distance turn-key property?
When starter homes are over $400,000 in your area, it is almost impossible to get cash flow on a rental property unless you pay in cash. Rents are almost never high enough on a $400,000 home to cash flow no matter where you live resulting in a lower ROI. You can buy two or three cash flowing rental properties in our markets, where someone in a more expensive area could only buy one such property that may not cash flow at all. If you are in an area with very expensive homes or very low rents compared to home prices, you may want to consider a long-distance turn-key investment property.
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