Tag Archive for: beginner investors

3 Key Fundamentals of BRRRR

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The top 3 fundamentals to keep in mind when learning BRRRR.

“BRRRR” stands for “buy, rehab, rent, refinance, repeat.” It’s a process for capturing equity and creating cash flow on rental properties.

We’ve helped investors through this process for over 15 years.

Here are the 3 key fundamentals of BRRRR we’ve seen make these transactions successful.

Key Fundamental #1: Building a BRRRR Team

Firstly, you have to find off-market properties.

The really good under-market BRRRR properties won’t just jump into your lap. These properties require a little digging, and – more importantly – a team to help you.

You’ll need to know wholesalers, real estate agents, other investors, and anyone else who can help you locate good undermarket properties.

(It’s also an advantage to keep lenders on your team so you can close fast on these great properties once you find them.)

Key Fundamental #2: The Money Side

“It takes money to make money.”

If you can learn the basics about the costs of your BRRRR projects, then you can squeeze more money out of each project.

We always say that there’s money in the money. Do the research to learn about real estate before your first investment, and you’ll be miles ahead of other investors.

Key Fundamental #3: Using the Right Leverage

Yes, it takes money to make money, but it doesn’t have to be your money.

Plan for and understand the entire BRRRR process, and leverage can work to 10x your net worth.

For More on BRRRR

Overall, this only brushes the surface of BRRRR. Over the coming weeks, we’ll visit each of these topics in much more detail. Why do you use two loans? How can you do this with zero money down? How do you go about a refinance?

If you have a deal now you’d like us to look at for you, send us an email at Info@TheCashFlowCompany.com.

Read the full article here.

Watch the video here:

https://youtu.be/JbO2YFxuPmw

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What Is a Bridge Loan?

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How do real estate investors use these short term loans? What is a bridge loan?

A bridge loan is a very short-term loan – even shorter than the typical hard money loan. It’s used in real estate investing to fill any gaps left by a lack of funding. 

Most popularly, these loans help you bridge the space between one project and another.

Let’s say you’re just finishing up a flip. The house is on the market, buyers are showing interest, and now you’d like to get another property bought so you can jump right in to your next flip.

A true bridge loan covers up that gap between projects. You get the money to close on a new property before the first one is completely sold. A bridge loan lets you overlap from an old project to a new one.

When to Use a Bridge Loan

Real estate investors use bridge loans for all kinds of situations:

  • When you’re buying a new property and already have one listed for sale
  • When you need to cover down payment on a new property
  • When you find a great deal but your bank’s financing won’t be ready in time
  • When a wholesaler waits for a buyer’s money to come into the title company
  • When a hard money or traditional loan leaves gaps in a project
  • When you need to refinance a hard money loan.


Read the full article on bridge loans here.

Watch the video here:

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How to 5X Your Real Estate Investments

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Text: "How to 5X Your Real Estate Investments"

Leverage can 5x your real estate investments. Let’s look at how.

Should a real estate investor ever avoid leverage? Should they always use cash when possible?

Short answer: nope.

Using leverage can help you 5x your real estate investments. Let’s take a simple example to show how it works.

Cash vs Leverage

First off, we’re going to use simple numbers in this example.

Of course, home costs and rent costs will change in different markets and different areas. But we’ll run with these numbers – even if they aren’t 100% accurate, they’ll paint a good picture of the math that backs up leverage.

Let’s say you have $100,000 at your disposal that you want to invest in real estate.

Income Real Estate Investing with NO Leverage

To begin with, you could take all the money and buy one property valued at $100,000 outright. You’d invest the full $100k, own the house free and clear, and receive $1,200 of net rent income per month.

This adds up to $14,400 per year you’d earn from a house you fully own.

Income Real Estate Investing WITH Leverage

Now let’s see how it plays out when you involve a lender rather than buying outright.

You could offer to put down $25,000, and the lender might agree to loan you the other $75,000. That $75,000 covered by the lender would be your leverage.

And now, instead of pouring all your money into one property… you only have to put in $25,000.

Take your $100,000 and divide it by 25,000. That’s 4 properties you could buy with leverage. For the same out-of-pocket amount as buying 1 property outright.

However, because you’re now paying a mortgage on these rental properties, your monthly net rent goes down.

Your income is now $750 per property. Multiplied by 4 properties. So this brings in $3,000 per month, or $36,000 per year.

You have the potential to make an additional $21,600 per year – just from using leverage.

No matter what amount you start with (in this case, $100,000), using leverage brings in more income.

How Does Leverage Change Your Net Worth?

Monthly rent income isn’t the only way a rental property makes you money. It will also increase in value.

When a home appreciates, it increases your total net worth. The average yearly appreciation rate for real estate across the country is 5%.

It’s clear that leverage impacts income, but what about wealth?

Let’s throw this 5% number into our equation and see what happens with leverage.

Net Worth No Leverage

If a property was purchased for $100,000, that one home would increase in value by an average of $5,000 per year.

So, the one home you bought outright would give you $150,000 in equity after 30 years.

You bought it for $100,000. After 30 years, you’re adding $150,000. So that’s a net value of $250,000.

Net Worth with Leverage

Next, let’s see the equity of the 4 properties purchased with leverage.

Multiply your 4 properties by the $5,000 in value they each increase every year. Your portfolio will appreciate $20,000 per year.

Over a 30-year span, your 4 properties would add $600,000 to your net worth. Add the original values of the homes (4 × $100,000), and your net worth increases by $1,000,000.

A million using leverage definitely beats the $250k you got from buying 1 home outright.

Read the full article here.

Watch the video here:

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