Buying first property

3 Replies

Hello my name is Ryan. Right now my wife and I are looking for a property to buy, a lot of the ones I am seeing are already renovated & have tenates. Is it worth it to invest in one of those? or, should I buy a nasty one and fix it. 

It all depends on a number of things:

1) What are your goals? Do you want to have a truly passive investment where you buy and then turn it over to a PM or are you going to be hands on and manage yourself?

2) What do the numbers need to look like for it to be a good deal for you and ACTUALLY cash flow? Are you looking for cash flow or are you looking for appreciation?

3) How handy are you and your wife? Are you going to do rehabs yourself or hire it out?

Once you know all of those answers, it will make it a lot easier to answer your question.

Good luck!

If you are looking to make higher returns and have some spare time, I would suggest the fixer-upper. In my opinion, a turn-key property won't return very much so you might as well put your money into an index fund and let it ride. The turn-key condo that I invested in was a lot less work, but returned only ~4% per year for me. The fixer-upper duplex that I bought has presented many more challenges in learning how to properly fix up and maintain a building but the property is on track to perform very well (around 14% cash on cash). It takes about 5-10 hours per month on average, but I believe that I'm compensated well for that time. (I am new at this though, so I think that time commitment will lessen as I get more comfortable with things.)

And for what it is worth, if you do buy a fixer-upper, I think it's a good idea to manage the property yourself. I believe you can keep your maintenance costs much much lower by maintaining it yourself (with the help of handymen, plumbers, etc.). All the property managers I have spoken to don't do preventative maintenance; they just get things fixed after they break. Best of luck to you!