Turn Key vs Fixer Upper for rental properties?

Question

When buying a rental property, what do you look for to build equity and if so is there a dollar or percentage you look to maximize the value?

Do you ever purchase a turn key property for renting or do you always buy something that needs work? Why or why not?

Thanks for your help!

Lane Kawaoka · Answer

Most turnkeys over 850 a month in rent will be right at 1% Rent-to-Value Ratio.When I started I had a good paying job so for me it was a good way to get started.

Mike D'Arrigo · Answer

@Victoria Radcliff this depends on a number of factors.

1. How much time do you have to devote to a renovation project2. How much experience you have3. Are you doing it local or out of state4. How will you determine upfront what the scope of work should be and what the cost will be if out of state?5. How will you manage construction if out of state6. How big of a portfolio do you want?

Doing a fixer upper works for some people but it's not for every one. One thing to bear in mind is that you will need to do a fairly substantial renovation in order to create equity. A light, cosmetic rehab doesn't force much equity if at all. A fixer is more risky with no guarantee of having any equity left so you need to decide if it's worth it. If you're just doing 1 or 2 properties, it probably isn't worth it, but if you plan to scale and build a portfolio, then it could be.

Jeremy Bourgeois · Answer

It all depends on your situation!

If you have a high income job, do you think it would be more profitable to spend your time fixing up a property? Or would it make more sense to buy turnkey?

What I look for are motivated sellers and some kind of rehab work to find a great deal. Now, you can't just walk into a property like this and rent it out immediately. It also will not qualify for traditional financing. These are the kinds of deals I look for, but it isn't best for everyone, nor the easiest. So, not to sidestep the question, but I think the answer is in your personal situation and your end goal.

Hope this helps!

Turn Key vs Fixer Upper for rental properties?

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