How to Get started in Real Estate

A few months ago Jacob and I had a long-time friend reach out to us and he asked What we do and how he could get started investing in real estate. The simple answer is: we wholesale houses. Anyone can go on youtube to watch a couple videos from real estate investing “Gurus” and attempt to make some extra money as a side hustle. Making money as a side hustle is not our main goal. We sell houses with our main goal being to provide Our Investors with a path to financial freedom through real estate.

In talking to our friend, his biggest question was, “How do I get started?” In Order to get started, you have to first decide which avenue you would like to pursue, whether it be Fix and flip, short term rentals or a long term rental investor. In this particular case our Friend wanted to have cash flowing investments so he wanted to look more at the long term rental options rather than the quick money via a fix & flip. In looking at rental property, the BRRRR method is the best option. The BRRRR method is as follows: Buy, Rehab, Rent, Refinance, Repeat.

Buy - Buy a house under market value that needs some work

When buying an investment property, the funds for the initial purchase will likely be from a hard money loan, private money loan or Cash. From what I’ve seen, hard money loans are a better way to leverage your current cash on hand. With a hard money loan you’re typically putting down 10% of the purchase price and the lender will finance the rehab. Hard money lenders terms usually include around 10% interest only payments for the first 6 months. We can put you in touch with some of the Hard money lenders that we’ve closed with to ensure you get the best options when it comes to funding.

Rehab - Renovate this house to match the high comps in this neighborhood

When assessing a property part of the assessment will be what the rehab will cost in order for the home to appraise for top dollar. The appraisal will be important for refinance purposes. In the early stages of becoming an investor you may need to walk the property with a contractor to tell them what your plans will be with the house and they will be able to give you a good idea on what it will cost to turn your vision into a reality. We also have multiple contractor contacts available for any investor looking to get multiple bids.

Rent - Find a renter

Once the renovation has been completed on the home, you will need to get a renter in there to start generating cash flow.

Refinance - Recoup your initial investment

Now you take your cash flowing asset to a bank and they will be able to refinance the home based on your appraisal amount and how much the home is renting for. The refinance is important because if you use cash, you will be able to pull your money out of the home and you will keep the cash flowing asset. The Cashout refinance process also lets you pay your debt to your hard money lender and will give you more favorable terms as far as interest rates and amortization. From what I’ve seen, Most banks in Texas will give you 80% of the appraised value of the home. For example: you buy a house for $100,000. You then put in $40,000 worth of work to rehab the property. Now the ARV (After Renovation Value)/ Appraised value is $200,000. The bank handling the cashout refinance will hold 20% in equity, and Pay out the remaining $160,000 of tax free money.

Repeat

Now that you have recouped all of the initial investment and made some money on your first property, It’s time to do it all over again.

The BRRRR Method above allows investors to purchase assets over and over again, make money along the way and you now have a renter paying off your loan to the bank while your asset appreciates in value! Now all you have to do is Click here to view available properties!