How to Buy Turnkey Properties Sight Unseen

The Big Picture on Buying Turnkey Properties Sight Unseen:

• • Turnkey properties are real estate assets that are fully renovated, furnished, and ready for rental or already have a tenant at the time of purchase—but the definition doesn’t apply to everyone. “Sight unseen” refers to the strategy of buying real estate without physically inspecting it beforehand.
    
  • Buying turnkey properties sight unseen is possible but still requires legwork. Always get independent third-party inspections and appraisals before purchasing any property you haven’t seen. Verify market rental rates through third-party services like RentRange.com—don’t just trust what the seller claims.
  • Make sure all renovation work is properly permitted, or you may face costs down the road when selling.

As a real estate investor, would you buy a rental property sight unseen? It might sound like a terrifying prospect, but it’s actually much more common than you’d think. Thanks to technology and the Internet it’s now easier than ever for investors to research and buy turnkey properties in the best cities for real estate investing in the country. 

Visiting and seeing these properties in person is nice but hardly mandatory in today’s world. Can you take turnkey operators at their word when they say the property is rent-ready? (No.) Do you need to do your own market research and due diligence? (Definitely, yes.)

The truth is, it’s possible to buy a turnkey property without seeing it in person… if you know how to spot the red flags of dangerous turnkey operators and know how to determine if a property is a good investment.  

What Does “Turnkey” Mean?

The word turnkey gets thrown around a lot in the real estate industry, but what does it really mean? According to Investopedia, “[a] turnkey property is a fully renovated home or apartment building that an investor can purchase and immediately rent out.” 

This sounds great, but this definition doesn’t always apply.

Why? Every real estate company has its definition because there’s no set standard for a turnkey property. For some, it’s new paint, carpet, and outsourced management. That would be very minimal, in my opinion. For others, it’s a complete renovation and hiring an experienced property management team.

So, how can you know what you’re buying regarding turnkey property? You have to do your due diligence and be able to spot turnkey property scams. When the product doesn’t line up with the alleged offer, there’s a good chance you may be getting scammed. 

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Beware of Scammy Turnkey Sellers

My husband and I once met a couple of turnkey sellers in their 20s. They were excellent salesmen with great email marketing. Their ads used terms like: “This property is turnkey, meaning you won’t have to do anything.” It sounded great, so we went to check them out.

However, when I saw the properties in person, I was shocked. Despite the nice photos and descriptions, the neighborhoods were run down with bars, graffiti, and other red flags. I asked if this dilapidated property was their turnkey listing, and they said yes. I thought it must have been right off of foreclosure, but they hadn’t started renovations yet

They even claimed the property was already sold and had a long list of investors who bought these properties without seeing them first. Their definition of “turnkey” was very different from ours.

It was a lesson in defining what turnkey means to you and ensuring sellers share those standards, especially before buying a property sight unseen.

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How to Define What Turnkey Means for You

After coming across countless turnkey providers, like the one in the example above, I decided that I needed to create a turnkey standard for myself and for the real estate investment club I founded with my husband.

We created the following turnkey property standards, which many of our operators have since adopted. We call them our R.E.A.L. Income Property Standards:

R – Renovated (to R.E.A.L. Income Property™ Standards)

E – Examined (through inspections)

A – Appraised (purchase price at or below market value)

L – Licensed Property Management

We ask all turnkey companies on our referral list to meet strict standards, verified by 3rd party inspections before closing. I strongly recommend you create similar standards for yourself, especially if you are considering buying a turnkey property long distance without seeing it.

As property values rise, it’s becoming harder for turnkey providers to meet high standards and still profit. Some have returned to a broker model, helping investors find properties needing little work.

For a reputable turnkey seller in business over two decades, check out Norada Real Estate. If the turnkey property hasn’t been fully renovated, a full inspection is crucial to understand what future repairs may be needed and budget accordingly.

7 Tips for Buying Turnkey Properties Sight Unseen

As you can see from my example above, buying property sight unseen can be really dangerous. This is why you MUST do your own due diligence. Never trust. Always verify. The following are seven tips to help you buy turnkey properties without seeing them first.

Tip #1 – Ask the Turnkey Company for a Full Scope of Work

The demand for turnkey companies is rising. A survey found that 78% of real estate executives believe turnkey companies will help shape the future of the real estate market, so it’s understandable if you work with one.

However, if you buy a property that has already been renovated according to the turnkey company, be sure to get a complete list of the scope of work that has been done and have an inspector verify that list.

If you buy the property before the renovation, be clear on what repairs will be covered and pay only a deposit upfront. Pay the full amount only after completion, with photos and/or verification by a 3rd party inspector.

Tip #2 – Get FULL Inspections Completed by a 3rd Party

Before purchasing a property, it’s essential to order a full third-party inspection to verify that the property meets or exceeds your expectations.

Getting the property inspected by a professional eliminates the need to see it in person. Most of us probably don’t know what we’re looking for anyway. A full inspection will make buying properties sight unseen easier and provide greater peace of mind.

If you go through a turnkey property platform like Roofstock, the listing should include full home inspections. These home inspectors must pass Roofstock’s standards and are generally trustworthy, but you may still want to order an independent inspection for your turnkey investment. 

Expect to pay an average of $342 for a home inspection. However, costs vary depending on location, home size, and the inspector’s experience.

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Tip #3 – Get a FULL Appraisal Completed by a 3rd Party

In addition to an inspection, get a 3rd party appraisal, even if paying cash. Like an inspection, an appraisal gives you key information without seeing the property. It determines if the property is priced right and makes for a solid investment.

Check average prices in the area and compare them to the purchase price. If the numbers don’t work, don’t be afraid to walk away halfway through, even if you like certain features. It’s easier when you haven’t seen it and become emotionally attached.

Most people pay a couple hundred dollars for a home appraisal, with the national average around $350. However, multiple factors can influence cost and drive it higher.

The key is getting objective data through inspections and appraisals. Let that guide your decision, not emotions. Be ready to walk if the numbers show it’s not a solid investment.

Tip #4 – Verify Rents From a 3rd Party Service

Never take someone’s word about market rents. It’s essential to verify them through a 3rd party service, like rentrange.com. These types of services offer property reports with a complete rental rate analysis and market metrics that show how different regions are performing. Verifying how much rent to expect helps you run accurate numbers through a rental property calculator.

Tip #5 – Make Sure All Work Has Been Permitted

Any mechanical or structural renovations performed on a property must be permitted. You should ask the seller for copies of all the “signed off” permits associated with the renovation. You can also ask the city where the property is located for all building permits for the property and cross-reference that list with what is found in the property inspection.

Don’t take shortcuts when it comes to verifying that renovations are permitted. If the renovation work is done without a permit, and you ever need to renovate or sell in the future, you risk the added cost of permitting and inspecting someone else’s work on your own dime.

Tip #6 – Avoid C & D Neighborhoods

C & D neighborhoods may look profitable on paper because property prices are so low, but they can be very difficult to manage if they are in high crime or high turnover areas. Always research crime statistics (I recommend City-Data.com) before choosing a neighborhood. I personally prefer B neighborhoods because tenants tend to stay longer where they feel safe, and the cost of entry is still not too high. 

Likewise, be careful working with Section 8 tenants.

Tip #7 – Speak with the Property Manager / Management Team

Ultimately, the success of a rental property depends on its management, which is why it’s important to speak with the person or team currently managing the property.

Ask them how many properties are in their portfolio, and how many of them are vacant on any given month. Other important information to ascertain is how many evictions they have per year across the properties they manage and the eviction process they use for removing delinquent tenants.

You should also make sure the property manager is properly insured and licensed according to their state laws. It’s also recommended that they have at least two years of experience with a proven track record and use professional rental management software that allows easy access to your property’s data.

An experienced property manager should also have systems in place that are effective and easy to use. These systems should include the following: a secure portal for online rent collection, a quality tenant screening process, accessible monthly reports on expenses and property income, in-house repair teams, and a system for quick responses to tenant inquiries.

FAQs

What are the disadvantages of a turnkey contract?

The disadvantages of a turnkey contract are the contractor has more control, which can lead to higher costs and less client oversight on quality.

Is turnkey a good idea?

Yes, turnkey rentals are a good investment idea because the recently renovated properties make them easier to rent out and begin generating profits quickly with less effort.

What is turnkey payment?

Turnkey payment is the total cost of having a product or service fully ready for sale and use by consumers. This includes direct costs like materials and indirect costs like administrative expenses.

What is the difference between fixed price and turnkey?

The difference is that price contracts have a cost ceiling that the contractor is responsible for exceeding. In contrast, turnkey contracts deliver the project in a completed state for an agreed-upon price.

Final Thoughts

It is 100% possible to buy turnkey properties without ever seeing them. Remember…you aren’t just buying a house; you are buying an income stream (passive income or cash flow). You don’t have to be an expert on buying or renovating a property. Rather than spend your time walking through potential investment properties all over the country, you can rely on licensed third-party services to do the work for you.

Take advantage of the internet age where proximity no longer plays a factor and information is easily available in formats anyone can understand. While we’ve laid out the seven tips above, make sure to perform your own due diligence along the way. 

And remember: if the property’s numbers are not up to your created standards, find another one! These tips will hit your investment goals and help protect you from the risks associated with buying turnkey properties sight unseen and maintain peace of mind.

Have you purchased turnkey property sight unseen? Are you happy with your investment? What would you have done differently? Will you do it again?