We are looking for a little passive income in a semi liquid investment in case a medical emergency comes about.

Hey @Alec McGinn personally, when I am saving specifically for Real Estate, I use liquid money market securities.

@Peter Aziz 30% of our gross rents are sent off to our Whole Life insurance policy so they remain liquid but still earn a return while not being used.

You should have in your lease what the deposit is for in detail, including to cover for liquid damages to you. 

I have seen others drink this cool aid and end up in a heap of trouble.. try having about 30 of them like this and 9 stop paying.. that happened to one group.Also Texas is regulators are really starting to focus in on disclosure docs etc for these sub to wraps.. because of the risks  Now on the flip side if have 100k in cash in the bank and you have a 20k problem and can just cut a check then the risk is mitigated.but if you going into this and your cash is limited and a 10k problem becomes some thing you cant handle then you cause major issue for the person who sold you the house since the loan is in their name and maybe you cant make the payments because your not getting rent.. and you just decide to walk. this is the bad part of these deals.so really depends on your liquidity and financial capacity. 

Are you securing against other liquid assets?

The GSE's add a massive amount of liquidity to the resi market which at least drives down rates.

My other suggestion is to find a partner that has the extra liquidity to help with the down payment if occupying it won't work.

Would rather not have the cash liquidity tied up..

Unfortunately, you have discovered the downside of owning real estate:  it's not liquid.