This week has been a bit of a lull in terms of the investment property. We locked the interest rate on Friday and are just waiting for the appraisal to be done so we can close (likely to be the first week of March but we shall see). The kids and the hubby are also both asleep so I figured I could also go to sleep or go back and address our investment strategy.

Since you’re reading it, I guess you know which I chose. I’ve mentioned in a few of the earlier posts that we have selected a turnkey rental property out of state as our first foray into REI. I would like to discuss the options we considered, as we understood them (not as experts, since this is a blog about newbs).

The basic strategies we considered were Wholesaling, Flips, BRRRR, and buy and holds.

Wholesaling is a really common way to start in the REI world. You basically find a house off market, get it under contract, and then sell the contract to someone who will do the renovations and make a bigger profit. You charge a finders fee. It is heralded as a way to quickly earn a lot of money for a down payment. Since I’m not sure I could hustle quite as much as would be needed, it was good that we already had enough for a down payment and could move past this option.

If you’ve ever watched HGTV’s Flip or Flop, or a myriad of other similar shows, you know what a flip is. Someone buys a house that is undervalued and needs repairs. The investor quickly does the necessary repairs (or at least makes it looks pretty) and then sells the house for what is hopefully a tidy sum. I would LOVE to do a flip and hope to do one in the future. However, we have neither the necessary capital nor the free time to tackle that right now. Especially not in San Diego where even run down houses go for a million. Doing a flip is actually considered active income for tax purposes and our goal is to build passive income. One day, I will get to live all my house designer dreams, but not today.

Then there’s BRRRRs. Buy Rehab Rent Refi Repeat. The first two steps are the same as a flip, however once the house is finished, you rent out the house for income. You then refinance and take out cash based on the equity. Take that cash to buy the next property. I would have been ok starting here but for the same two problems as the flip: a lack of free time and the start-up costs in San Diego are a bit above me. Also, I’m a bit more leery of being a landlord in California, but that’s a whole different discussion.

That leaves us with turnkey buy and holds. Unlike Wholesaling, flips, and BRRRRs, we are less likely to make an immediate huge cash draw. However, we will start cash flowing when we have a tenant, and any little bit helps. The house will also appreciate and we should be able to walk away with a bit of equity in just a few years (maybe that will fund my flip goals)?

The turnkey model worked for us. There is so much to learn about this process. I wanted to start with some of the answers filled in to give us more time and room to figure out the other things. Think about it as a fill in the blank as opposed to an open answer. Even with the first few steps completed for us, I’m amazed by the little things I have to figure out each week. So far, we’re very happy with our decision. Maybe our strategy will change down the line, but for now, we’re just happy to have taken the first step.

I could spend some more time discussing why we chose Ohio and a long term rental (as opposed to short or mid term), but I think it’s time I join my family in Dreamland.