How it works
The turnkey-versus-value-add decision is a trade between today's cash flow and tomorrow's forced equity. A turnkey purchase hands over a rented, renovated property: income starts at closing, management is simple, and the price reflects that convenience. A value-add purchase buys dated paper cheaply, injects renovation capital and several dark months of carrying costs — loan interest, taxes, insurance, utilities on an unrented unit — then exits with higher rent and typically an appraisal above total cost. Both paths deserve the same yardstick: year-one cash-on-cash return on every dollar actually deployed. This calculator applies identical underwriting to each — 25% down, 7% thirty-year financing, a 35% operating ratio, 3% closing costs — then adds the pieces only value-add carries: the rehab budget itself and month-by-month holding costs across the renovation timeline. The primary output is the gap between the two returns in points, alongside the extra cash the value-add path demands and how many months of rent premium repay it. When the gap favors value-add and the payback runs short, forced appreciation is being bought at a discount; when turnkey wins, the discount was already priced in.
Formula
CoC(path) = (rent×12×65% − debt service) ÷ cash invested | VA invested = down + closing + rehab + carry(months × interest+holding)
Tips
- Get three contractor bids before trusting any rehab budget — overruns eat the gap fast.
- Carry costs are real cash: interest accrues during rehab whether units earn or not.
- Verify the after-rent with property managers, not renovation optimism.
- Value-add wins compound when you repeat it; one project rarely justifies the learning curve.
- Compare identical neighborhoods — cross-town comparisons measure markets, not strategy.
Frequently asked questions
- Is turnkey or value-add better for new investors?
- On these defaults value-add posts the higher return but demands contractor management and five unpaid months — skills first-time buyers rarely have. Turnkey's lower CoC buys simplicity. A common sequence: start turnkey to learn operations, then deploy the value-add playbook once vetted contractors and systems exist.
- How much extra cash does a value-add deal need?
- Rehab budget plus carrying costs during the dark months. Here that is $48,000 of construction plus roughly $9,700 of interest and holding costs across five months — about $57,700 beyond what the turnkey path ties up. Underestimating carry is the single most common value-add modeling error this calculator exists to prevent.
- Does value-add always beat turnkey on return?
- No — it depends entirely on the spread between purchase-plus-rehab and the finished product's worth. When the discount is thin, the extra capital drags returns below turnkey's, and the verdict flips. The calculator quantifies exactly where the crossover sits for your two candidate deals rather than assuming either side wins.
- How is BRRRR different from plain value-add?
- BRRRR adds a refinance step: after rehab, a new appraisal lets you pull capital back out at 75% of the new value, recycling your down payment into the next deal. Plain value-add holds the higher-basis property with conventional financing. The refi moment has its own calculator in this batch — run both to see whether the recycle works.
- What operating ratio should I use for comparisons?
- Thirty-five percent of gross rent covers tax, insurance, vacancy, maintenance and management on typical single-family rentals — conservative enough for screening. Whatever you choose, apply it identically to both paths; asymmetric assumptions are how spreadsheets justify deals reality later rejects. Refine with actual quotes before wiring earnest money.