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Turnkey Rentals vs. BRRRR Properties: Which Investment Strategy Offers Better Returns?
Real estate investing offers multiple strategies for generating passive income and building long-term wealth. Among the most popular are turnkey rental properties and the BRRRR method (Buy, Rehab, Rent, Refinance, Repeat). Both strategies provide opportunities to create cash flow and equity, but they come with different levels of effort, risk, and returns.
In this post, we’ll break down how each investment model works, highlight their key pros and cons, and show a side-by-side comparison of profits to help you decide which approach aligns best with your investment goals.
What Are Turnkey Rental Properties?
Turnkey rentals are fully renovated, rent-ready properties—often with tenants already in place—sold by companies that specialize in acquiring, rehabbing, and managing properties. These properties are marketed to investors looking for a passive income stream with minimal effort.
Key Features:
- Already renovated and leased
- Managed by a third-party property management company
- Typically located in markets with strong rental demand
- Premium purchase prices for the “plug-and-play” convenience
What Is the BRRRR Strategy?
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat, a method used by active investors to build a rental portfolio using the same initial capital multiple times. It involves buying distressed or undervalued properties, renovating them, renting them out, and refinancing to pull out equity for the next purchase.
Key Features:
- Involves hands-on property rehab and project management
- Built-in equity from renovations
- Greater control over tenant selection and property condition
- Potential for exponential portfolio growth by recycling capital
Pros and Cons: Turnkey vs. BRRRR
| Feature | Turnkey Rentals | BRRRR Strategy |
|---|---|---|
| Time Investment | Low | High |
| Risk Level | Moderate | High |
| Control Over Process | Limited | Full |
| Initial Cash Required | High | Moderate |
| Equity Growth Potential | Limited | High |
| Scalability | Slower | Faster (with refinancing) |
| Passive Income | Immediate | Delayed (until rehab complete) |
| Management | Outsourced | Optional (DIY or hire later) |
Profit Comparison Example: Turnkey vs. BRRRR
To clearly see the differences in return potential, let’s compare a hypothetical scenario where an investor has $100,000 available.
Option A: Buying a Turnkey Rental
- Purchase Price: $150,000
- Down Payment (25%): $37,500
- Loan Amount: $112,500
- Monthly Rent: $1,300
- Monthly Expenses (mortgage, taxes, insurance, mgmt): $950
- Monthly Cash Flow: $350
- Annual Cash Flow: $4,200
- Cash-on-Cash Return: 11.2%
- Equity at Purchase: Minimal
- 5-Year Appreciation (3%/year): $23,885
- Total 5-Year Profit (cash flow + appreciation): ~$45,885
Option B: Using the BRRRR Method
- Purchase Price (Distressed): $100,000
- Rehab Cost: $30,000
- Total All-In: $130,000
- After Repair Value (ARV): $180,000
- Rent After Rehab: $1,500
- Refinance at 75% of ARV: $135,000
- Cash Pulled Out: $135,000 (covers entire initial investment)
- Monthly Mortgage (New Loan): ~$900
- Monthly Cash Flow: $600
- Annual Cash Flow: $7,200
- Cash-on-Cash Return: Infinite (money recycled)
- 5-Year Appreciation (3%/year): $28,082
- Total 5-Year Profit: ~$64,082 (cash flow + appreciation)
Key Takeaway: While turnkey rentals provide immediate, low-maintenance income, BRRRR properties can create much higher returns due to forced equity and the ability to recycle capital.
Choosing Between Turnkey and BRRRR: Which Is Right for You?
Choose Turnkey If:
- You prefer a passive investment
- You want immediate rental income
- You’re investing out-of-state or have limited time
- You don’t want to manage renovations or tenants
Choose BRRRR If:
- You want to maximize returns and equity
- You’re comfortable with hands-on rehab work
- You have access to contractors and local market knowledge
- You plan to scale your portfolio rapidly
Tax Considerations
Both strategies offer tax advantages, including depreciation, expense deductions, and 1031 exchanges.
However, BRRRR investors may see larger depreciation benefits due to higher rehab costs, which can be used to offset rental income. Turnkey investors benefit from more predictable write-offs, especially when the property is managed professionally.
Financing Options
- Turnkey Properties: Typically financed through conventional or DSCR loans. Expect to pay 20-25% down.
- BRRRR Properties: Often start with hard money or private lending for the purchase and rehab, then refinanced into long-term debt. This adds flexibility, especially when working with lenders like Investors Choice Funding, which understands investor timelines and can structure creative financing for your BRRRR projects.
Pitfalls to Avoid
Turnkey
- Overpaying due to inflated pricing
- Relying too much on poor property management
- Limited control over long-term tenant quality
BRRRR
- Underestimating rehab costs or timelines
- Low appraisal value after renovation
- Difficulty refinancing due to credit or lending conditions
Final Thoughts: Turnkey vs. BRRRR
Both strategies can be highly effective depending on your goals, capital, and time availability.
Turnkey rentals are ideal for investors seeking immediate cash flow and a more passive approach. They’re great for long-distance investors or those looking to diversify without getting their hands dirty.
The BRRRR method, on the other hand, is for investors who want to be actively involved and are focused on maximizing equity and long-term ROI through sweat equity and strategic refinancing.
If you’re new to investing and looking to get started without a steep learning curve, turnkey may be the safer bet. But if you’re experienced, resourceful, and ready to roll up your sleeves, BRRRR can supercharge your portfolio growth.
Work with Experts Who Understand Both Strategies
Whether you’re leaning toward a hands-off turnkey rental or planning a full-scale BRRRR strategy, Investors Choice Funding can help. We specialize in creative real estate financing, including Renovation loans, DSCR loans, and bridge funding for investors at all experience levels.
Our team understands the unique timelines and needs of BRRRR investors and offers fast, flexible capital to help you acquire, renovate, and refinance with confidence.
