Creating a Life of Financial Freedom
about 5 days ago.
Updated about 1 year ago.
On today's podcast episode I talk about an example of a property which was based on a video that I uploaded to my YouTube channel yesterday called "Buy, Rent, Repair and Refinance". You can see that video here: https://youtu.be/KfLPeO6U52E
I received quite a few questions from students of mine (and from new investors that are not yet students) asking me to elaborate on this and explain the numbers and how it works in more detail.
So I created this podcast episode especially for those of you looking for a greater understanding of how this works and a more detailed explanation of the numbers.
In this example my student Mark purchased the house for $116,000 and I gave him a loan of $106,000. His down payment was $10,000 and I loaned him the rest of the money.
Now Mark wants to fix and flip this house. But I want to show you an even easier strategy than fixing and flipping which is way less risky. It's called the BRRR Strategy (which stands for Buy, Repair, Rent and Refinance).
This strategy is overlooked by almost everyone. And you want to know why? Because everyone wants to make money RIGHT NOW. No one wants to be rich in the future. Everyone wants to be rich now. The reality of life is that it doesn't work like that.
The real wealth is made in sitting and holding on to your investments (Warren Buffett said that).
I have houses that I purchased for $35,000 in 2009 that are now worth $225,000. I just sat on them for 10 years and basically did nothing.
I was lucky enough to buy them right at the bottom of the market (when no one wanted to buy at the height of the financial crisis). I borrowed the money from private lenders and then I repaired the properties, rented them out and refinanced.
I utilized this BRRR strategy with every one of those houses that I purchased. And you could too.
I run through the numbers on this house showing you how much money out of pocket you as an investor would need to do this deal ($21,400)
I show you the breakdown:
$10,000 down payment
$10,000 in repairs
$5,000 in Points and Fees
Less $3,600 for first last and security
Your Net Out of Pocket $21,400
I explain how you can appraise this property for $160,000 and refinance it and after all fees get back $123,00. You can pay off the $106,000 hard money loan and be left with $17,000.
If you deduct this $17,000 from the $21,400 net cash out of your pocket (after refinancing) you are only out $4,400. And you control a $160,000 house with just $4,400 out of pocket. And you have $32,000 in equity in that house since it appraised for $160,000 and you owe the bank $128,000. You have effectively turned $4,400 into $32,000.
And if you just sit on that house for 15 years and get a 15 year mortgage it will double in value and you will own it free and clear. And in 15 years the rents will double too.
I also speak about the long term growth potential of rental properties and how single family rental properties will make you rich.
I recommend that you have a pen and paper handy to write down the numbers on a notepad so you can visualize it and see for yourself.
If you are brand new to real estate and want to learn more about how to wholesale real estate and flip houses then please register for the free wholesaling real estate training at this link below:
FREE WHOLESALING TRAINING
FIXING AND FLIPPING TRAINING
If you want to learn how to fix and flip houses I have a fix and flip training webinar at this link: https://www.lexlevinrad.com/fixandflipwebinar
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