Tips to grow your real-estate investment portfolio

Whether you’re looking to jump into the real estate market or are still thinking about it, there are a few tips that will help you along the way. The BRRRR investment method is used by many investors to grow their real estate portfolio at a faster pace. The acronym stands for Buy, Rehab, Rent, Refinance and Repeat. But how exactly does it work? Here are the tips for you.

Buying

The first step to this investment strategy is to buy a property. Keep in mind that it’s an investment purchase, therefore, you will need at least 20% of the purchase price as a down payment. I strongly suggest to have more than the 20% as there will be other costs associated with this process and it’s always better to be safe than sorry.

When choosing the property to buy, you want to try to buy for as low as possible to increase your margins. This is a critical step. You want to make sure that your purchase price plus all other costs associated with your investment do NOT surpass 75% of the after-repair value. What this means is that after renovating your property, the increased value should be 25% higher than what you originally invested..

Rehab

During the rehab stage, you want to analyze and choose the areas of the home that will increase the rental rates that you can charge and the overall property value. Aim to make the living space functional and only improve the areas that add value. Bathrooms, kitchens, landscaping, roofs and adding extra bedrooms are some improvements that will help your investment.

Rent

Having your property occupied is a must before taking the next step. To determine your rental rates, run comperables in the neighbourhood so that you charge accordingly to the current market. Make sure you screen your tenants thoroughly to try to avoid any issues but also respond to repairs and their needs promptly. Keeping a good relationship with your tenants will increase the chances of them treating the property as their own. Having money aside for repairs, vacancies and emergencies is also highly recommended. Keep track of rental income, operational costs and other expenses associated with your investment.

Refinance

Once your property is fully tenanted, you can then refinance your property and take some of the cash out. Be aware that not all banks offer cash out option when refinancing so do your due diligence. Other questions to ask would be about interest rates and the time period that is required before you can pull your money out. Provide the banks with detailed information of your investment to motivate them into giving you the refinance and help support a higher appraisal value.

Repeat

The final step of the BRRRR methods allows you to take everything that you have learned through the process and apply that knowledge to do it again. No investment is fail proof, but the BRRRR method continues to help investors and when done correctly, it can build generational wealth. Build a team that knows what your goals are and are like minded people. Try to avoid working with different people all the time. Systems and consistency will allow you to lower your investment risks and help you succeed.

Feature image by Chris Goodwin