As a property investor in Tampa, one of the most important decisions you will have to make is whether to invest in a fixer-upper or a turnkey rental property. Both options have advantages and disadvantages, and the choice ultimately depends on the type of investment you’re looking for. Your financial goals, risk tolerance, time commitment, and available resources are all essential factors to consider in this decision.
In this blog post, we will discuss the pros and cons of buying a fixer-upper versus a turnkey rental property in Tampa to help you make an informed decision.
What is a Fixer-Upper?
A fixer-upper is a property that, upon purchase, is not move-in ready. It may require significant renovations, appliance and furnishing purchases, and a lot of hard work and commitment. Fixer-uppers are houses that have the potential to be something great but have yet to reach that potential. You will not be renting out a fixer-upper immediately after purchasing it.
For someone who likes a project and can see the potential a home may have, buying a fixer-upper might be the one for you.
One of the most significant advantages of buying a fixer-upper is the lower initial purchase price. Fixer-uppers are typically priced below market value because they require repairs or renovations. This lower price can be very appealing, especially in Tampa, where turnkey houses are becoming increasingly expensive.
By investing in a fixer-upper, you have the opportunity to increase the property’s value significantly. With the right renovations and improvements, you can improve the property’s condition and increase its overall value. Since Tampa’s population is growing rapidly, the cost of homes continues to increase. With a newly renovated house in a hot real estate market, the appreciation rate will be much quicker than an outdated house.
When you invest in a fixer-upper, you also have the ability and luxury to customize the property to your liking and the current trends. Home trends are different than when the home might’ve been built. Homes with particular finishes, modern appliances, and fixtures appeal to people, and by renovating the house yourself, you have greater control over the property’s overall aesthetic.
Buying a fixer-upper can be initially cheaper, but it can also come with unexpected expenses. Even with a thorough inspection, hidden issues may arise during the renovation process. Unexpected challenges like these might not have been included in your budget and can quickly cause you to spend more money than planned. Considering this, we advise you to expect to pay for more than what you initially calculated; if you spend less, it’s a win-win!
If you plan to renovate yourself, you must be patient and committed to the process. We recommend having extensive knowledge before beginning renovations because it can be a time-consuming and labor-intensive process. Depending on the extent of the renovations required, you may need to hire contractors, supervise the work, and deal with setbacks.
Buying a fixer-upper is a higher-risk investment than buying a turnkey rental property. If the renovations are completed incorrectly or the property does not appreciate as expected, you could end up losing money.
What is a Turnkey Property?
A turnkey property is a real estate investment ready to be rented out immediately after purchase without requiring additional work or repairs. In the context of rental properties, a turnkey property typically includes all the necessary furnishings, appliances, and equipment needed for tenants to live comfortably. This type of investment is popular among real estate investors looking for a hassle-free investment that can generate immediate cash flow without additional work or renovations.
One of the most significant advantages of buying a turnkey rental property is the immediate cash flow it generates. Since the property is move-in ready and may come fully furnished, you can start renting it out immediately and earn a passive income.
Buying a turnkey rental property is a lower-risk investment than purchasing a fixer-upper. Since the property is already in good condition and may generate income, there is less risk of unexpected expenses or losing money. In addition, if the property has or has had tenants recently, it is proven successful.
Buying a turnkey rental property requires less time and effort than renovating a fixer-upper. Once you purchase the property, all you need to do is find tenants and manage the property, which can be done with the help of a property management company. However, this doesn’t mean the property doesn’t need to be well-maintained. It is crucial to keep your property up-to-date and ensure maintenance issues are resolved if they turn up.
One of the most significant disadvantages of buying a turnkey rental property is the higher initial purchase price. Since the property is already in good condition and generating income, it is typically priced closer to market value.
When you invest in a turnkey rental property, you also have limited control over the property’s aesthetic. While you can make some cosmetic changes, significant renovations are typically only necessary if you are interested. If the property’s finishes, appliances, and fixtures are not up to the trend, the home may be less appealing than a newly renovated home.
If the property is already in good condition and generating income, there may be limited potential for appreciation. While the property may appreciate over time, it may appreciate less than a fixer-upper. A fixer-upper will appreciate faster because it is getting a completely new look and feel, whereas a turnkey will remain the same as it was with the previous owner.
In conclusion, buying a fixer-upper or a turnkey rental property ultimately depends on your financial goals and risk tolerance. If you are willing to take on more risk and have the time and resources to invest in renovations, a fixer-upper may be better. However, if you are looking for immediate cash flow and a lower-risk investment, a turnkey rental property may be the decision that is more worthwhile for you. Both options can be the right choice depending on the person, and with the Tampa rental market, your property is bound to be successful.
How Can a Tampa Property Manager Help?
If you’re interested in investing in real estate in the Tampa Bay area, it can be helpful to seek advice from a professional property manager, especially if you’re not local to the area. Property management companies in Tampa can provide insights on specific neighborhoods that offer the best returns on investment.
By collaborating with a rental property management company in Tampa, you can have an expert assess the condition of a potential fixer-upper and determine the amount of work needed. They can also advise you on the estimated rental income once renovations are completed.
Additionally, when you work with property management companies in Tampa, you may be able to take advantage of reduced property management fees for using their services to purchase and manage your investment property. This can help you save money in the long run while ensuring your property is well-maintained and profitable.
Tampa Property Management Summary
There are pros and cons to investing in a fixer-upper and a turnkey property. Consider your current goals and long-term goals, as well as the position you are in financially. For example, a turnkey may be the better option for you if you have little time to spend on fixing a home but can afford to pay more. On the other hand, if you enjoy customizing your home that may cost less and best suit you and your future tenants, a fixer-upper may be the better option.
The Listing Real Estate Management is here to help you invest and manage your properties in Tampa, Florida, whether you decide a fixer-upper or a turnkey property is better for you!
Contact our property management team if you are ready to take the next step in the property investment process here in Tampa. We’re your go to boutique Tampa property managers. Cheers!