Turnkey Real Estate: Pros & Cons for Long-Distance Investing

The Big Picture On Turnkey Real Estate Investing:

Turnkey real estate offers hands-off investing. Renovated properties are ready to rent and often pre-managed by third-party companies. Investors benefit from immediate cash flow, minimal renovation hassle, and easy scalability.
The hands-off nature means higher upfront costs, limited control over renovation quality, and reliance on the turnkey provider’s integrity. There’s also the potential for overpaying if due diligence is neglected.
This approach suits passive investors, prioritizing ease and immediate income over control and customization. However, the higher purchase premiums may not appeal to those looking for higher returns through real estate flips.

Deni and I have a student named Maria who lives in the Bay Area and is in our FIRE from Real Estate course.

Maria makes a good living, but when she looks at the cost of buying a rental property in the Bay Area, even she blanches. It’s a struggle to find any rentals under $600,000.

In fact, Maria said most people she knows who have tried their hand at real estate investing just want to break even. Their only goal is not to lose money every month due to negative cash flow.

Because Maria had never bought a rental property before, she wanted to buy somewhat locally. But after an exasperating search in the Bay Area and Sacramento, she’s ready to throw in the towel and look elsewhere.

 

The Rise of Long-Distance Real Estate Investing

Maria is far from alone. It’s a common phenomenon – real estate investors from expensive coastal cities feel priced out and turn inland for higher rental returns.

Here’s how cities across the US measure up on real estate price-to-income ratios:

(Map courtesy of the Brookings Institute)

Long-distance real estate investing has skyrocketed in the last five years. From 2016 to 2020, the percentage of buyers who made offers sight unseen jumped from 19% to 63%, according to a study from Redfin.

Over a third of real estate purchases are bought sight unseen!

Redfin isn’t the only company to notice. Seemingly overnight, turnkey property sellers have risen from a cottage mom-and-pop industry to enterprise-level operations. Roofstock, the undisputed frontrunner in the turnkey rental property industry, revealed that 62% of their transactions were long-distance real estate investing deals, with buyers over 1,000 miles from their purchased property.

Real estate investing isn’t local anymore, Toto.

 

What Is a Turnkey Property?

A turnkey rental property needs little or no work to be rent-ready. In many cases, turnkey properties are already rented and producing cash flow.

Turnkey property sellers historically were individual real estate investors themselves. They bought a property that needed work, renovated it, and flipped it to a long-term rental investor, often off-market through their private mailing list.

While there are still tens of thousands of mom-and-pop turnkey rental property sellers in America today, the market has begun to shift. Some turnkey property sellers now use for-sale-by-owner listing services to publicly list their properties on the MLS without paying a full Realtor commission.

Others list through turnkey property investing marketplaces, such as Roofstock.

And increasingly larger companies are getting in on the turnkey property investing action.

Evolution of Turnkey Property Investing

Turnkey property investing has changed over the years – from a local mom-and-pop business to a modern industry that’s easier for anyone to enter.

Aspect

Traditional Turnkey

Modern Turnkey Trends

Seller Type

Individual investors

Larger companies, marketplaces

Marketing Method

Private mailing lists

MLS, online platforms

Property Condition

Renovated

Often already rented

Market Reach

Typically local

National or even international

Buying Process

Often off-market

More transparent online options

Where Can I Find Turnkey Rental Properties?

If you’re interested in long-distance real estate investing, here are a few places to start the hunt in your turnkey property investing campaign.

 

Roofstock

There’s a reason why Roofstock has enjoyed a meteoric rise in popularity.

Roofstock makes it simple and convenient for anyone to start investing in real estate long-distance. They certify each property before listing it and include an incredible amount of detail for investors in each listing.

In the sample listing above, you can see details like market rent, tenant payment history (if the turnkey property is already rented), projected returns, internal rate of return, five-year cash flow projections, property appreciation data, and detailed information about the neighborhood itself.

It’s worth mentioning that Roofstock is a marketplace, not a seller. They don’t typically own any of the properties listed for sale – they are merely connecting turnkey property sellers with buyers.

Roofstock charges a commission of 2.5% (or $2,000, whichever is higher) to the seller and 0.5% (or $500) to the buyer. With that buyer’s fee, they also include several guarantees – more on these shortly.

 

Corporate Turnkey Property Sellers

Increasingly larger operations are turning to turnkey property investing and catering to long-distance real estate investors.

One example is Norada Real Estate, which makes out-of-state real estate investing easy with properties in Florida, Georgia, Idaho, Texas, Mississippi, Ohio, and other Midwestern and Southern markets.

One perk that some corporate turnkey rental property sellers offer is seller financing. In many cases, Norada provides seller financing.

 

Mom-and-Pop Turnkey Rental Property Sellers

Traditionally, most turnkey property sellers were real estate flippers. They would buy properties in strong rental neighborhoods, update them, and sell them to long-term investors.

Because these are individual investors spread over thousands of cities in the US, they’re not as easy to find. Often, you’ll find them in local real estate investing Facebook groups, on local BiggerPockets forums, or in our nationwide landlords and real estate investors Facebook group.

Or better yet, you can find a directory of them in our Dealfinder Database, which we provide in our FIRE from Real Estate program.

 

Target Audience and Ideal Turnkey Investors

In all honesty, turnkey real estate investing isn’t for everyone, but it can be perfect for certain investors. Let’s discuss who might benefit most from this approach.

Time-Strapped Professionals: Investors with demanding full-time jobs or busy lifestyles can benefit greatly from turnkey properties. These individuals want to diversify their portfolio with real estate but don’t have time to manage renovations or hunt for deals.

Long-Distance Investors: For those priced out of their local markets or looking to invest in more affordable regions, turnkey properties provide an opportunity to tap into promising markets without the headache of long-distance property management.

Nervous Newbies: First-time real estate investors often feel overwhelmed by property acquisition and management complexities. Turnkey properties offer a gentler learning curve, with much of the initial legwork handled by experienced investors.

Portfolio Diversifiers: Even seasoned investors can benefit from turnkey properties when looking to expand into new markets quickly and efficiently.

Passive Income Seekers: Retirees or those nearing retirement often gravitate towards turnkey properties. They want steady cash flow without the active work of traditional landlords.

The ideal turnkey investor values convenience over sweat equity. If you nodded to any of these profiles, turnkey investing might be right up your alley!

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Advantages of Turnkey Property Investing

Why buy turnkey rental properties?

Here are a few of the pros to turnkey property investing:

 

Pro 1: Convenience

Turnkey properties are easy to find. They need little or no renovation work to be rent-ready, so you can list them for rent immediately.

Which, in turn, means little or no vacancy carrying costs upfront and instant cash flow.

In the case of turnkey property marketplaces like Roofstock, or corporate turnkey property sellers, buyers can quickly sift through hundreds of turnkey properties all over the country.

That means easy long-distance real estate investing anywhere in the country, from your pajamas.

Here’s a quick overview of how Roofstock’s property listing system looks and feels:

Pro 2: Turnkey Properties Often Come Already Rented

While not always the case, many turnkey rental properties come with tenants. In these cases, turnkey property investors can review rent payment history data to gauge the tenant’s reliability.

Additionally, turnkey buyers can ask for the renters’ original tenant screening reports to view their credit report, criminal history, eviction history, and rental application.

 

Pro 3: Possible Guarantees

One nice perk of Roofstock is that they include several guarantees to make turnkey property investing more comfortable, especially for long-distance real estate investors.

The first guarantee they include is a 30-day property guarantee. If you’re unhappy with a turnkey property you’ve bought through their marketplace, you can re-list it for sale with their commission waived, and they guarantee you will receive the full amount you paid for it.

If it fails to sell within 90 days, they buy it from you themselves.

The second guarantee that Roofstock offers is on rental income. For vacant turnkey properties, they guarantee that you’ll rent the property within 45 days of buying it. If the property doesn’t rent within 45 days, they will pay you 90% of the market rent until you sign a lease agreement with a tenant.

When did you last see a Realtor offer that kind of service and guarantee?

One caveat for that rent guarantee – you have to work with one of their certified property managers.

 

Pro 4: Help with Local Vendors

One nice perk of going through a turnkey property seller in long-distance real estate investing is that they can refer you to excellent, investor-friendly local service providers.

As alluded to above, when Roofstock enters a new market, it vets the local property managers and chooses the top two or three that meet its quality standards. These certified property managers are already screened to boost your comfort with out-of-state real estate investing.

But Roofstock isn’t the only turnkey property seller that can refer you to a good local property manager. Local mom-and-pop turnkey rental property sellers almost always work closely with good local property management teams as well.

Similarly, turnkey sellers can help refer you to local title companies, lenders, insurance agents, and any other local services you require. Roofstock puts local insurance agents through a similar vetting process and can recommend reliable and honest brokers.

 

Disadvantages of Turnkey Properties

Is turnkey property investing all sunshine and butterflies? Not exactly, or everyone would be doing it.

Here’s what to watch out for as you evaluate turnkey rental properties and consider long-distance real estate investing.

 

Con 1: Often Mediocre Returns

The nice thing about buying a property to fix up is that you can score a good deal and force some equity and appreciation.

But with turnkey properties, someone’s already done that for you. They’ve already squeezed the juice out of the equity and are selling it for top dollar.

My experience has been that rental investing returns on Roofstock hover in the 3-9% range. And properties at the high end of that range aren’t just lying around, either. When listed, they tend to move quickly, so you’ll need to closely monitor listings.

Nor are these turnkey property returns unique to Roofstock. From corporate turnkey sellers to mom-and-pop turnkey specialists, they know what they’re doing and are pricing the properties at full market value.

Convenience comes at a cost!

If you want to score better deals, check out our review of real estate investing tool PropStream.

 

Con 2: Often Lower-Quality Tenants

I once knew an unscrupulous turnkey seller who didn’t even bother running tenant screening reports. He just took whichever applicant was willing to pay the most into his turnkey properties.

Why? So that he could charge the highest price for them, which was justified by the high rent.

Just because a turnkey rental property comes with a tenant doesn’t mean they’re a good tenant. You still need to do your own due diligence to verify their tenant screening reports and rental application.

If the seller can’t provide those screening reports and the rental application, buyer beware!

 

Con 3: Long-Distance Real Estate Investing Makes Due Diligence Difficult

Captain Obvious here: it’s harder to do your due diligence on a property when investing in long-distance real estate.

You can’t walk through the property yourself, so you cannot tell if it smells like mold or if the condition matches the photos.

Instead, you must rely on others to inspect the property and report to you.

Granted, no one says your turnkey property investing has to be out-of-state. You can buy turnkey rental properties in your own hometown, which makes this con irrelevant for anyone not engaging in long-distance real estate investing.

Want to compare investment property loans?

What do lenders charge for a rental property mortgage? What credit scores and down payments do they require?

How about fix-and-flip loans?

We compare the best purchase-rehab lenders and long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

More Challenges and Risks in Turnkey Investing

Wait, there’s more? Right, although turnkey properties may seem like a dream come true, they’re not without their pitfalls. Here are some challenges and risks to watch out for:

Inflated Numbers: Some unscrupulous turnkey providers might exaggerate potential rents or underestimate expenses to make a property look more attractive. Always verify the numbers independently.
Lipstick on a Swine: Not all renovations are created equal. Some turnkey companies focus on cosmetic upgrades that look great in photos but ignore underlying issues. That fresh coat of paint might be hiding serious problems.
Quality of Tenants: Remember our earlier warning about tenant screening? It’s worth repeating. Some turnkey sellers might place any tenant just to show occupancy, regardless of their long-term suitability.
Market Knowledge Gap: When investing long-distance, you’re disadvantaged in understanding local market dynamics. This can make it harder to spot overpriced properties or declining neighborhoods.
Reliance on Third Parties: With turnkey investing, you’re putting a lot of trust in the seller and property management company. If either drops the ball, your investment could suffer.
Higher Entry Costs: The convenience of turnkey properties comes at a price. You’re likely paying a premium compared to finding and renovating a property.
Limited Customization: If you have specific ideas about how your rental property looks or functions, a pre-packaged turnkey property might not meet your needs.

Due diligence is as important to mitigate these risks. Always get a professional inspection, even if the property is supposedly “fully renovated.” Just because it’s called “turnkey” doesn’t mean you can turn off your brain.

Stay engaged, ask tough questions, and don’t be afraid to walk away if something doesn’t feel right. Your future self (and your bank account) will thank you!

Turnkey Property Management

As mentioned above, one advantage of out-of-state real estate investing through Roofstock is that they vet and certify local property managers to recommend them.

However, as the owner, you are not obligated to use one of their certified property managers. You can choose another property management firm or forego property managers and use our online landlord app to automate your management! (Shameless plug? Yeah, well, we are a business, after all!)

You can also deduct the rent from the tenant’s paycheck for even more assurance of on-time rent.

Of course, the inverse is also true. You don’t have to use Roofstock for your long-distance real estate investing, but you could still find out which property management firms they’ve certified in that local market.

Hiring people who have already been vetted for you is always nice!

As a final note, it’s worth mentioning that Roofstock does not receive a commission or other financial gain from its certified property managers. There’s no conflict of interest—it truly wants to work with the best in any given market.

 

Financing a Turnkey Property

One of the great advantages of turnkey property investing is that it’s easy to finance since it typically doesn’t require repairs.

Instead of getting a short-term renovation loan and refinancing once the repairs are finished, you can buy the property with a permanent long-term mortgage.

We’ve vetted several investment property lenders; see our investment property loans comparison chart for details. To compare today’s rates on conventional loans, check out Credible.

Roofstock also vets local and nationwide lenders and can offer a few recommendations.

 

Firsthand Experiences with Roofstock

I have not yet bought a property through Roofstock. So to bring some firsthand perspectives, here are a few case studies from real estate investors on BiggerPockets:

“Overall, I would say the process has been pretty painless. I think that Roofstock has a really great tool/system and does a great job of what they have set out to do. I was a little frustrated by the miscommunication and phone tag at the end, but that isn’t Roofstock’s problem, and I know that generally, last minute changes right before closing aren’t terribly uncommon. I would definitely use Roofstock again – in fact I plan to.”

Jon Krombein, Rental Property Investor from Seattle, WA 

 

“A Roofstock representative was closely working with me while I placed the order and confirmed that the purchase went through fine and congratulated me on the first purchase. Following Monday, I got a one line text from Roofstock that the purchase was cancelled. Not sure what happened in between. In this case, I am guessing, the Seller did not act on any of the offers and after the review period ended the Seller went to Roofstock to allow him to pick previous offers. At least they should give a proper explanation instead of apologies.”

 Anandakumar Elumalai, Rental Property Investor Torrance, California

 

“Would I Use Roofstock Again? Yes. I felt that even though I had issues with the certificate of compliance, the inspection/appraisal report, and closing, I would use Roofstock again and would recommend it to others. Obviously, that recommendation may change as we move forward and have more experiences with Roofstock, and become more experienced investors, but as of right now I have been pleased with the experience, communication, and ultimate result of using Roofstock for our first out-of-state rental purchase.”

Jason Gines, Turnkey Property Investor from Long Island, NY

 

Final Word

Whether you use a corporate turnkey property seller, a mom-and-pop seller, or Roofstock, turnkey rental properties can be an excellent avenue for long-distance real estate investing.

It can also be a convenient and simple way to buy your first rental property.

Always be doubly careful with your due diligence when buying properties unseen. Out-of-state real estate investing can help you pursue more profitable markets but also puts you at risk for buying properties with unforeseen problems.

Consider finding a local partner to serve as boots on the ground when in doubt.

Alternatively, you could visit in person – and perhaps write off the trip as a real estate investing tax deduction!

 

Have you ever bought a turnkey property? What were your experiences with turnkey property investing or long-distance real estate investing?

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