Why a Turnkey Property is a Profitable Investment

After the housing market crash nearly a decade ago, many towns and cities that were directly hit had to recover in their own way. While some practically became ghost towns, some re-emerged as economic hotspots for the real estate sector. Examples of such renaissance are areas with a growing number of turnkey rental properties.

Turnkey properties are normally found in undervalued markets where there’s a multiplying demand for cheaper real estate or affordable rental opportunities. These properties are highly profitable, all because of simple market forces that attract turnkey firms, investors, and customers.

Cheap homes, strong rents

There are many turnkey companies in the U.S. They usually buy, rehab, rent, and sell properties to investors. Some would specialize in finding cheap properties (e.g., as low as $20,000) needing renovations for investors, and then doing the renovations for them.

A majority of turnkey companies charge a 3% fee for every property acquired, and between 7% to 10% fee for the management of such properties. These are manageable costs, but with properties selling between $50,000 and $150,000, the rewards are high.

Most turnkey properties are found in areas hard hit by the housing bubble. Most investors come from markets with high-priced real estate properties. Simply, they are attracted to areas with low home prices but with improving rental demand or relatively strong rents.

Most profitable turnkey properties

Most turnkey properties are from cash flow-positive markets or those areas that boast price-to-rent ratios that lead to positive cash flows. As mentioned, areas most impacted by the housing crisis have the most number of turnkey properties, but only if they have improved demand for rental homes.

Another profitable location for turnkey properties are cities and towns near or surrounded by colleges and universities. The demand for rental properties is stable considering that every year, new students replace those who graduate.

The most profitable of all are pre-boom cities. These areas exhibit growth that is steadily increasing in many economic and socio-demographic measures, from a growing population, industry and job growth, higher investment to public infrastructure, to lower crime rates.