← Back to Blog

Mar 1, 2023

What is a Turnkey Investment Property?

It can seem like there are an endless amount of investment options out there from buying individual stocks to investing money into your 401k. However, real estate has been, and continues to be one of the best investments and has stood the test of time through wars and recessions. In an age where everything is becoming digital, investing in real estate is one of the rare tangible investments you can still make.

Within the realm of investing in real estate, there are various options from flipping houses, to the buy, renovate, refinance and rent (BRRR) model. However, these models can be costly, and returns can easily shrink if you don’t buy right or keep your budget on track. This is exactly where a solid rental property can be the perfect low risk, high return investment.

Turnkey investment properties explained

A turnkey investment property is one that is completely ready to go, meaning it can be rented out from day one of closing. This means that as an investor you rarely have to do any improvement works to it, and all you need is a tenant. In many cases, turnkey investment properties already have a tenant in situ; so from the point at which you close you will be receiving rental income immediately.

Turnkey investment properties are also reasonably priced and offer a strong monthly rental value, resulting in an excellent rental yield and return on your investment. Many turnkey investment properties offer a great return on investment, with capitalization rates exceeding 8% in some cases.

By investing in a turnkey property, you not only benefit from monthly positive cashflow, but also capital appreciation from the property as the asset will increase in value over time.

An example of a turnkey property

If you were to purchase a 3 bedroom, 1 bathroom, 1300 square foot turnkey investment property with an existing tenant for $125,000, and achieve a monthly rental income amount of around $1090, this would equate to a very healthy gross rental yield of 10.46%.

This is calculated by dividing the annual rental income by the price of the property, and multiplying by 100. The capitalization rate is used to determine the value of an income generating piece of real estate, expressed as a percentage. The main difference is that the rental yield is calculated based on the cost of buying the property, whereas the capitalization rate is calculated using a property’s value, which will increase as time goes on.

When you consider that these values are based on paying cash, the returns can increase significantly when using leverage and purchasing with a mortgage. With the above example, this means you could purchase the property using a mortgage and only need a deposit of around $30,000.

Summary

As we’ve seen, a turnkey investment property is a ready made, income producing asset which over time has proven to be an excellent investment, providing investors with monthly cashflow, a high rental yield and the benefit of capital appreciation. With a low initial investment and many of these properties already tenanted, they are an excellent investment opportunity, very often beating returns on other investments such as the stock market.