A Change in Strategy - Hybrid Notes/Buy & Hold Rental

[Patrick Kucera]

Good Morning BP! 

I've been away from the community for some time while I've been stationed overseas and I'm looking to get some feedback/constructive criticism on an addition to my investment strategy. When I was younger I had some mentors tell me that while the Military moves you around, buy a house at each location and rent it out. That way when you retire you have a number of rentals as passive income. I've used that strategy and have acquired 2 rental properties (one in Florida and one in New Jersey). However I've been overseas for years and have not bought in England and Guam (current location). My family and I plan on moving back to the states this summer and using the remainder of our VA allowance to buy our next residence. Here comes the change in strategy...

I've been listening to the BP podcast recently and came across Note investing.  I thought this would be a great additional supplement to the buy & hold rentals as we continue to move.  We've saved about $60K and I'm looking to start with a small note ($10-20K) and then when our savings is replenished from the note payments plus monthly savings buy another one similar to the Bond Ladder strategy (https://www.schwab.com/public/schwab/investing/accounts_products/investment/bonds/individual_bonds/bond_ladders). 

I'm looking to invest my own funds and I'm targeting passive cash flow.  I've been reading BP posts and listening to the NoteMBA podcast to get familiar with this investment strategy.  So far it looks like I would be looking for 1st position performing notes.  Am I on target here or should I be looking for something else that I don't know of yet?  I'm looking to make our first purchase before the end of the year, so I have some time to research/find a Note that works.  Also, where would be the best place to obtain a Note like this?  I've read that I probably won't pick one up from a bank so a Note Marketplace would be the ideal option. (NoteDirect?)  Finally, I haven't found any details on what documents you'd need to have to file your taxes.  I send all my documents to an accountant...just wondering what additional documents I would need for the Note.  Thank you for any comments/feedback you can provide.  I really appreciate it!

Patrick