Fixer Upper or Turn-Key

[Chris Ortler]

Hello Everyone,

I am just in the beginning steps of my Investment Property Adventure and I am looking for some suggestions on what type of property would be best?

A quick intro on me.  I live in CO with my wife and 5 kids.  My wife is a stay at home mom while I work a full time job.  I recently started in real estate about a year ago where I started an Airbnb Arbitrage company.  It started off great but is now becoming more difficult with so many regulations all over CO.  I have been increasing my knowledge on real estate and am not taking steps into investing and buying my first property.  This is extremely scary for me (like it must be for everyone) but my goal is to build something for my kids so that they are better off when they are older.  

So my question for anyone that can help is, is it better to look for a fixer upper or to find more of a turn-key that does not need that much work done? 

[Ryan Williams]

Hi @Chris Ortler, this is a great question. I think it totally depends on your goals, how much cash you have available, and your comfort/knowledge with renovations.  You can absolutely buy cheaper and add value to a property that can turn into a great investment, but you need to understand your costs, how/if you will recapture your capital, timeline and other things that go into renovation projects. 

If you can find a turnkey property that accomplishes your investments goals such as cash on cash return, cash flow, cap rate (or whatever metric is most important to you), that will obviously take much less work and be less of a headache on your end. Both can be great long term investments. 

You mentioned your do Airbnb Arbitrage, if you can find a turnkey that could be an STR that would probably be the least stressful way to the most return in the Denver Metro, but you have to look in the right spots as you mentioned! I hope this is helpful!

[Wale Lawal]

@Chris Ortler

If you don’t have a lot of time to devote to a renovation and can afford to pay a little more for a home, you may be better off buying a turnkey property. But if you enjoy putting sweat equity into your home and want to customize it to suit your design style, a fixer upper may be right for you.

A local Agent can help you find the property that fits your investment goals.

Read this blog for more information on Should You Buy a Fixer Upper or Move In Ready Home? https://www.upnest.com/1/post/...

All the best!

[Keith Anderson]

Hey Chris, I sent you a connection request. I am a local agent who would love to connect with you and explore the opportunities I can provide. 

[Ben Einspahr]

@Chris Ortler Welcome to BP! Just from reading a little bit about you, full time job with a wife and 5 kiddo's at home, you want to K.I.S.S and find something turnkey, especially if this is your first REI. All assuming your full time job is not in residential construction. If it is, then I might change my answer:)

In general, traditional rentals in the Denver Metro Area are hard to make work from a pure numbers standpoint. With todays current market conditions, it takes a little thinking outside the box by how you operate the rental whether that is as a STR or even buying a 4 or 5 bed home and renting it by the room. Rent by the room may sound like a tenant nightmare when first hearing it but it is becoming more and more popular and PM's are starting to specialize in it. I call it "recession-proof investing".

If Denver is outside your price range, you can always look into Colorado Springs and Pueblo. Both excellent markets.

Now, with all that said and you are analyzing properties, cash flow is not everything especially in a market like Denver. If you are looking for something with strong cashflow right out of the gate, you may be sitting on the sidelines for a long time. 

We just finished a rough draft report with 6 different REI case studies for Denver, Springs, and Pueblo with the new higher interest rate environment. I'll shoot you a DM so you can take a look.

[Mindy Jensen]

The CO market is changing, just like the rest of the country. The Fed raised rates .75% in June, and the jobs report just came out with better-than-expected results. The Fed is going to raise rates again.

I would not be getting into a fixer right now, unless you had multiple exit options.

[Seth Young]

It depends on how much time you have to spend on real estate. It sounds like you may have been hands on with the Airbnb business and your full time job, i'm impressed! 

If you are looking for more passive investment options, I would suggest turnkey. Work with a team that is already established and has a trustworthy and reliable reputation. If you have any questions, feel free to reach out. @Chris Ortler

[Juan V Lopez]

Hey @Chris Ortler, I think Ryan hit it on the head – where are you at right now and what do you want?

Flips are good ways to acquire lumps of cash in one fell swoop, but they take time, work, stress and it might be 4-8 months before you see a check. Would you and your family be OK with that? Higher risk/higher reward.

Turnkey properties are priced at retail (you're often paying price at or near the top of the market), but that's because someone has already invested the time and done the hard work. Lower risk/lower reward.

Additionally, the CO market is very high right now. Are you able to enter that market or would you be looking to invest out of state?

I think the more you can answer these questions within yourself and your responsibilities to your family, the clearer you'll be on the path you want to take.

It would be irresponsible of someone to advise you to flip your way up when they don't have 5 kids of their own and a full house to manage. Identify what works for you and start asking questions in that specific area.

Wish you the best, brother. Your children will be very grateful you started when you did.

[Raymond Bachmann]

Good morning Chris!

Yes, I do believe your approach should match what your goals are. You are looking for something to give to your kids over time. I do believe that either method you mentioned could work. With Turnkey, they are typically move-in ready and take a lot of the stressful rehab out of it. But I also feel that you can pay top dollar for them and they don't leave a lot of equity for you so it makes you rely on the cash-flow which you would still need to do your due diligence and verify. You can't really buy a turnkey property at discount so that takes the "buy right" mentality out. 

I can only talk about Colorado Springs and how our market will work for a fixer-upper. We are seeing homes sit on the market for an extra two weeks, sometimes longer than a month now. At our office, we are seeing several homes drop anywhere from $10-30k to close. I say this because its not that buyers aren't out there, but they are absolutely hesitant with rising interest rates and I want you to consider your exit strategies if your fixer-upper is sitting on the market longer than you anticipated.

I would recommend a buy-n-hold property. Work with an agent to find a property that is undervalued, buy it at a discount, now you already have equity built into it. Rent it long term and you can either sell it in 15 or so years to pay for a college or two, use the cash flow to do the same, or continue to hold onto it! Let me know if this helps!