Turnkey or Fixer-Upper: Which Is Right for You?
There are other reasons for purchasing property than to have somewhere for you and your family to live. Another major reason is to have an investment property you can rent to gain a passive income. One of your first considerations when looking for an investment property should be whether a turnkey or fixer-upper is right for you. You can figure this out by considering the pros and cons of each.
What Is a Turnkey?
Turnkeys are homes in perfect condition, meaning you can begin renting them as soon as the purchase is complete. They tend to be new constructions or recently-remodeled properties. If you buy from the company that renovated the home, you may be able to purchase its property management services as well.
What Is a Fixer-Upper?
The complete opposite of a turnkey is a fixer-upper. These homes are far from ready to rent — they may need significant repairs or an entire remodel. Real estate investors choose fixer-uppers when they believe a property has great potential for bringing significant returns in the future.
Advantages of a Turnkey
The main benefit of a turnkey is you’ll see returns almost immediately. You’ll be able to advertise the house for rent as soon as it’s yours. You might even consider asking your listing agent if you can use the same photos that drew you to purchase the property — beyond saving time, this will also avoid the need to invest anything in professional photos. If you also contract the property management company, renting out the house will truly be a passive income.
Disadvantages of a Turnkey
The reason some property investors decide not to purchase turnkeys is the high upfront cost. Acquiring a home in perfect condition is expensive, meaning you may need to take out a larger mortgage or wait until you’ve saved enough before you can afford to buy.
Advantages of a Fixer-Upper
In addition to the lower cost of fixer-uppers, there’s less competition for these properties. This means sellers are more likely to accept an offer, including if it’s under the asking price. Some sellers may even be keen to speed up the purchase, leading them to make more concessions. In addition, once you’ve finished remodeling, you’ll have a home with a much higher value than what you paid.
Disadvantages of a Fixer-Upper
Even though you’ll save money purchasing a fixer-upper, it won’t be cheap, as you’ll need to invest a large amount into the repairs. There’s always the risk this will cost more than you anticipate — or it could take longer to complete, during which time you won’t be receiving any income from the property. Plus, the market may look different by the time you’ve finished the renovations, meaning the demand for homes in the area may have changed.
Once you’ve decided if you’d prefer a turnkey or a fixer-upper, your next step is to start searching for real estate. Edmonton and area homebuyers can receive support from the team at Damon Bunting. We bear your unique needs in mind to help you find your ideal property. Contact us to get started.