Turnkey vs Fix & Rent

5 Replies

Wanted to get some of your investor opinions on this.

Both have their pros & cons.

The turnkey can be financed where as the fixer more often than not has to be done with all cash. Now the cash on cash return will be greater when you are into the home far less than what it would have cost turnkey. Doing the leg work and going through the grind does have its pluses, but so does being able to leverage your $$ and have the tenant pay your mortgage. Now most of the time when you do the work you will be sitting on a good bit of equity.

On the other hand I do want to point out- that a lot of people when financing a turnkey, they don't take into account that the tenant is actually paying for their equity/paying down the loan. That also is a prime example of OPM(other peoples money).

Like I said I'd like to hear all of your thoughts on this, which one do you all like & why? Everyone will be different.

I would go with fix and rent. That is my go-to strategy and I don't particullary like the idea of paying more to someone else because I didn't want to do the work. 

I like fix and rent because you can make it your own and decide what gets fixed and to what extent. 

The downside to fix and rent is that there are holding costs. My most recent property took 3 weeks to fix and rent. THat's 3 weeks of vacancy. I still prefer that method as you essentially get the same thing as a turnkey, but for less $

My biggest comparison of the 2 is based on time and location. I don't have the time to find the leads, buy low cost, get the crews (or do the work myself), and there aren't many great deals in my backyard without putting lots of time in. So for me, I love turnkey because you can still buy them with some equity and I didn't just add 3 months holding time trying to herd cats (various contractors).

It's all about your own personal goals. Would I fix and rent if I worked less at my normal job? Heck yes! I love doing it and knowing it's done RIGHT. They are both amazing strategies, but for different reasons.

Best of luck to you!

@Bryan O.

Great point, I've always said the same myself. Professionals in their field just don't have the time. You have got to find your crew you trust. Its all about time for sure. 

When it comes to time everyone is on a level playing field.

You can get the best of both worlds.

Remember just because you are not buying a turnkey property does not mean you must buy a complete wreck.

You can buy a property that is in ok shape. One that needs minor work. Good enough to qualify for financing just needs some love.

Still get equity and have tenant paying down your mortgage.

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