What to do? Where to start?

[Damon Robles]

First time posting! My wife and I are ready to begin our real estate investing journey (better late than never, right?) and are struggling to decide the best way to move forward. Let me give some background on our situation.

We own our primary residence free and clear (value ~$600k). We have a 6-month rainy day fund and have saved an additional $150k to invest. Our annual income from our 9-to-5 is a little over $100k. 

At first we were thinking about flipping. We have experience in rehabbing property and have a close family member that is a designer and project manager for flippers who is willing to help us with rehab projects. 

After talking with several folks in the real estate business and listening to podcasts and audiobooks, we have decided that a buy-and-hold strategy is better for building long term wealth. We're looking to invest in cities with good school districts within an hour drive of our home in Naperville. Within these restrictions, it seems like the type of properties we are interested in cost around $275k-$350k (no major repairs required). We have come up with two options, one has more risk than the other.

Option 1: Use the $150k we've saved to put down payments on two properties and rent both out. Hold onto them and let them cash flow and appreciate. Relatively low risk.

Option 2: Use the $150k and get a loan to buy a fixer, then BRRRR it. The grow potential is obviously higher with this option. The issue is if we use hard money, the costs of the loan wipes out much of the gains from the rehab. This means we won't be able to pull all the money back out when we refinance. We could pull the money out of our primary residence and get a better rate and lower loan costs, but that feels riskier as it uses our primary residence as collateral.

Any advice? Which option would you choose and why? Are there other options we're not thinking of? Thank you, in advance, for your time.

[Kyle Hoffman]

Hey Damon! First off, it sounds like you and your wife have done a great job for yourselves in saving financially and are now in an incredible position to start investing. My advice would be for your first property to try and find a market where you can capitalize on buying a SFH at a discount. Right now prices are dropping due to seasonality (at least where I'm at in Indianapolis) and interest rates are keeping many people on the sidelines. I think going for a SFH in an area with good appreciation and increasing rent rates could be a great option. Focusing on getting the first one under your belt and one that is more of a turn-key will be a great learning opportunity for you and will allow you to build up a network of people and professionals who can help for future investments. From there I think you could look into a fix and flip if you are up for the challenge. I think BRRRRs are hard to make work right now and my honest opinion on real estate investing is that the real value is in long term appreciation. So focus on finding a good market, build your real estate team up, and focus on getting that first property that you are confident in appreciating and being able to rent out. Don't worry to much about getting the perfect strategy, just get active.