No, I am not cold. BRRRR is a type of real estate investing you can consider to build and grow a rental portfolio. BRRRR stands for Buy, Rehab, Refinance, Rent, and Repeat. This process does sound tedious however it is a great way to reuse your money to grow a portfolio quickly.

Buy

This process is always the most crucial just like any other investment. It is ideal you find a property that is in need of repairs and updates. These can be updates such as repainting the siding, renovating the kitchen and bathrooms, or putting in new floor and updating the systems in the home. No matter the work that is needed it is very important you find yourself a property you can get the best deal on. Sometimes with distressed properties you’re able to negotiate or get a better deal since the owner is possibly looking to sell and not deal with the rehab “headaches”.

Rehab

While rehabbing it is important to know where to spend your money. When I say where to spend your money I mean you don’t need top of the line appliances, flooring, doors, etc. in your rental property. For example if you were to replace the flooring. Would it make sense to put down the best flooring out there at $8 a square foot or do you need something that looks great and is durable for $4 a square foot? This goes for any update inside. Do you need a smart fridge for $4,500 or does a nice stainless steel fridge for $2,000 work? At the end of the day these would be nicer features however it does not change the rental value.

Refinance

During this step your goal is to refinance with the bank and withdrawing the money you spent on your rehab. Your property value will increase after you perform updates thus giving you the return on your money invested. For example, you purchase a property for $300,000 at %20 down so you’re borrowing $240,000. You invest $60,000 on updates but after the completion the property is now worth $400,000. Again you would go to refinance with a 20% down and you would be borrowing $320,000 while receiving $80,000 back. You invested a total of $120,000 between your first down payment and rehab costs but you received $80,000 back thus netting your investment amount to $40,000. That is a total cost investment of 13% to buy a property, rehab it, and now rent it for cash flow.

Rent

Now that you have a move-in ready property you put it up for rent. You can manage this yourself or hire a company to assist you with the rent valuation and tenant screening. I personally use Turbo Tenant as it is a free online software to market, screen tenants, collect rent, and manage your tenants/properties. Since you have a great property now it really should not be hard to find a great tenant as long as you do the proper screening.

Repeat

Now that you made an investment of $120,000 and it only cost you $40,000 you have that extra $80,000 to do it again. This is one of the great benefits to this investing process as you are able to leverage other peoples money to help you grow your real estate portfolio.

With summer here I know we all look forward to the BBQ’s, pool days, and getting a nice tan. Me personally I look forward to golf season, gardening, and spending time outside with my dog. Once the sun comes out my wife turns on the A/C and these are some things I check to make sure it is efficient. This will help save some money on your energy bill as well as maintain a cooler home throughout the day and evening.

Close your blinds

Keep your blinds closed during the day. Having the direct sun shining through your window will heat up your house. Block out curtains are best to keep the hot sun out but anything helps.

Adjust ceiling fans

Your ceiling fans may not be helping. Your ceiling fan spins in two directions which you set. Make sure when your fan is on it is pushing the air downward and not pulling upward. This will help in the winter for heating as well going the opposite way.

Open your windows

When it cools down at night don’t be afraid to open the windows and enjoy a fresh cool breeze.

Adjust your thermostat

Even adjusting your thermostat one degree higher can have a huge impact on your energy bill and you may not even notice a difference. You can try a schedule or a smart thermostat to change remotely. This can help you with not spending money to cool when you’re not home. Check out Smart Thermostats

Check your house vents

Since heat tends to rise you may experience an unbalanced temperature in your home. If you don’t have two systems sometimes you can feel a difference in temperature between your main level, upstairs, and even a basement. Since most basements are cool anyways you can consider closing your vents so you don’t cool this area. This can also help create better efficiency throughout your home pushing the cool air upstairs to help cool and balance your home temperature.

Solar Energy

Consider going solar. I think this can be a very nice feature if you plan on living in your home long term. This can be an expensive option for purchasing however in the long run I do believe you will save money over time. This also is a great way to help with the environment.

There are two main categories of real estate. One is residential and the other is commercial. I am going to breakdown all the options so you can better know what you’re looking to purchase or invest in.

Residential

The main goal with residential real estate is you are purchasing property to live in. You may be buying only land, land and the structure, or just the structure with no land. These properties are zoned for housing and you’re unable to utilize these for commercial use.

Single Family – When you purchase a single-family home you are buying the land and the structures erected on the land. Often times you do not have shared walls, shared spaces, or homeowner associations (HOA). A big pro to purchasing a single family home is you tend to have more space from neighbors and even a yard. You are responsible for the full maintenance of the property both inside and out.

Townhome – When you purchase a townhome you are buying the land and the structure erected on the land. Townhomes often have shared walls, shared spaces, and HOA’s. If you’re okay with not having your own outdoor space and following some general rules this can be a great option. Most of the time HOA’s maintain the exterior of the property. You do pay monthly dues but you don’t have to worry about mowing the lawn, shoveling, or replacing the roof. All HOA’s have different rules and regulations.

Condominium – When you purchase a condominium you are buying the structure only and no land. A good reference point is you own the “walls-in”. You do not own the exterior of the property, the land this is built on, or any shared common space. You have the same HOA’s as townhomes do but sometimes more rules and benefits. Typically condominiums are similar buildings to an apartment building. You may have access to a fitness center, pool, lobby, parking garage, and more. The biggest difference is you own your unit instead of renting.

Multi-Unit – When you purchase a multi-unit you are buying the structure and the land it is built on. Multi-unit properties have two to four addresses but never more than four. Once you exceed four units it is considered a commercial property which would change your financing and ownership options. Often times people invest in multi-unit properties since they are “mini-apartment buildings”. You have access to rent out two to four units or even live in one and rents out the others to help pay for the mortgage.

Co-Operative – These are rare. Often times this purchase option is located in a large city; New York, Chicago, L.A., etc. These are large apartment buildings that owners purchase a share in the corporation that owns the building along with the unit. When you own a share of the building you have a right to vote for board members and make decisions about what happens to the building.

Land – People buy land often times to build or construct their dream home on the lot. You are only buying land as there are no structures erected yet. When buying land it is important to do research about what you can build on the property prior to closing. You want to have a soil test, see if utilities can be connected, check zoning ordinances, and more.

Commercial

Commercial real estate can be defined as a property that is used for a business purpose rather than a living space.

Multi-Family 5+ – This references any building that has five or more apartments. No businesses are run out of this building as the sole purpose is for apartment units and renting them out.

Office, Business, Retail – This refers to a property thats purpose is to serve as a space for operating businesses. Whether it is a restaurant, doctors office, or clothing store these buildings do not have space for people to live in. It can be a stand alone structure with one business or it can be a large building with many floors, units, or different businesses conducting. Some businesses own the building they operate in while many rent.

Mixed Use – This is a mixed property that conducts for both business and personal living. These buildings will often times have space for a business to operate on street level with apartment units located above the business. These can be large buildings with 50+ units both business and personal living or it can be as small as two units with one of each.

Industrial/Manufacturing – This is a property designated for large industrial use. Typically it is less than 20% office space with the remainder used for warehouse storage, manufacturing, shipping, loading docks, etc.

Land – This is only land with the purpose of developing commercial property on it. Just like purchasing residential land you have a lot to process and check prior to closing. When purchasing land for commercial development you have many more boxes to check prior to closing.

There are many tips and tricks realtors can offer when you’re thinking about selling. There are many ways to maximize your properties value by doing minimal staging, cleaning, and preparing.

Maintaining a Clean Property

This includes both the interior and exterior of the property. These inexpensive tips can increase the demand and value of your sale. Often times netting in a better offer including a higher price and more favorable terms for you as the seller.

Exterior

You always hear people talk about great curb appeal. This is very crucial however as this is the first impression your home makes for any interested party touring in person. Other than the online photos this is the best way to get off on the right foot with prospective buyers. Having an under maintained exterior will give a sour taste to a buyer during the touring once inside. They will be looking for items inside that need care instead of looking at the property and potential space.

1. Make sure the lawn is cut and not outgrown
2. Don’t have dead trees, bushes, weeds, etc.
3. Don’t have gutters, siding, or window trim hanging
4. Consider power washing the driveway, sidewalks, and siding for a clean look

Interior

Now that your buyer is inside you want them to focus on the space and visualize themselves inside. Below is a list of the top distractions for potential buyers. Not everything inside has to be perfect but maintaining these small items can make a huge difference when showing your home.

1. Paint (You don’t want to have many marks, patches, or dirt on the walls or ceilings. Most paint can actually be washed with warm water and dish soap.)
2. Clean bathrooms/kitchen
3. Declutter (Better to have boxes/bins stacked than toys or personal items piled up in a corner.)
4. Dust ceiling fans, blinds, pictures frames, etc.
5. Clean windows to allow the best natural light. Most buyers tend to look out the windows during shows.

For more questions and details schedule time to speak with me for a free selling consultation.

Are you looking to invest and start growing a real estate portfolio? If so, you have probably heard the term, “House Hacking”. This is one of many ways to start a real estate portfolio with not much money. I personally know a few people who chose this as their first investment.

With this strategy, you are looking to purchase a multi-unit property. This is typically a residential unit that has 2-4 different units. These can be more common in larger cities and not in the suburbs. Since you will be living at the property you have many advantages. The biggest advantage is you can benefit from a low down payment program. Often times investors would use an FHA loan which is only 3.5% down. This is an owner occupied loan program so you do have to live in the property for at least one year.

The second biggest advantage to house hacking is free living. Often times when you purchase a multi-unit building and you rent out the other units you do not occupy the collected rent can pay your mortgage. Not only did you purchase a property for little down you also can live for free. While living for free you may even cash flow and have a monthly income. On top of that you’re gaining equity in the property you purchased.

For example, say you buy a $500,000 four unit property. Your down payment at 3.5% would be $17,500 plus your closing costs. Your monthly payment without taxes and insurance would be $3,250 (including 6.5% interest rate and 0.5% PMI). If you’re able to rent the other three units for $1,500 each you would be collecting $4,500 each month. That gives you a positive cash flow of $1,750 but don’t forget about other expenses. You still have your tax and insurance.

House hacking is a great option for investors with little cash on hand. It can even be one of the best ways to start your portfolio. You will be living near your tenants which some investors don’t like. A quick trick would just be telling everyone else you also rent and help the owner show and manage the property. You can work with a management company or communicate mostly through phone and email.

Contact me with questions and we can start your portfolio today!

We always hear everyone talking about the appreciation they are receiving on their home and how it pays off in the long run. I figured I’d write a quick blog to briefly explain what appreciation is and how it works. To start, you have two types of appreciation, natural and forced. Both result in the value of your property increasing but they are for different reasons.

Natural Appreciation

This refers to the value of your real estate due to the changes in the market. You have no control over this increase or decrease as it is natural market effects based on the amount of supply and demand in the market. Interest rates and inflation do have an impact on this as they are driving factors for the supply and demand in the market. Your property can be positively effected in a booming market. However your property value can be impacted in the other direction as markets slow down. This is determined on the comparable properties that are selling. A comparable property is a property that located nears yours and has the same features (square footage, # of bedrooms, # of bathrooms, etc.). If you’re ever wanting to know what the value of your real estate, this is the first thing professionals will review and analyze.

Historically overtime real estate has always increased in natural appreciation. I know we all hear our grandparents say I bought my home in 1970 for $60,000 and now it is worth $600,000 today. Who knows maybe 50 years from now a property worth $600,000 will be worth $3,000,000.

Forced Appreciation

This refers to the value of your real estate due to the actions made by the owner. This area you do have control over the value of your real estate. Forced appreciation often times occurs when you’re purchasing a property in need of many updates and repairs, many know the industry as “flipping”. Investors often times will purchase a property significantly below market value. Then remodel the home increasing its value to the standard of the market value. Market value is the value given based on the comparable properties. Forced appreciation can occur from remodeling your kitchen, bathrooms, putting an addition on your home, and any large project that has significant value. Forced appreciation is referred to as “sweat equity” for home owners.