If you want to invest in out-of-state real estate, your main options are 1) have a boots-on-the-ground team in the market, 2) buy real estate from a turnkey investment company, or 3) enroll in a credit card that offers great travel rewards because you’ll be traveling to the market a lot.
However, Doug Larson, who has been a full-time investor for 11 years buying rentals, fix and flips, land, and lease-options, found a fourth option for investing out-of-state. It’s a strategy he refers to as “adventure flipping.”
In our recent conversation, Doug what adventure flipping is and why it’s one of the best real estate strategies for lifestyle investors.
Adventure flipping is when you perform an out-of-state fix-and-flip by actually moving into the investment property for the duration of the project. For example, Doug currently lives in Utah, but performs two to three “adventure flips” a year in California.
Doug said, “I live in Utah, so to do something out of state, you either have to have a lot of boots on the ground and organize things by phone, or you can go down there. This last summer, [my family] went down and picked [a property] up about five miles from the beach in North San Diego County, ocean-side. The whole family came down and we lived in the property… We went to amusement parks and the beach and all that kind of stuff. We lived there for almost three months while I was managing contractors and things. It really was a lot of fun. It was an adventure.”
Since you would be living in the property during renovations, you don’t want to take on a project that needs a ton of work. For Doug’s first adventure flip, he said, “[it was] in good condition, just dated. All cosmetics. I think we spent about $45,000 and probably two-thirds of that was labor with subcontractors.”
Doug said he chose to do the adventure flipping for three main reasons:
High knowledge of an out-of-state location
“We did three fix and flips in the San Diego area while still technically living in Utah. It’s just the market that I grew up in, I know it, I understand it.” Consider doing an adventure flip if you grew up in an area or lived in an area for an extended period of time, but you no longer live there now.
High demand for turnkey properties in the out-of-state location
“In some of those nicer areas there’s a little more upside. There are people who really appreciate the turnkey, and maybe living there. The doctors and lawyers … don’t get their hands dirty. They see something turnkey and they’re like, ‘Hey, you know what? I don’t know. It’s $50 -$70k more than this nasty fixer-upper down the street, but I’m willing to pay for that because I just want turnkey. I want to move in and not have to worry about stuff.’ I really appreciate that in those kinds of markets.”
Justification to visit an interesting, fun area
“I just love it and it was an excuse to go and visit… I did three [adventure flips] in 2010-2011. The last one I sold in 2012, and then we just decided we want to do it again. My wife wants to do it in Florida now. I’m like, ‘Okay, honey. Maybe we will, but maybe not this summer. We’ll see.’”
Which of the three criteria hold the most weight really depends on your investment philosophy. Doug’s overall real estate philosophy is not about collecting a certain number of doors. It’s about financial independence. In other words, he is a lifestyle investor.
Doug said, “If you’ve read The Four-Hour Workweek, or the E-Myth, or books like that … they talk about ‘your business works for you, and not the other way around.’ Make sure that it fits your lifestyle and the things that you really want to do in life, instead of your business owning you.”
Doug’s ideal lifestyle involves traveling, so adventure flipping allowed him to work that into his investment strategy. Brilliant!
Adventure flipping is when you move into an out-of-state investment property while you rehab it and then selling it to a turnkey investor or primary residence buyer.
The three main criteria for selecting a location to perform the adventure flip are 1) you know the area well, 2) there is high demand for turnkey properties, and/or 3) you want to have an adventure in that location.
While this strategy is obviously not for everyone, for those adventurous or lifestyle investors that love to travel, this is a great creative investment strategy that will fit right into your lifestyle.
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