Creating a Life of Financial Freedom
about 5 days ago.
Updated about 1 month ago.
On this podcast episode I talk about creating wealth in real estate, by building wealth one house at a time.
The example that I use on this podcast came from our Fixing and Flipping Coaching event this past weekend. I was reviewing potential fix and flip deals with my coaching students and we were evaluating deals together to find houses that would make good fix and flips.
The specific house that I discussed with them is a $180,000 house that can be purchased for $115,000. The asking price on the house is $120,000. It is a nice house in a decent neighborhood that was a foreclosure and is being sold by Fannie Mae. The house needs flooring, kitchen, bathrooms, and interior and exterior paint. I am guessing that to fix and flip the house the repairs could be around $25,000.
We use our fixing and flipping calculator which you can use by visiting this page:
For a fix and flip, the spread is a little tight and the house will only generate a profit of around $10,000. That seems like a lot of work for not that much profit.
However I show students how that same house purchased as a buy, repair, rent and refinance makes a lot of sense. If we are repairing the house to rent it, then the cost will be only around $15,000 (instead of $25,000 for a fix and flip).
The numbers for a BRRR using my financing if I was lending for the hard money loan are:
repairs (rental) $15,000
closing costs etc. $5,000
down payment $15,000
loan amount $100,000
Total cash out of pocket $35,000
Total cost $135,000
Appraisal value $180,000
The bank will be willing to lend 75% of that appraisal value (which is $135,000)
From that $135,000 use $100,000 to pay off the hard money loan. That leaves you with $35,000 cash. That is the same $35,000 that you laid out to buy the property.
That is how the Buy, Repair, Rent, Refinance method works. And it's the easiest way to create wealth by building wealth one house at a time.
Enjoy the podcast