Alternate strategy for mitigating risk on investment properties.

[Account Closed]

I’m curious to find out if their are other BP members who have adopted this kind of strategy. I’ll caveat but saying that I have a few primary goals that are driving this strategy so bare those in mind.

Goals:

1. Be hands off. I don’t want to run C- properties that require a lot of maintenance.

2. Be hands off. I don’t want problem tenants who have issues making rent or who need to call me constantly.

3. Be hands off. My ultimate goal is to make money while I sleep, not to lose sleep in order to make money.

4. Be hands off. I don't want to flip, BRRRR, or otherwise perform value add upgrades. I value my free time.

5. Be hands off. I don’t want to spend my weekends pulling weeds at a property or mowing the lawn during vacancies.

As a new investor I was not flush with cash. I had maybe $15k and a good job. I bought my first house in a great area with good schools, lots of amenities, and nearby developments. I dumped as much cash as I could into it for 2 years. As luck would have it I’d go from 5% down to 25% equity in a matter of 2.5 years. At that point I decided to turn it into a rental. It’s near a hospital and I was lucky to find a physician starting his 4 year residency. I locked him in on a 4 year lease at just under market rate. The house does not cash flow (because I put 5% down), it breaks even but I’m 18 months into the rental now and I’ve heard from the renter exactly once. He has paid 3-7 days early every month so I’ll chalk the first one up as a win against my goals.

With that safety blanket in place purchased a condo where I currently live. This time I hoped to turn it into a VRBO for 3 months out of the year. The winters in Phoenix can easily net 2-3x my mortgage per month. I’ve locked in a renter this winter from December to April for a cool 2.5x my mortgage. I’ll soon be up against a deadline to move out so I’ve begun to look for investment property #3.

On #3 I’m looking at purchasing it as my primary and living there for a year or 2 to satisfy the loan terms. I’m targeting a new masterplanned community and would be one of the first to pull the trigger in the neighborhood so I expect some growth as construction costs continue to rise, the other phases are developed and net migration to Phoenix continues.

This whole strategy of locking in a long term, diversifying with a long term STR, and the upside of being first into a masterplanned community is not discussed much at all on BP and I have to wonder why. My purchases are primarily focused on the above five mentioned goals. The first property is targeting growth in a growing area, the second is targeting cash flow that the first does not provide, and this third prospective investment is again targeting growth 1 block from a shopping center just purchased by a billionaire RED in AZ.

Is anyone else utilizing this kind of growth, cash flow, growth, cash flow alternating strategy? I would welcome any criticism, tips, etc.

[Ned Carey]

@Account Closed probably not what you wanted to hear but I think you are fooling yourself. You post title says "strategy for mitigating risk" then you describe a high risk strategy.

You said "the property does not cash flow" then you said "with that safety blanket in place."  How is a negative cash flow property a "Safety Blanket"?  You don't even recognize the risk of your first property!

You say you want to be hands off but one of the properties you mention is a Short term rental. Are you even aware of the forces pushing against short term rentals? Just because a billionaire buys an existing shopping center, that does not mean anything for properties nearby.

I think you are a victim of "wishful thinking" as my dad used to say. I truly wish you the best of luck but i suggest you rethink some of your plans.