Imagine buying a house that’s totally finished.
Seamless hardwood meets fresh paint. Stainless appliances grace contemporary cabinets. Home systems function efficiently, and the white picket fence gleams pristine.
No repairs, remodels, or hair-wrenching necessary. Simply turn the key and start living.
Feel free to pinch yourself — houses like this exist in the real world, and we’re not referring to new builds. We’re talking about turnkey houses.
What is a turnkey house?
The term “turnkey house” has two basic definitions in the real estate world:
- Generally, turnkey is a descriptive word indicating a house is “move-in ready.” True turnkey houses are in excellent structural and cosmetic condition, meaning you don’t need to spend money or time on repairs or design updates. What you see (and pay for), is what you get.
- In the property rental space, investors will pay a markup for “turnkey” homes that are fully rehabbed and may also have tenants paying rent and property management already in place. Here’s how this works: Turnkey “providers” scoop up rental properties in bulk (often hundreds at a time), get them ready to rent, and then resell them to private investors at a premium who in return have to do less legwork to start seeing returns.Depending on the level of service, turnkey providers will also act as property managers who fill tenant vacancies, conduct tenant background checks, manage leases, provide maintenance, and collect rent on behalf of the owner.
Is buying a turnkey house right for you?
Turnkey homes particularly suit those who would rather pay more upfront in order to skip out on home improvements down the line. Top candidates for turnkey houses include:
Buyers who fear home improvement:
If assembling your IKEA Lerhamn table brought you to tears, consider buying a turnkey house. But you’ll pay a premium for a house in perfect condition, so expect to compromise on the square footage or location you’d score with a fixer-upper.
Buyers on a strict budget:
Cost wise, turnkey houses are straightforward investments: the price you see is what you’ll pay — you shouldn’t have to write out any surprise checks for a plumbing leak.
“Trending wise, people who are on a limited budget and first-time homebuyers look for turnkey homes more than anyone,” shares Christina Griffin, a top real estate agent in Tampa, Florida who’s sold more than 1,800 properties. “It’s often people that have a very limited budget to move. They could just have 3% for a down payment and 2% for closing costs, so they want to make sure there’s no potential issues.”
Millennials make up a large portion of this group, a recent survey revealing 48% of young buyers desire a turnkey house that requires little maintenance.
Busy real estate investors:
Turnkey houses are also ideal for real estate investors who have more capital than time. Investors expend fewer holding costs — mortgage payments, insurance, utilities, and HOA fees — than if they purchase a house which requires time and money for upgrades.
If a house isn’t turnkey, the period the property is under construction and tenantless prolongs these expenses, delaying cash flow from rental payments. Some turnkey companies sell houses with tenants already placed, completely eliminating holding costs from the picture.
How does the price of a turnkey house compare to that of a fixer upper?
With few flaws to knock, turnkey houses are priced significantly higher than houses of comparable size and location that require some TLC. You’ll pay more for a turnkey house at purchase, but may ultimately spend the difference or greater on a fixer-upper in the long run.
A recent survey by Porch.com found respondents who bought turnkey houses said they spent an average of $250,496, while those who purchased fixer-uppers paid just $199,819.
After renovations, fixer-upper buyers who stayed within budget spent on average $246,891 in total. Those who went over budget — a whopping 44% — spent on average 38% more than expected, totaling on average $275,741. That’s around $25,000 more than the average cost paid for a turnkey house.
That said, the decision to purchase a turnkey house is not just a matter of price but also of personality.
If your office daydream is a kaleidoscope of tile colors and customized countertops, a turnkey house might be “too done,” leaving you little budget to adapt the home to your personal style.
Fixer-uppers also have the advantage for buyers who want a home they can grow into. You can buy a bigger house or live in a better location for a lower purchase price and improve the house as time goes on.
What should I look out for when buying a turnkey house?
Remember, “turnkey” is not a promise. It’s a subjective term. Sellers and listing agents boast their house in fantastic condition is “turnkey” to attract buyers, but no house is perfect. When viewing turnkey houses, keep your wits and look out for:
Signs of faulty remodels
In last-minute efforts to raise the listing price, flippers and homeowners may opt for speed over quality when it comes to home remodels. Signs of poor workmanship include:
- Fresh paint hiding decaying cabinets
- Cracked or unaligned moulding
- Flooring butted up against walls and door jams
- Gaps or crooked lines between countertops and backsplash tiling
- Windows and doors that don’t open properly
Decaying structural elements masked by trendy home design
Don’t let gorgeous granite and stainless appliances blind you from the home’s most important structural features.
A house with a turnkey price tag should look fabulous and function efficiently. For instance, the heating and cooling system and roof should be mint; on average a new HVAC unit costs a cool $5,000 to $12,000, while a new roof could set you back an average of $5,000 to $11,000.
Signs the HVAC is old or malfunctioning include:
- Dirty air filters
- Air vents with blackened edges
- Drywall discoloration around the air conditioning and water heater
- Fluid leaking from the main HVAC unit
- Faulty thermostats displaying the wrong air temperature
The roof is due for repair if you see:
- Mold or decay on soffits, fascia, or where the exterior wall and roof meet
- Cracked, warped, or absent shingles
- Interior water stains on the ceiling or around bathroom fans
How can I protect myself from buying a faulty turnkey house?
Ensure the turnkey house of your dreams ticks all the boxes with the following protective measures:
Conduct a full home inspection
Request a full home inspection before buying the property. A home inspection evaluates a house’s heating and cooling systems, plumbing, electrical, roofing, walls, flooring, windows and doors, foundation, and more. Hire a licensed, detail-oriented inspector for a thorough report.
Griffin advises, “I’ve been in the industry for a long time, and I’ve seen homes inspected by two different inspectors.
“One pulls issues and one doesn’t. It just depends on how far they look. A lot of home inspectors just have a certificate and some are licensed general contractors.”
The best way to find a reputable inspector is through your real estate agent. Griffin’s team connects their buyers to several trustworthy inspectors, leaving them with the decision of who to hire. When you find a match, request copies of the inspector’s license, insurance, and home inspection certificate for your records.
Include an appraisal contingency
Turnkey houses are sold at a premium — don’t buy one for more than it’s worth. Include an appraisal contingency in your offer stating the house must appraise at the sale price or higher for your offer to remain valid.
Even if you can afford to pay more than market price, why would you? That excess cost will only come back to bite you when you’re in the seller’s seat.
Get a home warranty
If you suspect you might be the guinea pig for all the shiny new appliances a flipper installed a week before listing, purchase a home warranty.
Also known as home repair insurance, a home warranty protects you against emergency expenses that arise from appliances, electrical systems, HVAC units, garage doors and other home systems’ potential malfunction.
Most home warranties exclude “known issues,” so problems listed in the seller’s disclosure and home inspection report are not covered. However, the warranty will provide you with some financial back up for an unexpected mid-winter’s heater nightmare or an indulgent jet-tub dysfunction during your first year in a new house.
The average cost of home repair insurance is $500 to $700, though price varies beyond this range for premium coverage. You can pay for the warranty yourself or negotiate that the seller covers the price in their closing costs.
Vet your turnkey provider
If you’re an investor purchasing a rental property through a turnkey provider, compare reputable companies before you commit to buying. Check out Fit Small Business’s list of the best turnkey real estate companies ranked by factors such as property rehabilitation, tenant selection, and average return on investment.
In addition to vetting the turnkey provider, you need to do due diligence on the rental property as you would if you were buying a house to live in:
- View the house in person, even it if requires a trip out-of-state
- Check out the neighborhood; safe neighborhoods are more likely to retain tenants (and less likely to draw unsavory vandalism)
- Confirm the house’s interior matches the listing photos
- Obtain a home appraisal so you don’t pay over market value
Buying a turnkey house still requires some legwork
At their truest expression, turnkey houses are gorgeous, move-in ready, and stress-free. But at their worst, they can be cleverly staged, over-marketed, and over-priced. If you’re set on owning a turnkey house, kick off the homebuying process by partnering with a top real estate agent.
Real estate agents can tell a true turnkey from a cheap flip like a jeweler detects a diamond from a CZ. They’ll guide you through the entire process from house hunting to negotiation. Once you finalize the paperwork, you can begin your new Pinterest-esque life from the moment you open the front door — no DIY project list required.
Header Image Source: (Mārtiņš Zemlickis / Unsplash)