If you’re contemplating purchasing your first home or an investment property, finding a home that meets your needs can be challenging. You may be debating between buying a turnkey vs. a fixer-upper home. The biggest difference between these two is the condition of the property. Determining the right fit depends on what you are able to take on as a homeowner and what you want to achieve if you’re going to rent the home and become a landlord.
What does turnkey property mean?
Turnkey properties are move-in ready houses. This means the property doesn’t require any repairs and is ready to rent immediately. Sometimes these homes are newly constructed and other times, the homes are recently renovated. Often, renovated homes are owned and refurbished by companies that specialize in these types of transactions. The company may offer property management services as well. This is a great option if you prefer not to be involved in the day-to-day requirements of managing an investment property and being a landlord.
What does fixer-upper mean?
Fixer-uppers are the opposite of turnkey properties. Purchasing a fixer-upper means exactly what the term implies, a property that requires fixing before it’s move-in ready. If you invest financially in a fixer-upper, you must also be prepared to invest your time and additional money in making repairs and remodeling. Often, these properties require extensive renovations before renting out. While fixer-uppers have great potential, it’s up to you to make this potential a reality to ensure your investment transforms into profit.
What to know when buying a turnkey
If you are a first-time homebuyer, a turnkey home might be the best option. This way, you don’t have to worry about major repairs in addition to going through a home purchase for the first time.
Since turnkey houses are move-in ready, you could start renting out this property immediately. Without needing to do renovations, the only necessary step is finding a renter. And typically, in today’s tight housing market, identifying a renter is relatively easy and quick compared to big home repair projects. Additionally, if you’re not interested in dealing with the work required to find quality tenants, a property management company can help. Our colleagues at Windermere Property Management are experts in marketing properties, screening potential tenants, collecting rent, and handling maintenance issues. This is a great option to generate passive income without dealing with day-to-day operational tasks.
While buying a turnkey home may sound like a no-brainer, the main downside is higher costs. A pristine property comes at a premium price. Top renovations such as new appliances, tiling, flooring, painting, and cabinetry all cost more, which shows in the listing price. If you decide to purchase a turnkey home, take time to figure out how to make it work financially. Research strategies to save money for a down payment while still covering your other expenses.
Turnkey properties aren’t always what they seem. According to the National Association of Realtors, “turnkey should mean that everything in the house is new, rehabbed, or otherwise in excellent condition with no visible signs of wear”. However, it can extend to “a house that is generally clean but needs substantial updating.” So, be careful when viewing homes labeled as “turnkey”, especially flipped homes. A great buyer’s agent will know what to look for and can find out what has been repaired and updated. Then you can make sure everything is thoroughly inspected for quality and safety.
What to know when buying a fixer-upper
Many buyers are looking for turnkey homes, so there is a much smaller pool of people searching for fixer-uppers. Most buyers do not want to take on a major remodeling project and invest in repairs, especially if they’re taking on a second mortgage with an investment property. The combination of less competition and extensive repairs can mean better prices. Just make sure to do your research and talk to your real estate agent before making an offer. Together, you can come up with a strategy for making the best offer. By securing a deal, your investment will increase as the home’s value increases with repairs, renovations, and improvements. Your efforts will pay off down the road with a higher return on investment potential.
The major negative of purchasing a fixer-upper is the cost of making necessary repairs. While you won’t have to worry about the fix-it extremes depicted in the classic movie “The Money Pit”, it can still be a costly endeavor. The real cost of a fixer-upper varies depending on the location, home size, and types of repairs. If you happen to be pretty handy, you might be able to save money through DIY remodeling projects. If you’re not, hire professionals to prevent needing to hire contractors to fix your mistakes.
Despite your best efforts to budget repairs, it’s impossible to account for unforeseen incidents. To minimize unexpected repairs, ensure a thorough home inspection is completed on the property before buying. Regardless, projects may run long and over budget, supply costs might rise, and the market might change by the time the house is ready to rent. Make sure you talk to your homeowner’s insurance company in advance to understand what’s covered in these types of scenarios. You may be able to qualify for a home improvement loan to help finance the renovations, but this is still money that must be paid back. Buying a fixer-upper is a big decision that requires a lot of thought and planning.
A local real estate agent can help
One of our highly-rated Windermere Silverdale agents can help determine what’s best for you. They are experts in our local real estate market and can identify properties to view and discuss. You can also check out some of their helpful home-buying tips.
If you’re thinking of buying a home in or near Kitsap County and you’re in the military, many of our agents work with military families. Some of our agents are veterans, military spouses, and/or relocation specialists. Explore our military resources to learn more.
Whether you purchase a turnkey home or a fixer-upper, we wish you the very best in your home-buying journey.