Investing in real estate is a great way to build wealth and create financial freedom for yourself and your family. There are many ways to acquire and make money through real estate; Fresh Look can help you understand the acquisition strategies and start investing. In this post we will review four of those options.
The most common investment strategy is a conventional “buy and hold” investment. A buy and hold investor purchases a property and rents it out, becoming a landlord. As a landlord, you are creating wealth and financial freedom by collecting monthly cash flow and/or waiting for appreciation and equity growth through mortgage paydown (by your tenants).
A recent article from US News and World Report had this to say about buy and hold investing:
“Rental properties, such as multifamily units, offer investors rental income and asset appreciation at the same time. Owning real estate that generates continuous cash flow can add diversity to your portfolio as well as an income stream that could see you through to retirement and beyond.”
Conventional financing usually requires a 20%-25% down payment for a non-owner occupied purchase. If you have funds available, this is a simple straightforward method to create additional wealth and ultimately, financial freedom.
If you don’t have the traditional 20-25% down payment but want to start building your real estate portfolio, house hacking could be the best approach for you!
House Hacking (using your home to achieve financial freedom)
House Hacking is a strategy that involves renting out portions of your primary residence to generate income that is used to offset the cost of your mortgage and other expenses associated with owning a home. Using FHA or other low down payment programs, many investors can qualify for an owner occupant loan. Most of these loan programs allow you to purchase up to a 4-unit property. The only catch is you must live in one of the units for at least 12 months. You can repeat this process yearly, up to 10 properties with most loan programs available.
This method may not be for everyone, but for those who are focused on growing their portfolio and have some flexibility in where they live, this strategy has allowed thousands to build their real estate collection with little money down.
BRRRR is an acronym for Buy, Repair, Rent, Refinance, and Repeat. When done correctly, the BRRRR method allows you to purchase rental properties that are priced lower because of the amount of work needed. Once you make the necessary repairs, the property gains value because of those renovations. You then rent the property or units and are able to refinance out most, if not all, of your invested money because of the value added through the renovations.
Biggerpockets.com explains: “the trick to being successful here is getting as high of an appraised value as you possibly can. A big part of success in this area is a combination of how well you rehabbed your property and how strong your initial comps were.”
Fresh Look Real Estate can help you find the right property, review comps and evaluate options if you’re considering the BRRRR method.
Thanks to the popularity of shows like “Flip or Flop,” most people are familiar with the concept of a traditional flip. Flipping a house is when an investor purchases a house, makes repairs and enhancements to increase the value, and then sells that home for a profit.
There are many things to take into consideration before you begin a flip. Before you purchase, you’ll want to ask your broker to run comps for what the house might sell for once it’s complete. Then you can estimate your renovation and repair costs, costs of the loan (interest and fees), and any other fees and taxes to determine whether you can net enough profit for a particular deal to make sense.
Fresh Look Real Estate has many brokers with years of experience in the field of flipping, from completing their own flips to managing and overseeing them for others. If you’re considering this type of an investment, Fresh Look is a great resource and partner!
Whether you are considering your first real estate investment or looking to make your next purchase, Fresh Look can help.