Buy and hold. Pay retail price?

7 Replies

Hi BP, would any investors pay retail price for a rental minus repair cost? Or would you treat it like a fix and flip and try to buy it at 70%? Or Would rentals typically sell for 80-85%?
Sure, buying turnkey rentals are common. You could get away with paying more than the "70% rule" for a buy and hold, but 85% is too high in my opinion. 75% to maybe 80%, depending on other factors
(267) 520-0454

@Jose Castillo How are you going to get rich paying retail? That is buying, not investing. Investing in anything implies that you make more money than it costs you. You don't make money buying retail, then renting it out for retail. Net zero, or very little before expenses. C'mon Jose!

Originally posted by @Jose Castillo :
Hi BP, would any investors pay retail price for a rental minus repair cost? Or would you treat it like a fix and flip and try to buy it at 70%? Or Would rentals typically sell for 80-85%?

 You aren't going to be buying any rentals in today's market if you look at it like this. Gotta play the market & right now we are in a sellers market.

James Wise, Real Estate Agent in OH (#2015001161)
216-661-6633

Make sure you take a minute to understand your current market and your current objective. IF there is motivation there a deal could be made. Don't be scared to seek creative terms. Yes, you could pay full price if it is structure in a way that benefits you and gives the seller what they want. Remember if you get terms they get cash and vice verse. This is how I always try to aprroach it.

Really depends on goals.

Many on BP assume the main goal is cash flow for assets.

There are some people who make 300k,500k, 1 million a year. To them mainly it is tax benefits, equity growth over time, quality of the asset with no headache, cash flow.

So cash flow moves many spots down on the list.

Some that do not need the money see properties as a pay down retirement plan and tax shelter.

It's all about where you are with your current situation, where you want to go, and how much headache and problems you want to deal with for annual yield. 

@Jose Castillo sure you can definitely do that. Like others have mentioned buying turnkey aka retail is common. I’ve done it myself. I’ve also bought 20 percent below market.

If you pay retail, in my opinion you want to make sure you do a couple things. Make sure most of the mechanicals/ big ticket items are new or less than 5 years old. Not all rehabs are done to the same standard and so you want to make sure anything you’re paying retail for has a quality rehab and all the big items are newer. There shouldn’t be any deferred maintenance.

Also make sure it’s not going to be a headache or minimize your headaches if possible. Don’t buy a “turnkey” rental for 40k in the Hood. Stick to 75-100k rentals (varies by market) and rents at 750 and above (give or take a bit). This will make sure your tenant pool is of higher quality.

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