Thinking about investing in a turnkey property?
A turnkey property is a home that’s ready for tenant move-in. In other words, it doesn’t require any repairs or renovations.
At Evernest, we often speak with out-of-state investors who want our help evaluating a potential property before making the purchase official. That’s true for both turnkey properties and those that need a little more TLC.
But, for every one investor who reaches out for guidance, there are many more who don’t, leading to costly mistakes that could have been avoided.
If you're planning to invest in the rental market, and have your eye on a turnkey property, let this guide help you steer clear of five major turnkey mistakes we see investors make. Let’s dig in!
1. Assuming Large Lots Increase Property Value
A common misconception among investors is that a bigger lot means a more valuable property. While this might hold true in certain areas, it’s rarely the case in most rental neighborhoods.
The truth is that large lots can create more problems than benefits. They require additional maintenance, adding an unnecessary burden for both property owners and residents. That’s because many residents aren’t interested in maintaining a huge yard and, when they vacate, the upkeep falls back on you.
And, in most of the neighborhoods where investors are buying, the numbers just don’t show that an oversized lot translates into higher property value or increased rental income. Simply put, extra land in these areas contributes little to your investment’s worth.
Ultimately, you should be at least a little bit cautious of any turnkey provider that highlights lot size as a major selling point — especially when dealing with B, C, or D-class properties.
2. Overlooking the Complexities of Different Municipalities
Plenty of rental markets are made up of at least a few different municipalities, each with its own rules, fees, and regulatory hurdles. This can be a major stumbling block for investors unfamiliar with their area of choice.
Let’s imagine an investor who recently purchased a rental property without researching local regulations. They might soon discover that the municipality has landlord registration fees, costly power deposits, strict inspection requirements, and additional garbage fees. Some areas even require home inspections before issuing a Certificate of Occupancy, which could lead to unexpected repair costs.
Failing to factor in these costs and tacking on the additional work to overcome bureaucratic hurdles can quickly turn a seemingly solid deal into a financial headache.
So, before purchasing, you’ll want to thoroughly research the municipality and factor in any potential challenges.
3. Assuming All Homes Appreciate
Lots of investors come to us with the mindset that real estate always appreciates. While this may be true in certain markets, it’s far from guaranteed in many of the areas where out-of-state investors are interested.
At Evernest, several of our team members own rental properties, and some of us have seen little to no appreciation over the years in certain neighborhoods. Unfortunately, many out-of-state investors are overpaying for properties and shouldn’t count on appreciation to recoup their investment.
Instead of banking on rising property values, focus on consistent cash flow and stability. Your best-case scenario is for the property to hold its value rather than decline.
A few of the primary factors that could drive appreciation include rising rents and overall neighborhood improvement. If appreciation is a key part of your strategy, note that these properties may just not be the right fit.
4. Relying on an Unverified Contractor
While your turnkey property may not need any repairs or renovations up front, it will eventually. And one of the biggest risks in investing is hiring a contractor without proper vetting.
An investor we spoke to recently was quoted $9,800 for a rehab on a property he could purchase for $10,000. He thought this was a win, because the contractor who provided the quote had experience working on luxury properties and high-end renovations. While this seemed like a great deal at first glance, it raised several concerns for us:
Why is a contractor who usually works on high-end renovations working on low budget projects all of a sudden?
Is the contractor licensed and insured?
Is the estimate deliberately kept under $10,000 to avoid permit requirements?
In many cases, if a quote is below $10,000, a contractor does not have to be a certified home builder and won't have to pull permits in certain municipalities. This contractor is likely not licensed or insured, which exposes an owner to unnecessary liability.
In Evernest's early days, we worked with a few contractors like this. While some saved us money initially, we almost always ended up paying more due to poor craftsmanship or unexpected problems down the road. We even had instances where a contractor was paid 50% upfront and never showed up again!
To avoid exposing yourself to these kinds of contractors:
Speak with other landlords who have worked with the contractor.
Ask property managers about their experiences with them.
Verify their licensing and insurance.
If possible, physically inspect previous projects to see their workmanship firsthand.
5. Ignoring 'White Elephants' That Drive Away Residents
A 'white elephant' is any feature that makes a property less appealing to potential residents.
Smart investors prioritize 'cookie-cutter' homes — those with broad appeal that are easy to rent. The more universally desirable the home, the better your chances of attracting high-quality residents.
Common 'white elephants' that deter good residents include:
Busy streets – These properties receive high traffic and most residents prefer quieter locations.
Burned-out or abandoned homes nearby – These properties lower neighborhood desirability and discourage stable residents.
Proximity to railroads or industrial zones – Noise and environmental factors make these properties harder to rent.
Steep hills or driveways – Inconvenient access can be a deal-breaker.
Homes near interstates or graveyards – Many residents simply won’t consider these locations.
Odd layouts – Poor design can make a home feel unlivable.
High ceilings in older homes – These can lead to increased heating and cooling costs.
National homebuilders use tried-and-true floor plans because they know what residents want. Following this approach will make your investment more successful and stable.
Final Thoughts: Positioning Yourself for Success in Turnkey Investing
Investing in real estate can be an exciting opportunity, but it also comes with risks, especially as an out-of-state investor. Some less-than-stellar groups are eager to sell properties to out-of-state individuals that local buyers wouldn’t even consider.
To build a successful portfolio, do your research, work with trust experts, be wary of deals that are too good to be true, and keep these five common turnkey mistakes in mind when evaluating potential properties. By taking these steps, you’ll set yourself up for long-term success in any rental market!
If you want an expert team of real estate investment professionals on your side, consider Evernest. We have the experience and tools to help you build a solid portfolio and avoid the bad deals and shady actors that can tank an investment. Visit our website to reach out and get started today!
