Build-to-rent vs Turnkey: A Guide

Build-to-rent vs Turnkey: A Guide

When you want to invest in rental properties, you can choose between build-to-rent and turnkey options. Both offer benefits you can enjoy as a landlord. However, these types of rental properties are very different. Let’s look at the two options a little closer before you make your decision.

What is a Build-to-rent Property?

Built-to-rent properties tend to be single-family homes built in neighborhoods as rentals. All homes in the professionally managed community will be build-to-rent homes giving tenants plenty of benefits, along with landlords. These properties are very similar to a traditional residential neighborhood with amenities.

Build-to-rent Pros & Cons

When you decide you want to invest in build-to-rent properties, there are many pros and a few cons. Let’s look at both to give you a better idea of the investment you will be making.

Pros

  • Better comps and operational data for properties you invest in
  • Easier to get demographic trends
  • More desirable renter profiles
  • More consistency with mortgage terms and approvals
  • Often provides Market Rate Premiums compared to multifamily properties
  • Less volatile market for rentals than multifamily properties
  • Easier to market due to the neighborhood feel and amenities
  • Tend to be more affordable than other properties
  • Provide a longer tenant occupancy compared to multifamily properties

Cons

  • In high demand and might be hard to find
  • May need to invest a significant amount of capital
  • Returns can be delayed compared to other types of rentals

There are plenty of benefits to build-to-rent properties, but a few cons.

What is a Turnkey Property?

When you invest in a turnkey property, you will be investing in a home that is move-in ready. The phrase comes from the ability to simply turn your key in the front door lock and move right in. The home won’t need any renovations or repairs. It’s ready to be lived in immediately.

Turnkey Pros & Cons

There are many pros when it comes to turnkey homes, but there is also a few cons. Let’s look at both.

Pros

  • Move-in ready home for tenants to move in immediately
  • Time-saving benefits since you won’t need to do any renovations
  • No need to get estimates from contractors for repairs and renovations
  • Start earning rental income sooner
  • May not need appraisals, titles, or inspections like when rehabbing a home

Cons

  • Comes with some risk, like any investment in real estate does
  • More expensive than homes in need of repair and renovation
  • Little control over how the property will look since it’s already renovated

While there are some cons to turnkey homes, there are also many benefits for landlords.

When you’re considering an investment in rental properties. the right type of property will make a difference. Build-to-rent and turnkey rentals are two very popular options. They both tend to provide higher rental incomes than multifamily properties and they both come with time-saving benefits.

Build-to-rent and turnkey homes are two types of rentals to consider for your portfolio. If you’re looking to invest in real estate, both offer good options. However, one may work better for you than another.

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