The key to rehabbing a BRRRR property is to make the property as “tenant proof” as possible, using materials that will last a long time and won’t need to be redone later.
Remember, price does not equal value. As Warren Buffet says, “Price is what you pay, value is what you get.”
Treat appreciation for what it is: a possible reward for an investment done right.
A good friend of mine advises investors that “your business should bring in at least 3X of your current job before thinking of quitting your job. 1X for tax, 1X to survive, and 1X for reinvestment and unexpected events.” I think his advice isn’t too far off.
Tax benefits will never make a bad deal good, but they can make a good deal even better.
If you are looking for a multifamily property, two-bedroom apartments are usually acceptable, and incredibly common. Single-bedroom and studio apartments are also common, but they tend to attract a more transient tenant, so expect more turnover in that style.
Most people see the time between Thanksgiving and New Year’s Day as “holiday” time, so they work half as hard. Savvy investors, however, know that this is the best time all year to find deals, for two reasons.
I’ll repeat myself one last time: buy rental properties that offer cash flow today.
When looking for single-family homes, look for ones for which all utilities (including water, sewer, garbage, electricity, and heat) can be paid directly by the tenant.
The amount of cash you should have in reserves depends on a number of factors, most notably the number of properties you own, the condition/age of those properties, the anticipated cost of fixing the properties (would you do the work yourself? ), saving for larger future big-ticket expenses, and your management abilities. However, I would encourage you to start with six months of expenses for each unit you have.
Those four sources are appreciation, cash flow, tax savings, and loan paydown.
This mindset begins by flipping a switch in your head so that you say to yourself, “I am doing this,” rather than, “I want to do this.” You tell yourself, “I will do this,” rather than, “I can do this.” Your mind says, “I won’t give up,” rather than, “I hope I won’t give up.”
Because I am largely a “value add” investor (someone looking to rehab a property to bring its value up), I tend to look for Class C properties in Class B areas, but you’ll likely find a strategy that works well for you.
Price is the monetary amount you pay when you purchase something, but cost is the long-term monetary amount you pay over the life of a product or service.
Property management fees differ depending on the size of the property and its location, usually ranging between 8% and 12% of the monthly rent, with 10% being the most common for single-family and small multifamily properties.
I recommend that instead, investors view appreciation as icing on the cake, a bonus that will assist in the investment but is not the basis of that investment.
“If you don’t know you made money on the day you bought it, that was a bad deal.”
A GREAT PROPERTY MANAGER CAN MEAN THE DIFFERENCE BETWEEN SUCCESS AND FAILURE FOR YOUR INVESTMENT.
If there is one thing that causes landlords to lose money each month and eventually go bankrupt, it’s this: they underestimate expenses.
Forced appreciation is also mentioned often in the investment space, and it’s the concept of improving a property so the property’s value becomes greater.