STR, LTR, or fix/flip?

San Diego, California
Starting Out
4yFollow

STR, LTR, or fix/flip?

Lindsey Johnson
Realtor · Charleston, SC · Member since 2021 · 170 posts · 58 votes

Hey BP family! 

I am a Realtor in the San Diego area looking to transition primarily into the investment space.

I am interested in STR, LTR, and fix/flips. I am open to long distance investing. Long term, I would like to manage a large multifamily portfolio. As I begin this journey, I am wondering-which niche you all recommend as the lowest onramp/barrier to entry? I want to make sure I am being as efficient as I can be in identifying a niche as a get started. Any advice would be appreciated.

Thank you!

1Reply
87 views

Most Popular Reply

Zach LemasterBusiness Member
Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
4y

@Lindsey Johnson

N Michigan is a great area for cash flow. I'm sure you could be successful with a STR in the right spot, but that is more of a unique niche. I think a LTR that has potential for STR use is a really well versed investment. Maybe start looking in the area you know right around the college? Fix & Flip is a full time job, with high risk. Not to discourage you from that, but I would say get an easy win in with a rental to become comfortable with the area, and then maybe take that leap when you are ready. This would be my advice.

[email protected]800-311-6781Podcast Guest on Show How to Get 10%+ Off Your Next Real Estate Deal Right Now
Rent To Retirement5334 Reviews
WebsiteView Page
12Reply
See this reply in the discussion

39 Replies

Jump to latestLatest
  • Lindsey Johnson
    OP
    Realtor · Charleston, SC · Member since 2021 · 170 posts · 58 votes
    4y

    @Nicholas Coulter Yeah man, great strategy for long term appreciation and cheap living in SD. Props to you!

    0Reply
  • Lindsey Johnson
    OP
    Realtor · Charleston, SC · Member since 2021 · 170 posts · 58 votes
    4y

    @Joshua Messinger Sent you a DM. Thank you for the insight!

    0Reply
  • Lindsey Johnson
    OP
    Realtor · Charleston, SC · Member since 2021 · 170 posts · 58 votes
    4y

    @Zach Lemaster I am thinking midwest, specifically Northern Michigan. I went to school there, have some boots on the ground, and know the market decently. Any insight into which strategy to consider first in that market?

    0Reply
  • Zach LemasterBusiness Member
    Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
    4y

    @Lindsey Johnson

    N Michigan is a great area for cash flow. I'm sure you could be successful with a STR in the right spot, but that is more of a unique niche. I think a LTR that has potential for STR use is a really well versed investment. Maybe start looking in the area you know right around the college? Fix & Flip is a full time job, with high risk. Not to discourage you from that, but I would say get an easy win in with a rental to become comfortable with the area, and then maybe take that leap when you are ready. This would be my advice.

    [email protected]800-311-6781Podcast Guest on Show How to Get 10%+ Off Your Next Real Estate Deal Right Now
    Rent To Retirement5334 Reviews
    WebsiteView Page
    12Reply
  • Lindsey Johnson
    OP
    Realtor · Charleston, SC · Member since 2021 · 170 posts · 58 votes
    4y

    @Zach Lemaster Good word, Zach. Thank you for the insight and for the connect! 

    0Reply
  • Zach LemasterBusiness Member
    Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
    4y

    happy to help, reach out any time!

    [email protected]800-311-6781Podcast Guest on Show How to Get 10%+ Off Your Next Real Estate Deal Right Now
    Rent To Retirement5334 Reviews
    WebsiteView Page
    7Reply
  • David Sandvig
    Real Estate Agent · Austin, TX · Member since 2018 · 63 posts · 48 votes
    4y

    Fix and flips are probably going to have the lowest financial barrier of entry, but require more time and effort.  Short term rentals can have higher returns, but there's going to be more turnover and you need to pay to furnish the property as well.  Buy and hold long term rentals are probably the lowest risk and are more passive in my opinion.  The financial barrier of entry is relatively high in my market, but LTR are still accessible in a lot of markets.

    I imagine you could find something that would work as a LTR in northern Michigan. Depending on when you buy it, you can try short term renting it for a month or two, and if it doesn't workout revert to using it as a long term rental. Inversely, you could also rent it out for a couple years and then try converting it to a STR when you're more comfortable with that.

    0Reply
  • Zach LemasterBusiness Member
    Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
    4y

    @David Sandvig

    Very good explanation.  Thanks for sharing.

    Do you mind expanding on how a flip would be the lowest barrier to entry financially? We flip professionally across the country and often find that fix and flips that are distressed need to be purchased with all cash upfront, or using hard money which is extremely expensive & still requires money down. A LTR or even STR could be purchased with 20% down using a conventional loan requiring very little out of pocket. A STR that is also used as a 2nd home could be purchased with as little at 10% down via conventional loan. I just want to get more insight in your thought process here.

    [email protected]800-311-6781Podcast Guest on Show How to Get 10%+ Off Your Next Real Estate Deal Right Now
    Rent To Retirement5334 Reviews
    WebsiteView Page
    11Reply
  • David Sandvig
    Real Estate Agent · Austin, TX · Member since 2018 · 63 posts · 48 votes
    4y

    @Zach Lemaster Definitely need to clarify that, thanks!  I was thinking of money down at closing.  So if you buy a wholesale property with no money down, you'll be paying a ~2% loan fee at closing, and then probably be paying 10-12% interest over the next year, but at least that's less of a financial burden to having a 25% downpayment at closing.

    Going with 20% down (or less) on a conventional loan, or a vacation loan, or maybe a DSCR loan could all be better options in this situation.

    1Reply
  • Zach LemasterBusiness Member
    Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
    4y

    @David Sandvig

    Thanks for clarifying.  Definitely using creative financing strategies like seller finance, subto, lease option, novation, etc. might be good options to bring less money to the table to close.  A strategy that may not be the best for a brand new investor however.

    [email protected]800-311-6781Podcast Guest on Show How to Get 10%+ Off Your Next Real Estate Deal Right Now
    Rent To Retirement5334 Reviews
    WebsiteView Page
    11Reply
  • Ryan Deasy
    Lender · Farmington, CT · Member since 2015 · 542 posts · 321 votes
    4y

    @Zach Lemaster just a thought, i know some hard money lenders will bridge the down payment gap for you too. meaning, in addition to funding the loan, for example, 80% LTV plus 100% of rehab, they will do a supplementary loan to help cover the down payment. so you have two loans, but if the deal is good, it gets you into the deal with little out of pocket and low barriers!

    0Reply
  • Zach LemasterBusiness Member
    Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
    4y

    @Ryan Deasy

    Great to point out.  We use bridge loans and private lenders for gap funding as needed, but I'm not sure I would recommend that to a brand new investor like Lindsey doing this for the first time to be so leveraged.  A little bit of delays (which happens often) could really turn a deal upside down rather quickly with multiple lenders in place on a flip.  I would recommend this for more experienced investors who have their systems dialed in for deal eval, rehab & exit.

    [email protected]800-311-6781Podcast Guest on Show How to Get 10%+ Off Your Next Real Estate Deal Right Now
    Rent To Retirement5334 Reviews
    WebsiteView Page
    10Reply
  • Ben McMahonPro Member
    Investor · San Diego CA · Member since 2014 · 341 posts · 139 votes
    4y

    @Lindsey Johnson

    Always a good question.  I'd say go in the direction you feel you're most competent in at first, and branch out from there. 

     If you have rented for awhile you probably know something about what a landlord is up against.  If you have done a lot of Airbnb trips, you might have an edge.  If you grew up with your dad owning a construction company, maybe that's you're advantage.

    I don't have to tell you that certain things are riskier and others safer.   Analyze your risk tolerance and see what direction that points you in.  BIGGEST thing is getting your first deal done.  After that, it all gets a lot easier.  

    Plus I am sure that you have read about a million posts and you have a lot of information available on here.  Like my dad always says, look at what's in front of you and just do what makes sense.  

    I don't have any statistical data on this statement, but I'd wager 80% of people that say they want to be a real estate investor never do their first deal. ( I'm not including people who buy their primary home. ) There's nothing wrong with that, its not for everyone.  So, Im glad you are ready to roll.  Get a deal done.  

    1Reply
  • Lindsey Johnson
    OP
    Realtor · Charleston, SC · Member since 2021 · 170 posts · 58 votes
    4y

    @Ben McMahon Challenge received. I plan to do my first before Christmas. I will report back. Thank you for the valuable insight!!

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free