Rental: fixer upper or turnkey

[Craig Hewitt]

BP nation:

Need some advice on a property we're looking at. I'll compare a fixer upper that's on the market (HUD sale) to an example of what I'm finding in our market to be a fairly market priced conventional sale.

Fixer upper: HUD listed at 52,000, but bidding is already to 63,000. 1250 sq dr, 3/2 SFH. Bidding ends close of business Monday. House needs a lot of work, but most of it is just heavy makeup, no roofs, foundation issues, etc. Just needs drywall, painting, cabinets, siding. Getting estimates now but I'd ballpark 15k to get it up to snuff. Comps in the area are 95-100k, and our realtor believes that the house will go for 70-75 in its current state. Estimated rent is 1200.

The turnkey house is in a slightly nicer neighborhood and is all recently renovated. It has builder grade materials, carpet instead of hard surfaces, and is about 200 sq ft smaller than the fixer upper. Because of the size we'd get maybe 100 less in rent per month. Listed at 125k and is move in ready. Also a 3/2 SFH.

So this poses the question, does the smaller cash investment in the turnkey house make sense even though it's not "as good of a deal", or is the house that will need some work (and thus more equity/investment) make a better choice. I'd say that we feel that the fixer upper is a bit more risky because you never know what you'll find when you start working on a place.

I guess that behind door 3 really could be "neither is a good choice", which my wife is saying, and we should wait for the 100k turnkey.

I'm a newb at RE, so please fire away with questions or comments on which way to go.

Thanks.

Craig