Why Sell to Turnkey Investors

Who should you flip houses to — retail homebuyers or turnkey property investors?

Many house flippers assume they can earn higher profit margins by selling to homeowners at full market value. But that’s not what we’ve found.

Here’s why we mostly sell properties to turnkey rental investors, rather than homebuyers on the MLS.

1. Easy to Find Tenant-Occupied Properties

One of the easiest ways to score great deals on real estate is buying from “tired landlords.” 

They may have bad tenants in place who need evicting, or maybe they’ve just grown to hate hassling with needy tenants and clogged toilets. Perhaps the tenants are actually fine, but the property needs significant updates and repairs.

Once you close on these properties, you can create a smooth system for either keeping or removing the tenant. If the former, you can put the tenant up at an Airbnb or extended stay hotel while you renovate the unit. A few weeks later the renters move back in and voila! You’ve got a turnkey rental property to sell with a known reliable renter.

If you need to evict, you can streamline your in-house eviction process, hire it out to an agency, or just offer cash for keys. Regardless, you can build a system to handle it quickly and efficiently. Once vacant, you can then renovate the property to sell as a turnkey. 

2. Simpler Renovation

When you rehab properties to hold as rentals, you can use the same hardy finishes in every single unit. The same paint colors, the same appliances, the same countertops, the same flooring. 

You can buy in bulk, and your team of contractors can crank through the renovations like a well-oiled machine. It’s fast, it’s cheap, it’s a replicable process. 

When you flip a house to retail homebuyers, you need to customize renovations if you want to sell the property for top dollar. You need to choose the appropriate finishes for that caliber of property, pick out the best paints for it, and so forth. 

Think of it as the difference between a bespoke suit made from scratch versus a mass-produced suit. 

3. Higher Profits

The cheaper renovation saves you money of course. But it’s not the only potential savings.

Faster renovations save you money on holding costs. Every month you hold the property as a flipper costs you money. 

You don’t need to pay a real estate agent if you sell a turnkey property to your own buyer’s list. That can save you 6% of the sales price right there. 

In some cases, the sales price paid by turnkey buyers isn’t actually that much lower than the premium homebuyer price. You often come out ahead selling to other investors, given your lower expenses. 

4. Earn Cash Flow While Marketing the Property

When you sell a turnkey property, you can sell it with tenants occupying it. 

That means you can collect cash flow while you market the property for sale to your buyers list. In fact, you may only incur a few weeks’ worth of holding costs while actually renovating property, if you place a renter in the property right away. 

And if you struggle to sell the property, you can always wait out a cool real estate market, keeping the property as a rental in the meantime. It adds a contingency plan to your exit strategy. 

5. Ongoing Revenue from Property Management

Likewise, if you have a property management company you can offer that as an additional service to your turnkey buyers.

You earn an initial profit upon selling the property. Then you earn ongoing profit by managing it. 

In fact, many turnkey buyers prefer doing business with an all-in-one turnkey seller and property manager. It reassures them that you didn’t just stash a terrible tenant paying above-market rents in the property to inflate the sales price and ditch it quickly. They know you placed (or will place) a reliable renter in the property, because you want their repeat business. 

6. Repeat Business from Buyers

Homeowners only buy one house at a time. They won’t offer repeat business any time soon — you have to start from scratch marketing each property for sale. 

You can sell endless turnkey properties to the same list of buyers however. You build a buyers list, and send out an email blast every time you have a new property to sell. Grow your list enough, and you can put properties under contract within hours of a single bulk email to your list. 

7. Fewer Headaches from Buyers

Let’s face it: homebuyers are a nervous, needy bunch. They need plenty of handholding, because they’ll only buy a few homes in their entire lives. 

They’ll hit you with endless questions, demand lots of contingencies, want to visit the property again… and again… and again. 

Turnkey buyers are professionals. Many buy sight-unseen, with few questions asked beyond the standard due diligence you’ve already conducted yourself as an investor. Some have bought hundreds of properties before, and others have bought properties from you before and trust you. 

The bottom line: they’re far easier to work with. 

Final Thoughts

There’s nothing wrong with flipping houses to homebuyers for the maximum possible price. Many flippers build a career out of doing just that. 

We do it occasionally ourselves. But as a general rule, we prefer to work with other investors, for all the reasons outlined above.