turnkey vs fixer upper

Turnkey vs Fixer Upper Homes: What’s A Better Investment?

Investors usually buy two kinds of homes: turnkey vs fixer upper properties. However, which kind of home is the best choice for investors? There are several factors to consider.


What Is a Turnkey Property?

Before we get into the turnkey vs fixer upper debate, we must define both terms. What is a turnkey property? Simply put, these properties are move-in ready. The home could be fully renovated or newly constructed. Regardless, the house is in top condition when the listing goes up.

Many companies that offer turnkey properties are also in the property management business. They renovate homes and sell them at the same time. This can be an appealing setup for landlords-to-be who want a hands-off approach to rental property management.


What Is a Fixer-Upper Home?

fixer-upper or move-in ready homeAs the name implies, fixer-upper homes are the complete opposite. They’re fixer-uppers and need renovations, remodeling, and repairs before they’re ready to rent out. The buyer is the one who needs to put in the work (and money) to upgrade the home.

However, despite the condition of these homes, many investors favor them due to their low price points. Investors are also in control of all the renovations. As a result, they can choose which areas to prioritize and what design style to use. Those with good intuition can transform these properties into something that will attract future renters.


Turnkey vs Fixer Upper: The Pros and Cons

Between turnkey vs fixer upper homes, which is the better investment? Here are the advantages and disadvantages of each kind of investment property.


Benefits of Turnkey Properties

When choosing between a turnkey home vs fixer-upper home, one of the main concerns investors think of is cash flow. If the investor needs to start earning cash immediately, then a turnkey property may be the right choice. This is because turnkey properties need no renovations. Landlords can rent them out as soon as they own the home.

In addition, landlords can use the listing photos to rent out the home. This can help the unit stand out from the competition, especially if the listing photos were professionally taken. Landlords can also quickly hand over turnkey properties to property management companies for passive income.

Apart from these, turnkey homes often come with predictable costs. Investors will immediately know how much the initial investment and ongoing expenses are. This will reduce the likelihood of surprise financial expenditures.

Turnkey homes also come with minimal stress. Investors don’t need to consider renovations, hiring contractors, or finishing the remodeling based on a timeline. It’s also ideal for investors who lead busy lifestyles and don’t have the time to commit to property renovations.

Finally, turnkey homes can diversify an investor’s portfolio by property type and area. This can be attractive if the local area is experiencing an economic downturn.


Drawbacks of Turnkey Properties

With the pros outlined above, you might think the winner is evident between a fixer-upper or move-in-ready home. However, there are downsides to turnkey properties. For one thing, turnkey homes are often much more expensive than fixer-uppers. Hence, investors must pay much more upfront to secure the property.

In addition, turnkey properties come with limited customization. The investor has to deal with its current design style, whether aesthetically pleasing or attractive to renters. Turnkey properties are also more popular on the market. Thus, there’s a lot more competition that investors need to deal with. The seller might choose someone else that offers a better deal.

Furthermore, turnkey properties may come with tenants included. Hence, while you may immediately obtain a tenant, there’s no guarantee that the tenant is good. Depending on how the previous landlord screened their tenants, they may not pay rent on time or even keep breaking the rules.


Benefits of Fixer Upper Homes

Should you get a fixer upper or turnkey property? Many times, the choice depends on the investor’s budget. If the investor wants something affordable, the fixer-upper home may be the right choice. They’re typically much cheaper, allowing investors to choose properties in more desirable neighborhoods without worrying about the cost.

In addition, fixer-upper properties allow for more creative expression. The investor can choose the design style, layout, and amenities that will most likely attract renters. They can also choose what materials to use to cut costs during renovations.

Fixer-uppers also tend to increase in value significantly once they’re renovated. Hence, the investor can get a much larger return than they spent on remodeling. They can rent out the property or even sell it at a high price.

Finally, fixer-upper homes tend to have less competition. Not everyone is willing to take on a large remodeling job.


Drawbacks of Fixer Upper Homes

Drawbacks of Fixer Upper HomesMany people choose the former between turnkey vs fixer upper homes precisely because the latter takes a lot more work. Fixer-upper properties will need renovations, remodeling, and even major repairs at times. They’re more stressful overall.

In addition, investors need to pour a lot of money into fixer-upper homes. How much they will spend may depend on the location, scope of repairs, and size of the house. The costs aren’t predictable like turnkey homes, so the investor may spend a lot more than they planned.

Furthermore, fixer-uppers take a lot of time. The investor won’t see a return on their property until the project finishes. Moreover, the U.S. housing market can be hard to predict. There’s no telling what the market will be like once the renovations are done. They won’t know whether it will be a buyer’s or seller’s market or renters moving to different locations.

Finally, investors likely need to hire professionals to renovate the home. This increases the cost and can be hard to adjust for those who’ve never worked with contractors before.


The Right Choice for You

It can be hard to choose between turnkey vs fixer upper homes. There are pros and cons to both types, and the decision will depend on several factors. Ultimately, it’s best to determine your budget, when you want a return on the investment, and whether or not you’re willing to deal with renovations.

Are you a landlord who needs professional assistance with managing your rental property? Look for a professional property management company through our online directory today!