Turnkey or BRRRR?

New to Real Estate · Oklahoma City, OK · Member since 2019 · 8 posts · 10 votes

After many years of analysis paralysis, I'm finally in a place where I'm ready to make my first real estate investment. My plan is to use my HELOC from my current primary residence as the down payment. For someone in my situation, is it better to purchase a Turnkey property or a fixer upper using the BRRRR strategy?

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Benjamin AakerPro Member

Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes

I recommend BRRR. Turnkey will be a lot less cash flow. Make sure if you use your HELOC that the new property can pay back the HELOC as well as its own mortgage.

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Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
2y
@Deal H.
I want you to get in the game too, I just want you to do so from a place of financial strength. HELOC money is actually expensive. Buy the wrong property, and that property + the interest only payment on the HELOC will mean you're going backwards, not forwards.
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Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
2y
I am a realtor in Chicago and have many clients with the same question. I usually recommend them a third option, which is to buy a 2-4 unit that needs cosmetic rehab. Stuff as simple as replace cabinets/counters and repaint. These easy cosmetic value adds get your rents/cashflow up and create some equity while also attracting the best tenants.
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Travis Biziorek
Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
2y
If you're using a HELOC it's best to do something that's going to create value.
That's not turnkey.
The reason behind this is if you use a HELOC for a 20% down payment on a property you're 100% financed. That's not good for several reasons.
One of those is that your HELOC is going to come with a pretty high interest rate and interest only payments. You'll need a plan to pay down your HELOC and, without creating equity in a deal, you'll have to rely on your W2 for that.
You won't cash flow on your rental if you finance it 100%, so using cash flow to pay down the HELOC isn't an option.
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John MorganPro Member
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
2y
@Deal H.
I've done several of both. Turnkey is what I recommend and doing from now on. And I have 29 SFR.
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Peter W.
Member since 2020 · 351 posts · 329 votes
2y
If you have to ask, the answer is probably turnkey. Although I wouldn't necessarily use a turnkey provider. Buy a house which is move in ready (or very close), go find some tenants and get it rented. If you want to do deal number 2, find some cosmetic stuff for you to update.
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Todd AndersonPro Member
Real Estate Agent · Cape Coral, FL · Member since 2023 · 392 posts · 175 votes
2y
I talk with investors all the time who have the same question. To be clear, to get to the right answer for you I would need more information.
I have done a number of Brrrr's. It is a good way to get into Real Estate. BUT. You need to have time, You are taking on another job. You need to have experience in renovation, or know someone who does. And renovation money. There is also higher risk that comes along with the deal. There are always things that come up that you don't expect.
With a turnkey investment you have experts in place to help with all items listed. We work with builders, lenders, insurance, property management, and most importantly, We are boots on the ground. The turnkey I suggest to the investors that I work with is New construction Investment properties. As a new first time investor in this strategy you are able to own there property for the best years of its life, when it needs the fewest repairs. The way we present our OFF MARKET inventory all the builds are with in 1-3 months of completion so the investor also does not fund the construction.
And lastly all the properties that we recommend cashflow day one, or as soon as the team finds a tenant.
Let me know if I can help further or you would like to talk about our inventory. Feel free to connect.
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Jason Allen
Attorney · Columbus, OH · Member since 2023 · 193 posts · 145 votes
2y
You should start with something turn-key. This will help you learn the ropes before going into an advanced strategy like BRRRR.
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Adam BartomeoBusiness Member
Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
2y
Most new investors do not have the stomach for rehabs or the maintenance of owning an older property. Being your first property, I would advise turn key.
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Robert Portal
Lender · Orange County, CA · Member since 2023 · 26 posts · 13 votes
2y
Both are great options BUT it depends on your tolerance. I started with turnkey because I didn't know anything about home renovations. I wanted to learn so that I could 'speak the same language'. I actually started in Bixby, OK.
After a few rentals, I became more aware of the ins and outs of what goes into a home renovation. Though it's more work, it's almost more lucrative if done right.
If you want to go safer, then do a turnkey investment (I have personally used Rent to Retirement) but I have also heard of Roofstock.
If you have a solid trustworthy team (contractor, lender, agent) then go the BRRRR route.

Good luck!
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Simon Ashbaugh
Realtor · Columbus Ohio, Cleveland Ohio · Member since 2022 · 849 posts · 830 votes
2y
Quote from @Deal H.:

After many years of analysis paralysis, I'm finally in a place where I'm ready to make my first real estate investment. My plan is to use my HELOC from my current primary residence as the down payment. For someone in my situation, is it better to purchase a Turnkey property or a fixer upper using the BRRRR strategy?
The BRRRR strategy can be profitable but it requires extensive knowledge, trustworthy contractors and careful market analysis. For a beginner, it will be wise to start with a property that requires less hands-on management, like a turnkey property or one needing only minor repairs. This approach will help you gain experience and build trust with local professionals while minimizing risk. Hope this helps!
2 Reply
Joseph Bui
Lender · Nationwide · Member since 2023 · 362 posts · 237 votes
2y
I've done both across Memphis and Detroit. BRRRRs usually provide better returns, but you need to have the stomach to wait and take on more risk. Turnkeys are safe, but you are likely paying market price and you won't be getting a "deal". Happy to connect and share more about pro/cons.
2 Reply
Joseph Bui
Lender · Nationwide · Member since 2023 · 362 posts · 237 votes
2y
Quote from @Deal H.:

Thanks everyone for insight. I understand that BRRRR would provide more cash flow, but from what I've read this method also requires more time and investment. I have a full time W2 job that takes up much of my time, so I'm leaning toward Turnkey until I gain some experience. Has anyone used the company Roofstock to acquire properties?
Roofstock is nothing more than a layer on top of the MLS that provides more information for investors. They don't really "help" in any meaningful way. I've been doing BRRRRs in Detroit and Memphis and I'm happy to share resources.
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Zach LemasterBusiness Member
Rental Property Investor · Denver, CO · Member since 2015 · 1k+ posts · 3k+ votes
2y
@Deal H. that is great to hear you are in a position to make your first investment into real estate. Could you expand more on what other things are important to you in this investment? Why type of price point are you looking, what anticipated ROI/cash flow, how much time do you want to be involved in, what is your risk threshold, how long do you plan to hold the property, are you looking to invest locally or open to exploring other markets, etc.? Both can be excellent strategies, but one option may be significantly better for you based on the answers to these questions.

@Robert Portal thank you for the mention of Rent To Retirement. You had great advice in this thread!
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James WachobBusiness Member
Real Estate Broker · Memphis, TN · Member since 2015 · 1k+ posts · 888 votes
2y
Hello @Deal H.,

Congratulations on reaching the point where you’re ready to make your first real estate investment!
When it comes to choosing between a turnkey property and a fixer-upper using the BRRRR strategy, it really depends on various factors, including your market conditions and where you are in your investing journey. Both approaches can be effective, but they come with different sets of considerations.

Turnkey properties are often a safer choice, especially for those just starting out. These properties are usually fully renovated and rented out, providing a more predictable and hands-off investment experience. Given the current market conditions, new construction and turnkey properties tend to offer a more stable and lower-risk entry point into real estate investing. This can be particularly advantageous as you’re learning the ropes and gaining experience.

On the other hand, the BRRRR strategy—Buy, Rehab, Rent, Refinance, Repeat—can be a great way to build wealth and leverage your investments once you're more comfortable with the process. While it has the potential for higher returns, it also involves more risk and requires a deeper understanding of property management and renovation.

Feel free to reach out if you have any more questions or need further guidance. Best of luck with your investment journey!

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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @Deal H.:

Thanks everyone for insight. I understand that BRRRR would provide more cash flow, but from what I've read this method also requires more time and investment. I have a full time W2 job that takes up much of my time, so I'm leaning toward Turnkey until I gain some experience. Has anyone used the company Roofstock to acquire properties?
You're just making excuses. You have enough time to do a BRRR.
1 Reply
Jordan RayBusiness Member
Real Estate Agent · Memphis, TN · Member since 2023 · 630 posts · 328 votes
2y
Quote from @Deal H.:

After many years of analysis paralysis, I'm finally in a place where I'm ready to make my first real estate investment. My plan is to use my HELOC from my current primary residence as the down payment. For someone in my situation, is it better to purchase a Turnkey property or a fixer upper using the BRRRR strategy?

Hey Deal! Welcome to BiggerPockets! I bought my first property this way and it can be a great strategy.. however. My HELOC was locked up and I was constantly making the interest payment that was taking away from my cashflow. I would recommend using your HELOC for short term use and make sure to pay it back off quickly. I personally use my HELOC now to help with quick acquisition in combination with my 100% purchase/100% Reahb hard money loan and then i just pay it back off at the end of the BRRRR. Hope this helps! Best of luck! Ket me know if you find any interest investing in Memphis TN and I would love to be your POC here! Talk soon!
[email protected]662-642-1458
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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
2y
It depends on your goals and comfort level:
- Turnkey: If you want a property that’s ready to go with minimal hassle, a turnkey is a safer choice. You’ll start generating cash flow immediately, but the returns might be lower.
- BRRRR: If you’re willing to be hands-on and can manage renovations, BRRRR offers higher potential returns and helps you recycle your capital. However, it requires more work, time, and risk.
If you're ready to dive in but want something more passive, start with Turnkey. If you're comfortable taking on more effort for bigger rewards, BRRRR might be the way to go.

From a tax perspective, BRRRR may be better because you can potentially benefit from accelerated depreciation on the property, which can help reduce your taxable income and give you a bigger tax advantage compared to a turnkey property.
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Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
2y
Quote from @Deal H.:

Thanks everyone for insight. I understand that BRRRR would provide more cash flow, but from what I've read this method also requires more time and investment. I have a full time W2 job that takes up much of my time, so I'm leaning toward Turnkey until I gain some experience. Has anyone used the company Roofstock to acquire properties?

You have 3 things you can invest: money, time and energy. To some degree, you can substitute one for another. If you don't have much money, then invest your time and energy.
Putting a second mortgage on your home to buy a turnkey property is a horrible idea. You will be 100% leveraged and you are paying top dollar, because the turnkey company needs to make a profit as well.
Real estate is not for everyone and it can make your life miserable. Based on what I read here you are likely to have a better life and better ROI by investing in an S&P500 index fund.
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Dean HarrisBusiness Member
Real Estate Agent · Memphis, TN · Member since 2015 · 1k+ posts · 1k+ votes
2y
I have used the BRRRR strategy over 50 times my self in Memphis, TN. Im happy to share my expierences, contacts, locations, etc. The key is to have a trusted GC and property source. Being all-in at 70-80% of ARV vs 100% or even 105% of the ARV is way cooler! :)
Good Luck!
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Tyler Tapley
Real Estate Agent · Memphis, TN. · Member since 2018 · 175 posts · 101 votes
2y
We have about 100 BRRRR examples and case studies we share with clients. We give them the exact address, a video of what it looked like when it was bought, who did the rehab, what the rehab cost, what it rented for, a video of what it looked like AFTER the rehab, who did the loan (who the lender was), etc. We love sharing this information. Good Luck!
2 Reply
John Salcedo
Member since 2022 · 74 posts · 45 votes
1y
I started with a few turnkeys and as my experience and risk tolerance grew, I now do out of state BRRRR projects.
Experience is a very huge factor. If you are new, stick to turn key. Even turn key will not be 100% passive.
1 Reply
Zachary Cain Humphrey
Investor · KY · Member since 2022 · 204 posts · 77 votes
1y
Purchasing a land lot and then using the paid off lot to secure a construction loan from a bank could also be a viable option rather than fixer upper or turnkey. If you go the fixer upper route , just know there are many predatory contractors looking to take advantage of new investors. Only pay for work done. Never pay money in advance of work being done.
0 Reply
Tyler Tapley
Real Estate Agent · Memphis, TN. · Member since 2018 · 175 posts · 101 votes
1y
Quote from @John Salcedo:

I started with a few turnkeys and as my experience and risk tolerance grew, I now do out of state BRRRR projects.
Experience is a very huge factor. If you are new, stick to turn key. Even turn key will not be 100% passive.
Where are you investing? Glad it is working out nicely for you.
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