Many people are considering a stronger focus on long term financial stability and creating passive income streams. Why not? Everyone shares the dream to make money and having the freedom to do what they love (aka: RETIREMENT! ).<\/p>\n
Real estate makes a great option to gain consistent returns for future abundance. Real estate can be an active or passive investment, but either way you have control of your investment. You get to chose the location, actual property, style, and so much more. In addition, you can decide on solutions to problems such as replacing an AC or just getting the current one replaced. Alternatively, you have the option hire a property manager and have them make those decisions.<\/p>\n
Beyond just control, real estate has a multitude of benefits including: tax benefits, loan pay down, appreciation and cash flow. Most of all, it just makes sense. The demand is \u00a0high, as people and businesses will always rent property. Current home ownership rates in the US are the lowest in over 20 years<\/a>.<\/p>\n Now that I have hopefully convinced you that real estate is a good investment, let\u2019s cover strategy. A simple strategy to develop a profitable real estate portfolio is using the BRRRR method. This method stands for buy, rehab, rent, refinance and repeat. Brandon Turner at Bigger Pockets<\/a>\u00a0is credited for creating the term, but the concept has been around for a long time.<\/p>\n B- Buy<\/strong> Since you must find the properties at such a discount, you can\u2019t just hire any real estate agent that only depends on data on\u00a0the MLS. Many of these deals require hard work through direct solicitation or through real estate wholesalers. There is a great article at Bigger Pockets that provides additional sources to find real estate deals<\/a>.<\/p>\n R- Repair\/Rehab<\/strong>BRRRR method explained<\/h4>\n
\nHowever you do it, your first step is to actually buy the property. The important element to this step is to buy the property at the right price. That means finding a house that is available well under the potential value. A good\u00a0rule-of-thumb is to keep the total costs (including remodeling\u00a0costs) around 70-75% of\u00a0the potential fair market value. You must be mindful and calculate any needed updates to the house before closing on the property. For example: if you find a house with a potential fair market value of $100,000 that needs about $15,000 of repairs, then you will not want to spend more than $60,000 to purchase the property to stay at 75% of fair market value.<\/p>\n
\nThe step is my favorite. In this step, \u00a0you add value to the property through updates or upgrades. This step is also very tricky because you must\u00a0control your desires to over-remodel the property. It is important to\u00a0keep in mind that you are not updating a house for you to live in, but as an investment. Sometimes \u201cgood enough\u201d is perfect! A great example is with the kitchen. Granite countertops are ideal for your house, but you can often save over $1000 if use tile or another economic material for counter tops.<\/p>\n