BRRRR or Turnkey for STRs?

Question

What's up folks? Give me your thoughts:
Turnkey or BRRRR for purchasing for the sole purpose of STRs? My initial thoughts are to purchase turnkey, because you have furnishing/amenity expenses that you normally wouldn't have for long term rentals, and to have those on top of renovations, I'm wondering if it would be worth it. Plus, since the location matters more for STRs, the properties would have to be in appreciating markets. But on the other hand, I don't want to be hasty especially in this market since it's so hot and spend too much money on a property acquisition just to get in.
Let me know if I'm missing anything! Would love your feedback.

Patrick Bavaro · Answer

@Andy Acosta I think it’s a great idea if the numbers work! Makes It even more lucrative IMO. I’m actually working on a BRRRR right now that I think will turn into a potential STR, but instead of Buy I’m Building!Currently, I’m in the process of building a new build 4/3 out in Cape Coral FL. Total all in cost was right about $265k, only required 10% down, rents right now at about $2300 LTR And around $4k/mo estimated as STR, and post construction appraisals are around $340k-$410k depending on the location. It’s a win win win all around for me. Goal is to cash out refi at the end and pull all my equity back out Let me know if you’d like to connect. Just message me. Good luck!

Ralph Auriemmo · Answer

Hi @Andy Acosta - I've seen investors fail to budget enough money when looking at renovations in conjunction with furnishing and starting up an STR. Either the quality of the reno or the quality of the furnishings and amenities suffer. Neither of those are good for an STR. I'd say given that, both BRRRR and Turnkey are roughly equal if you budget properly on the BRRRR. Of course, you will have more holding costs with the BRRRR during reno while the turnkey can start generating revenue sooner.

John Underwood · Answer

It depends. 1. How much cheaper can you get a fixer upper? You have to account for repairs and furnishings and down time getting it ready. Turnkey is almost always more expensive and you might get into a bidding war. But if you can save some significant money then this might be worth while. 2. Turnkey - run the numbers and if they work for you then go get it. You can be up and running quicker with less hassle and stress.Both options come down to proper analysis and each property will be different. Put this in a spreadsheet to make it easier to take the emotion out of any decision.

Alexander Felice · Answer

in principle, you get paid more for taking more risk. My approach is to buy the problems whenever possible as that's where the you can create the most value (equity). in practice, at this point in the market it's difficult to find distressed properties and margins are thinner. This makes it more of a time value of money problem, how long do you want to spend searching for the big discounted property rather than just getting something and start producing. The downside here is it creates a tendency to overpay just to go fast.

Brian G. · Answer

@Andy Acosta it’s hard to find value add deals in desirable STR markets and on top of that it’s not easy to find the right skilled workers who can do a significant rehab in a timely manner, especially if it’s your first time owning in a given market. If you have vetted contacts then that’s a different story. It can be done successfully but it’s definitely a challenge. There’s definitely a risk reward dynamic.

Joshua Janus · Answer

You can certainly find a BRRRR in Columbus, Ohio to fix up and turn into a successful STR.

Taz Zettergren · Answer

What option are out there for turnkey STR's? I work in the turnkey space for long term rentals but hear a lot of investors talking about doing STR's and honestly I'm intrigued.

Robert Tinker · Answer

I'd look at market first, and location in that market, ie beach front, close to attractions. Your time and money that will be needed. Going to be hard for just a rule of thumb on which is better.

Garrett Kroll · Answer

I’d consider the middle option as well - finding a place in good condition, only in need of cosmetic upgrades, and unfurnished. Because this is hospitality, good interior design and furnishings can be an amazing differentiator with super charged ROI. I personally shy away from turnkey b/c I’d be paying a premium for a standard experience, that is most likely not targeted to a specific guest persona. While there are exceptions for some turn keys, that could make it hard to differentiate in a competitive STR market.

Bruce Woodruff · Answer

I always go fixer, you make so much extra $$. And the cost of furnishing is very low, not the $30k you hear about from some people. Shop at higher end thrift stores, or the not-so-pricey antique stores. Get your cookware at Goodwill (no one knows if silverware and plates are new or used :-)Why leave tens of thousands on the table.....?