Confused Newbie (From Buy & Rent Strategy to Buy, Fix, and Rent)

[Michael Krassos]

Hello all, Background Up to this point I've been looking for Single Family Rental opportunities from Turn-Key providers out of my home state of NJ. These opportunities required no immediate repair and are marketed as rent ready. Essentially these providers buy distressed, fix up and sell as cash flowing opportunities. I evaluated the worthiness of an opportunity in the following way (simplified for Blog purposes): -- Cap Rate > 7.75% -- First Year Cash on Cash Return > 12% (Expenses include closing costs, funding costs at 20% down, inspection, appraisal, legal costs, property management, maintenance, etc) -- DCR > 1.6 -- Positive Cash Flow -- All with expenses estimated at 50% What's Next? Now I'm exploring partnering with someone out of state and buying a property needing some repair, then renting. The Question Do I keep the costs to repair the property to get it rent ready out of the equation? I'm familiar with the 70% rule but not sure where or if to insert the repair costs into my calculations. If I keep it seperate it seems the money spent to repair will only be returned at point of sale (hopefully at ARV or with appreciation for a profit). Appreciate the help.