Real estate investors come in a lot of varieties. Different strategies, goals, opinions, and standards. You’re going to find a lot of differences of opinion out there.
And if you’ve ever looked into turnkey real estate, you’ve likely stumbled across this opinion: turnkey real estate is too expensive. It’s overpriced.
Is it true?
At Memphis Invest, we deal in turnkey real estate. So of course, you would expect us to say no, and we’re telling you: no. Is turnkey real estate more expensive than a rental property that you are going to buy yourself?
Yes, if you’re playing the right game. That’s because it’s a whole different strategy. See, it’s all about perspective. You can’t measure the cost of a turnkey property in the same way you would a traditional rental property. Let’s break it down:
Weighing the Cost of Traditional Rental Properties VS Turnkey Properties
Traditionally, you buy rental properties under market value in order to keep acceptable margins in your passive income. Turnkey properties are not priced under market value. So what’s the deal?
You have to remember a few key things here:
- Not all turnkey providers are created equal. Some will try to rip investors off. Do your due diligence.
- Buying under market value typically means that you will have to do repairs and renovations in order to bring the value up to be able to rent the property out at an acceptable price. Your renovations bring up the value of the property and force appreciation in one big burst. In a turnkey investment, you do not have to deal with this step. It’s been done for you by the provider and the property is ready to rent as-is.
- In both cases, you are paying what the property is worth.
It all comes down to what you value in your real estate strategy. The price of entry isn’t what ultimately matters. While some investors may grumble when they compare the below market costs of a pre-renovation property compared to a turnkey property that’s tenant ready, we have to remember that these are properties that suit different people.
The turnkey provider isn’t ripping investors off—they’re providing something that the other doesn’t, and that comes with a higher upfront price, but not necessarily a higher overall price. It comes down to what you’re looking for.
What Are the Benefits of Investing in Turnkey Real Estate?
Turnkey real estate investing isn’t for everyone, but it’s a strategy that suits a particular type of real estate investor. Maybe you’re not interested in a strategy that has you endlessly seeking out properties on your own, buying them, rehabbing them, renting, refinancing, and then getting up and doing it all over again.
Maybe you don’t have the time to fool with it. Maybe you’re new to the whole real estate investment thing and you just need help with it all.
Whether you’re trying to manage your risk or you just don’t have time for the hassle of the traditional model of investing in single-family rental properties, turnkey real estate offers a unique opportunity.
You might be trading in those under market values for a higher upfront cost, but you’re gaining the distinct convenience of not having to fool with the headache of it all. The entire process gets streamlined.
Turnkey real estate:
- Removes the headache and hassle of renovating your rental property after purchase.
- Takes the burden of landlording away from the owner with a property management team.
- Is as passive for the investor as real estate investment can get while still retaining clear control and direction over the investment.
- Manages risk by connecting investors with experienced real estate professionals through the turnkey provider.
- Allows investors to scale their portfolios quickly and with access to real estate markets nationwide.
Ultimately, the debate over the cost of turnkey real estate comes down to strategy and perspective. If we’re talking about face value facts, yes: turnkey real estate is more expensive than an under market value rental property that an investor would typically buy. However, we know that that isn’t the full picture.
We have to factor in the strategy and benefits that are behind investing in turnkey real estate: and you have to decide if that is the road you want to take.