Newbie looking for strategic advice (long distance investing)
Hello everyone, I feel like I am in a slightly different position than most people and am looking for some beginner advice. Before I get started I will say this, I intend to seek proper legal advice before making any decisions but before doing so I wanted to reach out on the forums to see if there was anything I was missing/things I have yet to consider.
As with most newbies, I am still in the "real estate sounds awesome" phase but I haven't actually done anything yet and am still working on education. Originally I was looking to get into the world of house hacking, owner-occupant, type investing. While it is not impossible for me to do so, I also live in Boston and do not have the ability to make the down payment, even with 3.5% down FHA (and that's assuming I have the time/hustle to find a seller to accept such terms). While I really like the idea of owner-occupant I have slowly pulled myself away from this strategy and have shifted more to owning actual investment properties further away from where I live. Unfortunately, I also hit a bit of a snag.
I am actually a professional Canadian working in the US on a work visa. While I was looking into owner-occupant style investing everything was fine because I am legally allowed to own a personal property in the US and do with it whatever I want since it is my home. However, when I started looking into real estate with the sole intent of investing (not my personal house) it became clear that I have a few more restrictions than normal US citizens. Namely, I am only allowed to receive purely PASSIVE income from any of my investments. On my current work visa I am legally restricted to only being able to receive income from 2 sources, my current employer listed on my work visa or from passive investments. Now what does this mean? As long as the income from real estate is passive, everything is fine. But if I receive income from active work (wholesaling, flipping, management...) this is illegal since I am now making income from another employer (even if I am my own employer). Thankfully, rental income is considered passive, but this also means that I am not allowed to actively partake in management activities. I will need to outsource everything (repairs, property management, etc.).
Basically, the way I am looking at my situation is that I need to act like an out of country investor even though I am in the country. The only difference is that I have a SSN, US credit history and can get conventional financing as would a normal US citizen. But having come to the conclusion that my investments not only should, but HAVE to be passive, I have continually found myself looking into turnkey companies since they provide all the services. Again, without having received proper legal council yet, I feel like this is an excellent way to not only ensure investments are passive but to prove (in case of legal disputes) that they are passive since I have 1 company doing all the work. All I do is purchase the investment property and let the company take care of everything. Now this leads me to my "plan".
While I know turnkey companies are a controversial topic I am hoping to do the following (after receiving proper legal council). Purchase my first property from a turnkey company (after doing my due diligence) to see where it takes me. This allows me to purchase a property in a market I can afford and make sure that it is passive income. Worst case scenario, it is a disaster and I need to support the deal with my current job, I learn and avoid making that mistake again (my job does allow significant wiggle room for a deal going south). Best case scenario, I love the service offered by the turnkey company and become a repeat customer. Middle scenario, I use a turnkey company to make my first long-distance investment, learn, realize I can do this on my own with better margins and make subsequent deals on my own. But at the end of the day I need to make sure everything is passive.
As far as education is concerned. I have been reading a lot of Ali Boone's blog posts about turnkey companies and also intent to read David Greene book Long Distance Real Estate Investing but I would love to get other suggestions.
Coming to the end of this I am always open to new ideas/thoughts opinions on things I may not have considered. Please let me know what you think about my plan or of turnkey companies in general. All comments are welcome!