My First Deal: Cashflow vs Equity

[Geo Johnson]

Hello All,

I’m currently in the process of developing my first RE deal. I have Realtor and I’m working on funding. My question is this: while researching deals I’m finding two major types of properties, major rehabs and turnkey rentals. The rehabs go for 60k needing roughly 60k in repairs. The average turnkey property goes for 140-160k. Should I take the experience of the rehab for 20k in equity or get cashflow right away with the turnkey rental and force appreciation over time? I can’t wait to read the responses!

Thanks

Geo

[Ali Boone]

Personally for a first deal, as a new investor, I think turnkey is safer. With the hard stuff done for you (rehab, property selection, etc.) it gives you the chance to learn all the basics of a solid property investment without being bombarded by the more advanced stuff. If you take on a rehab and all that jazz with no real skill behind you, you're likely going to be so busy figuring all that stuff out that you miss a lot of the basics that will carry you further down the road. If someone wants to do a rehab, I say buy a turnkey first, get the experience and learn all the basics (what makes for a good rental property, how to run numbers, DUE DILIGENCE, managing the manager, troubleshooting challenges, etc.), and then make a rehab your second deal once you've learned that stuff. Just seems like a more natural and safer progression to me.