Buying Rentals: Foreclosures vs Fixer-Uppers vs Move-in-Ready

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Just dipping my feet into the St. Louis area (around Tower Grove Park mainly) and have just begun talking to an agent about finding a small multi-family to house hack with. This person is a long-term buy and hold rental investor himself, owns his company, seems knowledgeable. He didn't mention Foreclosures, BRRR'ing, Fixer-Uppers, but did show us a few places (on the computer) that looked move-in ready, or close to it.

Can any experienced STL investors familiar with the south city/tower groves areas comment on whether you feel it's necessary to buy REO's or properties that require significant rehab in order to make solid returns? Are they readily available or are they "unicorns"? If they are available, do you feel that the returns are worth the time, hassle, and risk involved?

Everyone in the blogs and the books seems to ONLY talk about these kinds of properties as if any other situation is sub-par.

The only way to compare - run the numbers under different types of scenarios.

Property A - what is the CoC, IRR, growth potential over 5-10 years with move-in condition?

Property B - BRRR / acquire below market value - what do the same metrics look like?

How much is the difference worth to you in terms of time/effort & to what extent will you have to be active/passive. A BRRR/fixer-upper property in a great neighborhood will outperform a move-in ready property in a lower quality neighborhood. So you want to factor all these things into your model.

The most important thing with BRRR/fixer-upper is to have access to reliable contractors who can execute on time. So you want to work with a PM team that has this network already established vs. you starting from scratch.

Lastly, the heavily discounted BRRR properties are in such run down conditions that they tend to be "all cash" buys and may not be an option if you're looking for financing.

Hope that helps and all the best.

Amit