Turnkey vs. renovating

[Eli M.]

Dear BP community,

What would you recommend to a first time investor; should he go with a turnkey property which saves time, headache from renovations and brings in a cash-flow from day one or should he buy for cash, renovate it, rent it out and refinance it?

if it makes a difference, we are talking about a single family house in Philly.

thank you all in advance

[Jon Holdman]

You need to be very careful with turnkeys.  I've looked at a bunch of these because there seem to be no deals left in Denver and its hard to do a rehab at a distance.  But I find they are consistently high priced and rent is very often overstated.  Do you own research based on the local area.  Don't pay over retail for a turnkey.  Verify the actual rent.  Verify the company doing the rehab.  Some of these appear to be real junkers that have been given a cosmetic rehab and generate ongoing "maintenance" bills.