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I practice the “buy and hold” investing strategy. I do not ever flip real estate, I never wholesale real estate, I never invest for the short term. So given that my intention is SPECIFICALLY as a buy and hold investor, what I do is known as the BRRRR method:
Buy, Renovate, Rent, Refinance, Repeat.
Buy:
I buy properties in high demand, up-and-coming areas. I also always look at properties JUST below the average price for the area
My specialty, if I have a specialty, is 2-4 unit buildings. Those are my favorite. WITHIN those 2-4 units, I always try to find a building where each unit is around 2-3 bedrooms, and 2 bathrooms. This is the sweet spot for rentals.
I also try to find places that need MINOR cosmetic renovation. This means that the structure and internals of the house are fine…but it just looks old and dated. To me, this really gives you the best bang for the buck in terms of ROI and adding value to the property.
What makes my strategy a little more unique is that I move in to one of the units, then rent out the others.
The other rented units should cover all of your expenses, and then you live there FOR FREE. The reason I do this is because it allows me to buy a 2-4 unit property under owner-occupied financing, meaning I get a lower interest rate, less money down, and much better loan terms on the building.
So anyway, lets then talk briefly about the next part of my strategy: Buying under market value.
There’s a saying in real estate that goes something like this: you make your money when you buy, not when you sell. This is EXTREMELY TRUE. Buying something under market value like this really just takes patience…good deals don’t come up every day, you’re going to miss out on so many of them until you finally get the right one.
In terms of renovating…I leave it all up to a contractor.
I don’t ever touch a hammer, or attempt to do any of the work myself. I just don’t know how to do any of that. So instead, I’ll find a contractor through either word of mouth, or finding someone highly rated on YELP.
And NOW…You rent it out!
Like I mentioned, the rents should ideally cover all of your expenses.
How to rent a property: https://youtu.be/hS8lIrzEwv0/
How to calculate cashflow: https://youtu.be/DgWcrsavcJs/
Now, after about 6-12 months or so – depending on your bank – you can do what’s called a refinance.
Given that you bought the property under market value, and you hopefully fixed it up to increase the value even further, you’re hopefully sitting on a good amount of equity in the property. If the numbers make sense, and interest rates are low enough like they are right now, you can do what’s called a “cash out refinance” on a property.
And then, obviously, the last step is just – REPEAT THIS PROCESS AGAIN.
If the market goes up as you’re doing this, amazing – that means your properties are going up in value, too.
If the market goes DOWN as you’re doing this, amazing – now you get to buy cheaper properties in the future.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com