Newbie confusion - where do I go from here?

[Michelle VanDyken]

Hello all! I’ve recently joined bigger pockets and have been reading everything I can get my hands on.

I’ve found myself inadvertently in real estate investment. Although I may not have intended to get into it, my husband and I are in love with it.

We bought our first property to rent to my daughter. We bought it for $50k, put $42k into it (which is way more than we would put into it as a normal rental, but we knew it was for my daughter so we put in upgrades we wouldn’t normally do). we rent it to her at the cost of mortgage, insurance, and taxes-zero cash flow. But I figure we are still gaining the appreciation of the house while she pays the house off.

Obviously that one isn’t a true investment property but we did discover that we love buying run down homes and renewing them. My husband is a contractor and does the work and I love creating the vision of the new house and bargain hunting to do it the least expensive way possible.

When we were finishing my daughters house a bank-owned home became available in an auction. Because it was an auction we had to pay cash for it and have rehabbed it with cash. I came across the BRRRR book while rehabbing this house and thought perhaps we had accidentally stumbled into the perfect method of investing in real estate.

Fast forward to now, we are almost done rehabbing second house, about two weeks away, and had a realtor give us a market value because we have two interested parties that would like to purchase the house. The house would sell for approximately $100 k above our purchase price and rehab costs.

Our quandary is do we flip and use that profit to buy more rentals or stick with the brrrr method? If we take the full 75% out of the house I believe the rental market would only bare $150 cash flow above mortgage, taxes, and insurance. I have no idea what to calculate for vacancy expense as we are new to this rental thing and our market, north central Montana, is too small to show up on the online estimators. The problem with flipping would be the capital gains tax. Ultimately we are wanting to create passive income from rentals, just not sure if this place would be better left as a rental or flipped and use the profit to buy more rental property.

Any guidance? Thoughts? Suggestions? Book recommendations? Keep in mind I am new so many of the acronyms are a foreign language to me. Thank you in advance for your help!