Next Step From House Hacking: Another One v. BRRR v. Turnkey

[Art Maydan]

So the bottom half of the duplex I’m living in is rented out and I’m trying to figure out what my next step should be (aside from getting a broker’s license. That’s happening.) I see 3 good options and I’d like to hear your thoughts:

1. Continue living in the current duplex and buy another 2-4 unit one year from when we bought this one under advantageous owner-occupied terms.
2. Continue living in the current duplex while investing in turnkeys. I had discounted this option because I’d rather do the work myself and reap higher rewards, but the only way I see to get even better returns than turnkeys is with a BURR-like strategy. I have the money for a 20% down payment on a $50-$100K house in Memphis or whatever now and I just bought this duplex 3 months ago. I’m still getting things in order here and don’t have the time yet to learn enough about rehabbing to be comfortable buying a fixer upper. Am I wrong? Is it easier than I think?

9 to 10-Cap turnkeys with management factored in are abundant. My duplex is a 14-Cap and it took me 9 months to buy and a lot of work. And work to manage. Getting into a turnkey for $10-$20K leveraged 5X sounds pretty nice.

3.Continue living in the current duplex while studying how to rehab houses, read fix and flip books, etc. Get my broker’s license. Find a house that needs some work, buy it, hire contractors to get it rent ready, rent it out, refinance. I know that the third option has theoretically the highest returns, but I also have zero experience with rehabbing.

What do you think about a turnkey as a stepping stone from house hacking to doing value-add plays? Am I overestimating the difficulty of rehabbing a house? Is it something I can do while working full time? What would you do?

[Chris T.]

@Art Maydan

It's very tough to do a BRRRR on TK properties. Most TK sellers mark it up and sell their systems. I doubt you will find a TK provider selling you a discounted property.

Finding and adding value yourself is usually the most rewarding. Network around, and find the right partner or right GC that can help you. It is not easy to rehab a house, but neither is landlording, and you're one right now. 

And if done correctly, you get most of your money back to do it again, and again.

Not so with TK properties.