Chicago 1st Property Question: Turnkey or Rehab?

[David Rogers]

Hello investors!

I'm struggling right now to decide if I should spend more than I want on a ready-to-rent property, or risk getting screwed in the rehab process to buy a very undervalued property and try to rehab it successfully. 

I've been analyzing neighborhoods and houses and have come to the following guidelines. I can put down 3.5% with an FHA loan, finance about $180k @ 5%, and be just under the 1% rule with average projected rents of $1000 per unit on a duplex. I'll be occupying one unit for 2 years, so I'll be covering part of that rent and mortgage. My expenses (property management, utilities, repairs, PMI for the loan, insurance, and property taxes) are just above $800. Securing a property for anything less than $180k, or with rents above $1000 puts me in a good position. However, finding a duplex that needs little repair for around 200k has been very difficult.

There are, however, many poorly maintained duplexes for around $80-110k which gives me about $70-80k of rehab money if I include that in the loan. In this scenario I see myself being taken advantage of and making many rookie mistakes during the rehab process.

My question, then: should I "overpay" for a turnkey so that I get landlord experience with a smaller chance of surprises, or should I buy a property in need of rehab in order to be closer to the 2% rule once I start renting, at the risk of messing up the rehab? With my inexperience I feel like I need to settle on one instead of just trying to "find the best deal."

Thank you,

Dave

[Mark Ainley]

@David Rogers Being you are local do some research, have a team that is smarter than you, and do a 2 flat yourself. If you were out of state I would advise the opposite but being local, owner occupied, and you seem like you want to learn do it yourself.  Keep in mind there are also turnkey/rent ready providers that don't always translate to overpaying, just maybe not on the north-side.