Amongst all the golden rules to create wealth in real estate, one stands out above the rest to get you into the elite club. Since you have chosen real estate to create wealth for yourself, let us share the #1 rule to fast track your wealth.
The Rules goes like this…..
If I invest in this real estate project, will I recycle my down payment within less than one year? If the answer is yes, then the project is a definite must!
EXAMPLE:
Tim buys a single-family home for $250,000, which he knows is outdated and needs lipstick renovations of $20,000. The required down payment for this purchase is $50,000 (20% x $250,000). Tim takes on a mortgage of $200,000 (80% x $250,000). Tim also knows that the basement has all the right variables for a secondary suite conversion at a minimal cost. By looking at comparable sales in the area with a good investor focused realtor, Tim knows that by putting another $30,000 into the conversion project, similar type homes with secondary dwellings are selling for $400,000. Tim moves forward with the project with a total cost to him of $100,000 ($50,000+$20,000+ $30,000). At the end, he goes to his lending institution, which happily lends him $320,000 (80% of the new value of $400,000). What Tim has now done is he’s pulled out $120,000 of his original $100,000 invested, which he can now put towards a new similar or slightly bigger project. Tim has effectively succeeded in taking out 120% of his original capital in less than a year!
Now imagine purchasing a dozen properties over a span of 5-10 years with the same down payment? If this rule is well utilized, you can turn your original funds into a giant real estate portfolio. The nicest part of it all is at the end of the run, your original capital will still be available to buy your 13th property. If you’re committed to obeying this rule and creating enough value in your project to recuperate 100% or more of your initial investment, you are on the right track to massive success. Some of you may know this as the BRRR strategy, which stands for “BUY, RENOVATE, REFINANCE & REPEAT”.
If done properly, this type of aggressive acquisition strategy can have a huge snowball effect on your wealth. The part is that it can be executed within all property types (single family homes, multi-family apartment buildings, commercial strip malls, etc). If you are interested in learning more about this essential real estate investment strategy, please reach out to one of your LacelleGroup Investor Focused Realtors.
