turnkey property Archives

The current housing market means you’ll likely pay top dollar for a home that’s considered turnkey — immediately ready for you to move in. Plus, the competition is steep. Perhaps those two reasons are why 52% of American homebuyers are looking for a starter home or a fixer-upper rather than a forever home, according to TD Bank‘s First-Time Homebuyer Pulse, which polled buyers planning to purchase in 2022. If you’re struggling with whether to keep combing the housing market for a move-in-ready home that fits your budget or to take your chances with a fixer-upper, here’s the expert insight you need.

Pros of Buying a Fixer-Upper

Buying a fixer-upper can provide you with advantages that a turnkey home doesn’t offer. Consider the following.

Cheaper Taxes

“Fixer-uppers can be a great way to get a deal on a property and save money on taxes,” said Jeremy Luebke, founder of WeLoveLand. “In many cases, fixer-uppers are sold for less than the market value because the seller is motivated to move the property quickly. This can be a great opportunity for bargain hunters. Additionally, fixer-uppers often come with significant tax breaks. The government offers tax breaks for people who rehabilitate or redevelop properties, so if you’re planning to do major work on your fixer-upper, you may be eligible for some significant tax deductions.”

Flip Potential

“The big advantage to taking the risk on a fixer-upper is the equity you build while improving the value of the property,” said Doug Greene, owner of Signature Properties. “This is the flip potential that exists, while in a turnkey home you are essentially buying the property at full price (i.e., market value).”

Potential for Creativity

“An advantage of purchasing a fixer-upper is the opportunity to put money into the features of your house that are most important to you,” said John Riedl of Easy Cash Offer Florida. “Do you want a modern kitchen? What about a luxurious soaking tub? If you are purchasing a property that is move-in ready, you can find yourself subject to the taste and interests of the past owner.”

Riedl also pointed out that fixer-uppers give you a lot of control over the renovation process by selecting paint colors, floor materials, contractors, and anything else you desire.

Cons of Buying a Fixer-Upper

Time, money and effort are all required when it comes to getting a fixer-upper where you want it to be. Here’s more on the potential disadvantages of going this route.

Renovation Costs

“The cost of labor and materials is near its highest price ever, and if you are hiring contractors to perform work on your home, unless you have a crew on standby, it could be months before the work is done,” said Tony Grech real estate investor and lending expert with Luxury Mortgage. “Just like there is a shortage of home inventory that has driven prices up, there is a shortage of qualified tradespeople as well as a shortage in raw materials due to supply chain issues that stretch back to the beginning of COVID. So you save $20,000 or $30,000 on the price of the home, but it costs you $60,000 to perform the work that you want.”

Effort

Beyond the costs in labor and materials, renovating a home comes with some other headaches and risks,” said Brian Davis, real estate investor and founder at Spark Rental. “You have to navigate the treacherous waters of permits, which involves not just filing fees and dealing with the permit office, but also hassling with inspectors.”

Ryan Fitzgerald, owner of UpHomes also said that renovating a fixer-upper requires a lot of effort. “Renovations are time-consuming and stressful so make sure you’re up for the challenge if you decide to get a fixer-upper,” he cautioned. “If you don’t want to deal with the construction, managing contractors, and living in a home that isn’t finished, a fixer-upper may not be the best choice for you.”

Live Richer Podcast: First-Time Homebuying During Inflation: Is It Worth It?

Pros of Buying a Turnkey Home

While a home that’s ready to move in will likely cost much more than a fixer-upper, there are some definite advantages that are worth considering.

No Renovation Costs

“When you purchase a turnkey home, the price you see is the price you pay,” said Luebke. “There are no additional costs for things like landscape or certain home upgrades. This can be a big advantage when budgeting for your new home. You know exactly how much money you need to bring to the table, and there are no unpleasant surprises down the road.”

Minimal Effort Required

If you’re looking to move in and start enjoying your new home as soon as possible, turnkey home is a perfect choice. “Turnkey homes require much lower effort because you can move right in and start enjoying the home after you unpack,” said Ryan Fitzgerald, owner of UpHomes.

Cons of Buying a Turnkey Home

However, buying a turnkey home also comes with a few drawbacks. It’s up to you to decide if they are worth it.

More Expensive Taxes Upfront

While you can get a lower property tax rate by buying a cheaper fixer-upper, that’s likely not the case with a turnkey home.

“If you opt for a turnkey home, the municipality will have likely already caught up to the new assessed value by the time you move in,” said Greene. “It’s usually the sale of the property that triggers a property reassessment in the system.”

Flip Potential Is Nonexistent

“Buying turnkey is certainly the way to go if you have no desire to make repairs to a home and want it move-in ready,” said Jeff Shipwash, CEO of Shipwash Properties LLC. “Unfortunately, in today’s market, turnkey properties are at a premium. This means you will more than likely have strong competition and will be paying top dollar for it. This results in buying with little to no equity to spare.”

And without any equity to spare, there is no flip potential.

Limited Opportunities for Creativity or Customization

“The home might not be exactly what you want,” said Luebke. “Since the home has already been built, you may be limited in terms of customizations or changes that you can make. The home might come equipped with most, if not all, of the features and amenities that you desire, but there is always the chance that something will not be quite to your liking. This can be frustrating if you have specific ideas about how you want your new home to look and function.”

>>This article originally appeared on GOBankingRates.com.<<

In 2023, despite a cooling housing market and high mortgage rates, turnkey homes are in demand and selling fast. While fixer-uppers, homes with less curb appeal, and those located in less desirable areas are sitting on the market for longer, turnkey homes in good school districts remain hot commodities. In this article, we'll examine a report published by Realtor.com on why turnkey homes for sale are still in demand and explore the reasons why some homes sell quickly while others sit unsold.

Why Turnkey Homes for Sale are Selling Fast in 2023?

During the pandemic, homebuyers had limited choices, and everything sold for more money than ever before. Buyers who couldn't afford to buy a fixer-upper were left with few choices but to buy a well-appointed, well-situated turnkey home. This trend has continued into 2023, with homebuyers still seeking out these properties.

A good home in the resale market is selling quickly, and buyers today are not the same as those who bought 12 months ago. With prices still much higher than they were pre-pandemic, buyers don't have much room in their budgets for costly repairs, and they want a home that is move-in ready.

Competition for Turnkey Homes Remains Fierce

Competition for turnkey homes in good school districts remains fierce. If the house is perfect, the odds of someone else wanting it are high, too. In a market where costs are still high and buyers can be a little choosier, it makes sense that they're going to zero in on the homes that are the most appealing. Turnkey homes are especially popular with families looking for a home in a good school district. They want a home that is move-in ready and won't require any work or upgrades.

Why Fixer-Uppers Are Less Appealing to Buyers

While fixer-uppers have traditionally been popular with investors who could get these homes at a discount and resell them at a profit, this trend has slowed down in 2023. With home prices falling from their peaks over the summer, many investors are now pausing their purchases.

Fixer-uppers are staying on the market longer, and sellers are having to drop the price on these homes or accept lowball offers. Buyers want these homes only when there is no other inventory out there. Anything that is staying on the market for more than 48 hours without a booked showing is in a less desirable location and definitely not in tip-top, showable condition. Buyers are always looking for improvements that have already been done.

Location Matters

While properties that need major renovation and updates, like a new kitchen or bathroom and major systems, are not selling well, these problems can be overlooked if the home is in a great location. Homes located near a train station or in a community with top-rated schools are still desirable, and buyers could get a discount on these properties.

Price Matters

Even the ugliest, run-down, abandoned homes with the worst smells, located in the most undesirable areas, such as on a busy highway, will still sell if the price is right. Price will always overcome any objections buyers may have about the property.

How Should First-Time Homebuyers Buy/Bid for Turnkey Homes?

In today's housing market, first-time homebuyers are facing tough competition, especially those seeking a move-in ready home in a desirable community with high mortgage rates. The market has changed since the COVID-19 pandemic era, but turnkey homes in great locations continue to receive multiple offers and sell for a premium. According to Realtor.com, you need to have some strategies that can help you be competitive in the current housing market and secure your dream home.

Strategy 1: Know Your Local Market

To be successful in buying your dream home, you need to focus on your local market rather than what's happening in the national housing market. It's essential to research how long homes, including turnkey ones, are staying on the market in the specific community you're interested in. Analyzing the comps of comparable homes that have sold can also help you make an informed decision. Your real estate agent can advise you on whether you need to waive contingencies and kick in a high down payment to have your offer accepted.

Strategy 2: Get Pre-Approved for a Mortgage

Getting pre-approved for a mortgage can give you a competitive edge in the housing market. It helps you narrow down your price range and avoid losing your dream home to another pre-approved buyer.

Strategy 3: Find a Trustworthy Real Estate Agent

Your real estate agent will guide you through the home-buying process, so it's essential to find someone you trust to help you make the largest purchase of your life. Ask for recommendations from friends, check online reviews, and ensure they have experience working with buyers in a similar price range and the areas you're interested in.

Strategy 4: Make a Larger Down Payment

Sellers favor buyers who can make larger down payments as they believe they are more financially stable and more likely to complete the sale. Putting down at least 20% can increase your chances of winning a bidding war and eliminate the need to pay private mortgage insurance every month.

Strategy 5: Offer Compelling Terms

Bidding wars aren't only won on price; terms also matter. By offering a flexible closing timeline and allowing the sellers to rent back the home or vacate the property at their pace, you may have a better chance of winning the bid. You could also waive a traditional home inspection and opt for an evaluation of the structural and engineering components of the home, showing the seller that you don't plan to back out unless there are significant issues with the property.

Should You Investors Buy Turnkey Homes in 2023?

Investing in turnkey homes can be profitable in 2023 due to high demand and low inventory. Buyers seek move-in-ready properties, especially in good school districts. Fixer-uppers are less appealing, and location and price remain crucial factors. Consider investing in turnkey homes for a potentially lucrative return on investment.

When considering investing in turnkey homes, it's important to keep in mind that these properties can be a profitable investment for the right buyer. Turnkey homes can provide a reliable source of rental income, as they are often in desirable areas and require little to no renovation or repair work.

Additionally, turnkey homes tend to attract long-term tenants, as renters are often looking for a property that is move-in ready and requires little upkeep. However, investing in turnkey homes also comes with some risks. Buyers should thoroughly research the market and the specific property before making a purchase.

They should also be prepared for unexpected expenses, such as maintenance and repairs, that may arise over time. In the end, whether or not to invest in turnkey homes depends on the individual buyer's financial situation, investment goals, and risk tolerance. With careful research and planning, investing in turnkey homes can be a profitable venture in 2023.

Conclusion

Turnkey homes for sale are still in demand in 2023, despite a cooling housing market and high mortgage rates. While fixer-uppers and homes with less curb appeal are sitting on the market longer, turnkey homes in good school districts are selling quickly. Buyers want a home that is move-in ready and won't require any work or upgrades.

Location and price still matter, and homes in great locations and those that are priced right will always be in demand. Buying a move-in ready home in a desirable community in the current housing market requires first-time homebuyers to be competitive. By following the above strategies, you can increase your chances of securing your dream turnkey home.

If you're ready to start your search for a hot turnkey home in a great community, we can help. Our team specializes in finding the perfect home for every buyer, and we're here to guide you through the home-buying process. Contact us today to learn more about our current listings and start your journey toward homeownership or real estate investment.

Source:

https://www.realtor.com/news/trends/a-tale-of-2-housing-markets-why-some-homes-still-cause-heated-bidding-wars-while-others-sit-unsold/
https://www.realtor.com/advice/buy/on-the-house-if-the-housing-market-is-down-why-do-bidding-wars-and-offers-over-the-list-price-abound/

Housing Market: Should You Buy a Turnkey Property or Fixer-Upper?