First TIme investor Out ofState Rental Turnkey in Class B or C, with Light Value-Add?

Hey @Steven Le,

First off, congrats on narrowing down your options — that’s a big step! It sounds like you're on the right track by thinking about your goals and managing risk, especially as a first-time investor.

Here’s my take on each option, and some advice from my own experience with my first deals:

1. Turnkey in a Class B Area – Lower Cash Flow, But More Stability
Pros-
Stability: Class B areas tend to be more stable with lower vacancy rates and fewer headaches. Tenants are often more reliable, and these areas tend to be less susceptible to market swings.

Lower Risk: Since you're a rookie, this option might give you peace of mind — especially when you’re just starting out.

Easier to Scale Later: If things go smoothly with this first property, it’s a good base to build on, and you can always expand into higher cash flow opportunities later on.

Cons:
Lower Cash Flow: As you mentioned, Class B areas generally offer lower returns compared to Class C or higher-risk areas. If cash flow is a priority, this might not give you the big returns you’re hoping for.

2. Turnkey in a Class C Area – Higher Returns, But More Turnover and Maintenance
Pros -
Higher Cash Flow: Class C areas often offer much better cash flow compared to Class B. You'll likely see higher rents and better yields on your investment.

More Affordability: You can typically get more property for your money in Class C areas, which could mean better long-term returns if managed well.

Cons:
More Tenant Turnover: Class C areas generally have more turnover, which can lead to vacancy periods and higher maintenance/repair costs. Tenants might not stay as long, and they can be more challenging to manage.

Riskier: While the returns are higher, the risk is also elevated — if the area has instability or you face significant maintenance issues, it could be a headache.

3. Light Value-Add (~$5K–$10K) in Class C – Minor Updates, Better Upside, But More Moving Parts
Pros:
Better Upside: With some light renovations, you can increase property value, boost rents, and possibly raise the overall value of the property quicker. Small updates like fresh paint, new fixtures, or kitchen upgrades can go a long way.

Potential to Build Equity Faster: You’re leveraging value-add strategies to build equity early on, which could help if you want to refinance or sell in a few years.

Cons:
More Moving Parts: Even light value-add projects come with their own set of challenges. There’s a learning curve on how to manage renovations remotely (even if you have a property manager), and unexpected issues can arise. The upside is great, but it requires a bit more hands-on effort — even if you’re outsourcing it.

What Worked Best for My First Deal?
Simplicity Over Potential Returns: For my first rental, I opted for stability over high returns. I bought in a Class B area with a turnkey property, even though the cash flow was lower than Class C. The stability and predictable cash flow were key for me because I didn’t want to deal with constant turnover or unexpected repairs.

Avoiding Overwhelm: Since you’re not planning to be hands-on, it’s important to pick a strategy that doesn’t overcomplicate your first deal. I stuck with something more straightforward to get my feet wet. Once I had experience under my belt, I then felt comfortable moving into higher-risk, higher-reward properties.

My advice - If you’re in it for the long-term and want something manageable, I’d lean toward the Class B turnkey option, especially as your first deal. You’ll get familiar with the process and cash flow steadily without as much stress from turnover and maintenance.

However, if you’re comfortable with a bit of risk for better returns, a light value-add in a Class C area could be an exciting next step once you have more experience. Just keep in mind that things won’t always go according to plan, and it’s harder to gauge the true return until you’ve handled the renovations. Ultimately, your choice depends on how much risk you're willing to take and your preference for managing the property (even if it's just remotely). If you’re new to the game, starting simple with stable cash flow could set you up for future success without overloading yourself.

Always here to help!

Best,

Melissa Justice

Investment Strategist at Rent to Retirement