Build-to-Rent vs Turnkey: Knowing Your Options

Build-to-Rent vs Turnkey: Knowing Your Options

Choosing the right type of property to invest in isn’t always easy. A build-to-rent project is one good option, while turnkey is a bit more of a classic option. Neither option is necessarily right or wrong. It depends on the type of investment you want to make and what you believe is the better option for you.

It’s rather common for those that have invested in turnkey projects to choose to invest in build-to-rent options. While there are many differences, both types of investments can provide a nice return. Let’s look at what both offer so you can make a sound decision.

What is Build-to-Rent?

A build-to-rent project is a new construction neighborhood built for investors. You get the plan your real estate investment strategy and grow your portfolio. This can help you create long-term wealth and allow you to choose new homes over existing homes.

Many benefits come from this type of project. You get to invest in a new home, which comes with a warranty. This means lower maintenance bills for the first few years or longer. Tenants also get to live in a newer home, which means it’s easier to find great tenants for your rentals. Most tenants will choose a newer home over an older home if they have the choice.

What is Turnkey?

A turnkey home is usually a remodeled existing home that’s ready to be moved into. It can be a new construction home, but those tend to fall under the build-to-rent category. While a turnkey home is usually a better investment option than a fixer-upper, it doesn’t offer the same benefits as a build-to-rent option.

Since turnkey homes are existing homes, they can still have maintenance issues. Just because they have new carpet, paint, and other items, doesn’t make the entire home brand new. It may look great, but there can still be maintenance issues at any time.

While turnkey homes can certainly make for excellent investments, they don’t offer a warranty as build-to-rent homes do. They have been renovated, so you are trusting the work of the contractors over the work of builders.

Comparing Build-to-Rent and Turnkey Homes

The upfront purchase price of a build-to-rent home is usually higher than that of a turnkey home. However, the construction materials used will be brand new and you won’t have to worry about maintenance for several years.

While turnkey homes might come with a warranty, it’s usually only a one-year warranty on the specific renovations done. Build-to-rent homes often offer warranties of up to 10 years on major systems.

You will get a slightly higher appreciation potential from a build-to-rent home compared to a turnkey home. Both offer easy to obtain financing, as well. There are advantages and disadvantages of both options. Choosing the right investment to fit your needs is the most important part.

Both build-to-rent and turnkey homes offer good investments. Taking the time to look at both options and choose the one that fits best for you is important.

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