finding better opportunities in properties that need work or move-in-ready rentals?

Question

I've been curious about how investors are approaching acquisitions lately.

A property that needs $50K in renovations might offer a better purchase price and more upside, but it also comes with contractor headaches, holding costs, and the risk of going over budget.

On the other hand, a turnkey rental might cost more upfront, but you can potentially start collecting rent much sooner.

I think both strategies have their place, especially depending on how much time and cash an investor wants tied up in a deal.

For those actively buying right now, are you leaning more toward value-add properties or stabilized rentals?

And what's making one strategy more attractive than the other in your market?

Aaron Zucker · Answer

Frankie — in NY right now, my answer is: value-add only if you actually control the rehab, turnkey if you do not.

A $50K renovation on paper is rarely $50K. On Long Island and in the boroughs I routinely see that become $65K-$75K once you add permits, a contractor delay, and 2-3 extra months of taxes, insurance and interest while nobody is paying rent. If you do not have a crew you trust and you cannot be on site, that discount gets eaten fast.

Where value-add still wins for me: cosmetic to medium work — kitchens, baths, flooring, paint — on a house that is structurally sound, with the big items (roof, boiler, electric, sewer) already verified, not assumed. I underwrite it with a 20% contingency and I price my offer as if the rehab will take 60 days longer than quoted. If it still works on those numbers, it is a real deal.

Turnkey is not lazy, it is just a different trade. You pay a premium, but rent starts in week one and there is no draw, no contractor chasing, and no surprise behind a wall. For someone with a full-time job or buying their first 1-2 doors, that certainty is often worth more than the forced equity they think they are getting.

Rule I give buyers: do not buy the rehab discount unless you can name the contractor, the timeline, and your walk-away number before you sign.

James Jones · Answer

Value-add, and it is not close for me. A move-in-ready rental in Memphis usually means I am paying for the other guy's rehab and his profit, and at that price the rent rarely clears the 1% rule. I buy BRRRR single-family under $100K that needs work, because the work is where my equity is made: finished ARV $180K to $265K, and a DSCR refinance at 70 to 80% LTV that gives me my capital back. The conversion is the lever — 2/1 to 3/1, 3/1 to 4/2, carport or garage into a master bedroom and bath, adding 400 to 650 square feet. A 3BR+ Section 8 house here rents $1,395 to $1,950. Turnkey rents on day one, but value-add pays me twice: rent and refinance.

Marcus Auerbach · Answer

I used to BRRRR a lot, but the market has shifted and you can't get enough discount to make up for condition. I can get almost as much discount for just negotiating well, don't have to deal with a gut reno and can collect rent right away. Appreciation (in my market still the case, 6% YOY) takes care of the rest

Ashish Acharya · Answer

Frankie, I think both strategies can work, but I’d look at more than just the purchase price and projected rent. For a property needing $50K of work, I’d include the true cost of the renovation, financing, holding period, carrying costs, and a realistic contingency before comparing it with a turnkey property.

I’d also add the after-tax return to the comparison. Renovation costs don't all get treated the same way for tax purposes, so depending on the property and the work being done, depreciation and potentially cost segregation can change the economics. The other thing I’d look at is how long the investor expects their capital to be tied up. A value-add deal that produces a higher return but keeps capital locked up for 12 months may not be better than a stabilized property that starts producing cash immediately.

For me, the better strategy is the one that gives the investor the best combination of return, risk, time, and usable cash flow, rather than simply the highest projected upside.

Feel free to DM me, I’d be happy to send over a few resources that might be helpful.

Divin Kanyama · Answer

@Frankie Vozzi Both strategies can work, but the better choice usually comes down to whether the extra return truly compensates for the extra risk and effort. A value-add property may create equity and stronger long-term cash flow, but the renovation budget is only part of the cost. Financing, permits, vacancy, contractor delays, change orders, and the investor’s own time all need to be included. If the projected upside disappears after a realistic contingency and a longer timeline, the discount may not be as attractive as it looks.

Stabilized rentals can make more sense when financing and carrying costs are high, reliable contractors are difficult to find, or the investor values immediate income and predictability. The tradeoff is paying more upfront and potentially accepting a lower initial return. Rather than choosing one category across the board, it may be better to set a required premium for taking on renovation risk. If a value-add deal does not offer meaningfully better returns after all costs and contingencies, the stabilized property may be the stronger investment. The most attractive strategy is often the one that matches the investor’s available cash, team, time, and ability to absorb surprises—not simply the one with the highest projected upside.

Jules Aton · Answer

With the exception of my current home that was a consumption item, done by a well known reputable builder I have always purchased properties that required some amount of work. It was a necessity when I was starting out and had little money and held up as I realized there should always be a value add for renovation. I get your point about reno time = losing rent but improving a property in a class A neighborhood should be a solid move especially when compared to an unknown entity’s version of a new build or fully renovated product.

finding better opportunities in properties that need work or move-in-ready rentals?

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