A turnkey property is a rental sold ready to produce income from day one, with no work needed from the buyer. It has already been renovated, and it often comes with a tenant in place and a property manager lined up. Turnkey homes are commonly sold by companies that buy, rehab, lease and then sell to investors, many of whom live in another state.
Say a turnkey house costs $150,000 and rents for $1,500 a month, or $18,000 a year. If vacancy and operating expenses, including management and repairs, take 45% of rent, that is $8,100, which leaves net operating income of $9,900. The cap rate is $9,900 ÷ $150,000 = 6.6%, pre-tax and before any mortgage payment.
You pay for the convenience. The seller’s profit on the rehab is built into the price, so turnkey homes commonly sell at or near full market value, not at a discount. The most common mistake is trusting the seller’s projections. Marketing sheets often leave out vacancy, repairs or capital expenditures, and the seller may also be the manager. Check the rent against comparable rentals, get your own inspection, and rebuild the numbers yourself before you commit.