{"id":145070,"date":"2022-10-06T15:00:00","date_gmt":"2022-10-06T21:00:00","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=145070"},"modified":"2023-11-06T14:22:19","modified_gmt":"2023-11-06T21:22:19","slug":"turnkey-vs-fixer-upper","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/turnkey-vs-fixer-upper","title":{"rendered":"Should You Invest In Turnkey Properties Or Fixer-Uppers? Here&#8217;s The Pros And Cons Of Each"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm?e=BIGPOC3079470632&#038;light=false\" width=\"100%\"><\/iframe>  \n\n\n\n\n<p><span data-preserver-spaces=\"true\">The ability to quickly analyze a property and determine if it will be a good investment takes practice and depends on factors like your financial position and real estate investing goals. Personally, I&#8217;m a long-term real estate investor. I look for slow and steady appreciation. Others might be motivated to flip properties and focus on a more short-term approach.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Factors like price and location will always be important when considering a new investment, but the property&#8217;s condition may or may not inhibit your decision. Some investors search for properties ready for immediate tenancy, also considered <a href=\"https:\/\/www.biggerpockets.com\/blog\/category\/real-estate-investing-strategies\/turnkey-real-estate-investing\" target=\"_blank\" rel=\"noreferrer noopener\">turnkey<\/a>, while others prefer to repair, renovate and resell for a profit with the <a href=\"https:\/\/www.biggerpockets.com\/guides\/brrrr-method\" target=\"_blank\" rel=\"noreferrer noopener\">BRRRR method<\/a>. Here is some advice from a seasoned real estate investor on choosing between a turnkey or fixer-upper investment property.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">The Benefits of Turnkey Investing<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">\u201cTurnkey\u201d means different things to different investors, but generally, the term refers to a property in move-in-ready condition. The property is often fully renovated and may even already be occupied by tenants (or will be ready for occupancy without any work required.) Some of the&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/6-pros-cons-turnkey-properties\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">benefits of investing in a turnkey propert<\/span><\/a><span data-preserver-spaces=\"true\">y include:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Higher potential for quick cash flow and faster return on investment because there are no upfront costs (or headaches) to renovate the property.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Allows for portfolio diversification by property type and location, which can be extremely appealing if your local area is in a period of downturn.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Easy to hand off to a&nbsp;property management company&nbsp;for a completely hands-off, passive investment.&nbsp;<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Almost always more affordable to invest in a turnkey property than to build from scratch.&nbsp;<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">The Challenges of Turnkey<\/span> Investing<\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Turnkey investing might sound too good to be true, but it doesn\u2019t come without its own set of pitfalls.&nbsp;<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Turnkey properties are often a larger upfront investment because they are in premium condition and priced accordingly.&nbsp;<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Turnkey rental properties often come with tenants included. Depending on the screening practices of the previous landlord, you may or may not end up with high-quality tenants who maintain the property and pay rent on time.&nbsp;<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Many turnkey properties wind up being long-distance investments, which means you may or may not have the opportunity to do your due diligence and inspect the property for structural, electrical, or other issues.&nbsp;<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Because the property is already built and designed, you won\u2019t have much control over factors like layout, style, and appearance without incurring additional costs.&nbsp;<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">The Benefits of a Fixer-Upper<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">While the advantages of a rent-ready property are that you will start collecting income right away, repairing and rehabbing a property can be a long-term strategy to improve your return on investment. If you can purchase a property for a cheaper price and increase the value so that you can ask for higher rent, you can see where your investment will pay off down the road.&nbsp;<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Depending on your market, there may be less competition for fixer-upper properties as some investors may not have the skills, connections, and knowledge to complete necessary renovations.&nbsp;<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">While most investment properties take an average of 10 years to appreciate, fixer-upper properties appreciate as you renovate, repair, and update the home. The more you put in, the more return on investment potential (especially if you got a great deal on the purchase price).<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">The Challenges of a Fixer-Upper<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">The biggest pitfall of a fixer-upper property is the time and cost associated with actually \u201cfixing it up.\u201d Who is going to do the work? Investing in fixer-upper properties is a common real estate investment strategy, but there are often greater risks involved.<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">If you aren\u2019t qualified to renovate a property yourself, you\u2019ll need to build and hire a team of professionals who can complete all of the work required to get the property rent-ready. This can be a complicated process if you don\u2019t already have a reliable team that you\u2019ve worked with before.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Always be prepared for the fact that repairs will likely take longer and cost more than you expected. Every day your rental property goes without a tenant is a day that you\u2019re losing money, and&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/5-steps-to-lower-vacancy-rates-and-increase-renewal-rates\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">vacancies can quickly destroy your profit margins<\/span><\/a><span data-preserver-spaces=\"true\">.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Even if you got a great deal, the future is always uncertain. You can\u2019t be sure what the market will look like when you\u2019re ready to find a tenant or an end-buyer when the property is complete. Don\u2019t get stuck paying the mortgage on a property that isn\u2019t making any rental income in return.<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Final Thoughts<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">There are many different investment strategies in the real estate market, and choosing the right path will come down to your financial position and long-term goals. I typically recommend those new to real estate investing steer toward finding properties that will require minimal repairs in order to be considered rent-ready. If you are experienced in large-scale home improvement projects, have a team of professionals in place, or have flipped properties in the past, buying a fixer-upper can be a great investment.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">All investments come with risks, so take the time and do the research to determine if a property will be a good investment for your unique situation. Be cautious when it comes to cost and time spent on repairs and maintenance.&nbsp;<\/span><\/p>\n\n\n\n    \n  <div id=\"visibility-group-block_64dd5ab97ed79\" class=\"visibility-group  hidden\">\n        \n\n<div id=\"hero-block_62df1a82bfc88\" class=\"first:mt-0 hero-block py-4    has-background has-slate-200-background-color has-text-color has-slate-900-color\">\n    <div\n        class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 lg:w-2\/3 \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-large-font-size\"><strong>Analyze Deals Like a Pro<\/strong><\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:16px\">Deal analysis is one of the first and most critical steps of real estate investing. 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