In real estate, a turnkey home is a home that is updated/renovated and fully ready for move-in on purchase. Turnkey has become a real estate marketing phrase meaning “ready to use.” All you need to do is “turn the key” and you can start living in the home immediately.
As with all marketing terms, turnkey is subjective and requires verification. Sellers might claim renovations and updates but not have the proof to back up these claims. On the other hand, a turnkey construction is a home being built that you can modify and move into after completion.
The tradeoff for a turnkey home is higher upfront costs. However, turnkey homes can be less expensive to maintain in the first few years of ownership because you won’t have to perform repairs or updates for the foreseeable future.
This piece will cover the basics of turnkey homes, discuss the pros and cons, and consider whether a turnkey home is right for you.
What is a turnkey home?
A turnkey home is one that has all repairs and renovations completed and needs no further updates to be lived in.
Turnkey homes typically have the following features:
- Updated systems/rooms (e.g., bathrooms, kitchens, etc.)
- New or updated functional utilities (HVAC, plumbing, electrical, etc.)
- Cosmetic renovations (e.g., roofing, siding, paint, gutters, etc.)
- New/updated appliances (e.g., stove, fridge, washers/dryers, etc.)
Turnkey homes can be renovated or newly constructed properties that have never been lived in before. The key detail is that they are fully updated, and there are no repairs needed before you can move in.
Because they are move-in ready, turnkey homes are often marketed to landlords and investors. You can buy a turnkey home and have tenants move in as soon as possible to start collecting rental income.
This is one reason why turnkey homes often come with property management companies attached — the buyer just needs to purchase the home and pay the mortgage.
“To a buyer, ‘turnkey’ implies something that you can live in and feel comfortable. Something that is cosmetically in good shape,” says Ryan Smith, owner of Cinch Home Buyer.
“To an expert, ‘turnkey’ should mean one word, ‘stable’. It isn't just fresh paint and granite; it means the ‘big ticket’ items (roof, HVAC, joists, floors, electrical, and plumbing) have five to seven years of life remaining.”
Does turnkey mean furnished?
Turnkey homes are updated and move-in ready, but that doesn’t necessarily mean they are furnished. Some turnkey homes will come with furniture, and others won’t; it depends on the property.
If a home is furnished, it should say so in the real estate listing. In some cases, your real estate agent may be able to negotiate the inclusion of furniture in the real estate contract.
To figure out whether you get the furnishings, make sure you ask the seller:
- What conveys when the house sells? This typically includes hard fixtures like HVAC and built-in appliances, but not freestanding possessions like furniture.
- Are there any seller exclusions? Seller exclusions are items that the seller intends to remove after the sale. These must be clearly stated in the listing agreement to avoid disputes when the property changes hands.
- What will be included on the bill of sale? The bill of sale is a document used to transfer ownership of personal property during a home sale. It contains a list of the included items and the date of transfer.
Turnkey price premium: What it means, why it happens
The tradeoff for the convenience of a turnkey home is the increased price tag. Most sellers will charge more for a turnkey home as they know they have a good property on their hands.
The turnkey premium makes up for the fact that they perform all necessary repairs, updates, and renovations before selling.
According to Dominic Kalvelis, owner of We Buy NJ Homes Fast, the upfront premium is also a means to assuage uncertainties and speed things up when buying a home:
“The pricing premium is real, and it's not just for granite counters. You're paying to skip the disruption tax: time, contractor roulette, permit delays, and the risk that a $25,000 project turns into a $60,000 project once walls open up. Compared to a fixer-upper, turnkey is less upside but more predictability.”
An equivalent non-distressed fixer-upper can get you a 25% to 50% discount over a fully ready turnkey property.[1] However, the lower upfront price of a fixer-upper can hide the true cost of homeownership after factoring in necessary repair and renovation costs.
Below is a table showing some of the estimated repair costs for fixer-uppers, according to Home Advisor/Angi.
Estimate costs based on relevant comparables in your location.
Turnkey construction
In the construction world, a turnkey project is when a construction company produces a complete and ready-to-move-in home under a unique contract.
In most cases, a turnkey construction is handled by a single contractor that manages every part of the project — materials, labor, design, permits, and handover to the buyer.
This is different from a build-to-order home, where the buyer specifies parts of the design and process. The point of turnkey constructions is that the buyer doesn’t have to worry about decisions and planning.
Turnkey construction projects are also different from construction-to-permanent loans. These are home construction loans that convert to traditional mortgage loans when the project is completed and the buyer moves in.
There are degrees of turnkey homes that allow for different levels of customization. For instance, some contractors will provide a set of pre-designed plans, and the buyer can add personal finishes on top.
The main benefit of turnkey construction is the streamlined process, but the convenience comes with an additional price tag. Some experts believe that a turnkey construction home can cost buyers as much as 25% more than buying a comparable existing home.[2]
Who is a turnkey home best for?
Because they prioritize speed and convenience, turnkey homes are a better option for some buyers.
1. Certain owner/occupants
Among non-investors, turnkey homes are a good option for busy owners and occupants who neither have time nor the effort to plan and manage repairs and renovations.
This might include:
- Career-focused professionals who may be away from home a lot and can’t sacrifice time for repairs and renovations.
- First-time home buyers who want peace of mind and security with their purchase.
- Out-of-state and relocating buyers who can’t manage inspections and projects from afar.
- Risk-averse buyers who want to avoid unexpected repair/renovation costs from possible emergencies.
2. Investors
Turnkey homes are also a favored choice for investors looking to extract rental income from properties as quickly as possible. Turnkey homes require no additional modification, so investors can start renting them to tenants immediately after closing.
“When does turnkey make financial sense? If you are relocating, starting a job, juggling kids, or you simply can't afford renovation delays and carrying costs, turnkey can be the cheaper choice in the long run, even if the price is higher,” says Kalvelis.
Pros and cons of buying a turnkey home
Pros
- Move-in ready
- New updates and features
- No repairs or renovations
- Faster closing
- No immediate unexpected repair costs
- Ready to rent
Cons
- Higher cost
- Difficult to customize
- Updates might not be to taste
- Surface upgrades can hide defects
- Could be harder to find comps
You can talk to a knowledgeable real estate agent for more in-depth knowledge about the advantages and disadvantages.
Is a turnkey home right for you?
Whether you should buy a turnkey home depends on your specific circumstances, but there are considerations that will apply to everyone.
The first is your timeline and desired move-in date. If you want a shorter timeline from offer to closing and want to move quickly, going turnkey is a good option.
The second is your cash reserves. Turnkey solutions will carry a premium, though that additional cost accommodates the fact that you won’t have to sink any money into repairs and maintenance. Even with a turnkey home, you still need some cash reserves as unexpected repairs can still happen.
Third, consider your tolerance for managing projects. If you think you can’t manage the extra burden of scheduling and overseeing repairs, then that’s another point in the turnkey column.
Even if you want a turnkey home, your decision might be limited based on the inventory in your area. In hot markets, turnkey homes might be snatched up quickly.
Turnkey due diligence checklist
If you are planning on buying a turnkey home, make sure you perform due diligence to avoid nasty surprises. Below is a checklist to help you stay organized:
- Paperwork: Requested paperwork includes permits, contractor invoices, warranties, receipts of purchase, and transferable warranties.
- Inspections: Get a full inspection, including ones for the sewer, roof, and foundation. You may also need to get an inspection for the HVAC system.
- Red flags: Red flags to watch out for include mismatched materials, shoddy tiling/caulking, lack of permits, and missing smoke/carbon monoxide detectors.
The term turnkey is subjective, so you should never rely on other people’s assessments when deciding.
Turnkey rental and property management verification
If the property has a management company attached, you also need to vet their performance and reputation.
You should also try to get any promised services in writing. Specific issues to inquire about relate to any fees for leasing, how the company handles turnover, and maintenance expectations.
Most property management services will also have a reporting and owner portal where you can track these aspects of management. Most importantly, you should understand how the company handles deposits and moves funds.
Below are potential questions to ask property managers:
- How much experience does the company have and with what kind of properties?
- What services are offered, and are they guaranteed?
- Can the company provide references from past clients?
- What fees does the company charge for its services?
- Does the company use vendors employ staff for repairs and maintenance?
The bottom line
A turnkey home can be a good option for buyers whose budgets can accommodate them, who want to move in quickly, and who don’t want to make any major changes or updates to the home for at least a year or two. Investors especially might appreciate the ability to immediately move renters into a property.
Buyers with limited budgets and more interest or flexibility for projects, on the other hand, might not be the best fit for a turnkey home.
If you’re curious about the availability of turnkey homes in your market, and whether they are a good option for you, talk to an experienced real estate agent. Clever can introduce you to the top agents in your area, who help buyers like you find their dream home, with no obligation or fees. Take a short quiz to get started!
FAQ
What does turnkey mean in real estate?
A turnkey property in real estate refers to a property that requires no major repairs and is renovated, updated, and entirely move-in ready when purchased. The owner can “turn the key” and start living in the unit immediately.
Is turnkey the same as move-in ready?
Yes, turnkey and move-in ready mean the same thing and are often used interchangeably. However, turnkey often implies a higher renovation standard, while move-in ready may imply just minor cosmetic updates.
Are turnkey homes worth it?
Turnkey homes can be worth it as you trade the higher upfront price for lower repair and maintenance costs over the first few years of the home’s life. They can also avoid the expenses of unexpected repairs that may occur with an older, non-renovated home.
Does turnkey mean finished?
Yes, turnkey homes are finished, fully operational, and don’t require any more renovations or updates before the buyer can start living in them.
Should you still get an inspection?
Even though the home is completely finished and updated, you should still pay for an independent inspection before buying.
What should you ask for after a renovation/flip?
You should ask for a complete record of the home’s sales history and renovation history, including all permits for updates. If you buy a home with unpermitted renovations, you may be legally on the hook for the illegal updates.