Which REI Strategy to Focus On?

[Timothy Boyd]

Hi BP community! I am a newbie to REI and am having a hard time deciding on which niche/strategy to pursue in the greater Cincinnati area. I've listened to about 240 episodes of the podcast so far, read quite a few books, and have been lurking in the forums for months now. Below are my thoughts in no particular order on the three strategies I am thinking about focusing on, and I'm sure some of the thoughts are off base. Hoping you wonderful pros can help me narrow things down and call me out where I have a bad assumption. I know that he who chases two rabbits catches neither, so I really do want to buckle down and figure out what to focus on and become good at.

My Why -  I want to get out of the rat race and achieve financial freedom in the next 10 years so that I can travel with my wife and play guitar all day!

Flipping SFH:

- PROS:

o   Higher potential velocity to financial freedom because of larger profits on each transaction.

o   No landlord/tenant issues.

o   I have a tiny bit of experience renovating and restoring houses I have owned, and I enjoy it for the most part.

- CONS:

o   Not really “investing” because you don’t hold any asset. 

o   Not passive at all.

o   Speed is of the essence and I am not sure how quickly I can move while working full time.

o   Transactional and more vulnerable to market swings.

BRRRR Multifamily:

- PROS:

o   Long term wealth building. 

o   Take one initial stack of capital and continue to roll it into more properties as you refinance.

o   Tax advantages.

o   Tenants pay down mortgage.

o   Spreading the vacancy risk in multifamily.

- CONS:

o   Potential for tenant headaches/evictions. 

o   Not passive.

o   Slower velocity to financial freedom as the portfolio is developed.

Vacant Land (targeting tax liens):

- PROS:

o   Passive.  No maintenance other than taxes.

o   Option of selling or sitting on it.

- CONS:

o   Illiquidity.

o   Adding value (running utilities/sewer) is speculative.

o   Unsure if this can be a standalone route to financial freedom.

TL;DR – Newbie trying to figure out which strategy to focus on as I am struggling weighing the pros and cons of each.

Thank you for any insight and advice!

[Joe Schmitt]

@Timothy Boyd

My path is similar to yours. I chose invest in vacant land almost exclusively.

Flipping and renovating houses is a LOT of work and it takes a ton of capital to get started. Whether you self finance or use leverage you need to manage a lot money. There is significant timing involved and you need to handle a lot of moving parts related the timing of the spend. AND you need to source the labor and materials. For me, the juice isn’t worth the squeeze.

Land gives you multiple exit strategies with no improvements (and I would encourage you to avoid doing improvements). I have wholesaled land with double closes, flipped for cash, and sold on terms. The challenge with land is that you need to market hard; it’s a marketing business. The upside is that I never have to leave my home and I can delegate a lot of the work to VAs. I make plenty of money with land in my sweatpants at my kitchen table.

I am familiar with all of the major courses, groups, and philosophies for land investing. Feel free to reach out to me if you are interested in exploring the asset class further.