Smartland Podcasts

Why the BRRRR Method is a Risky Gamble for Out of State Investing

It seems that every year, a new real estate investing strategy rises to the forefront. Recently, the trend du jour is the BRRRR method, which stands for “Buy, Rehab, Rent, Refinance, and Repeat.” The acronym is self-explanatory: an investor buys a distressed property, remodels it to make it rentable, places a tenant in it to generate rental income, holds it for about six months before refinancing it, and then moves on to repeat the process with another property. While the process sounds like a home run, the devil is in the details – and the BRRRR method becomes especially devilish when investors use it for out-of-state real estate purchases. Choosing a Property with the BRRRR Method When you use the BRRRR method, you’re counting on a number of factors to fall into place in order to be successful. Among those are being able to rent the property out at a rate that will generate cash flow, as well as being able to refinance the property at more than the purchase price. Picking a property that will clear these hurdles requires an in-depth knowledge of the real estate market in the area. In some locations, even an attractive remodel may not be enough to draw in enough rent or help the property appraise at a significantly higher price. Remote real estate investing [https://smartland.com/blog/how-to-make-remote-real-estate-investing-work-for-you/] is tricky enough, and it becomes even riskier when you purchase a property in need of TLC. Who Is Your Contractor? Especially if you’re planning to use the BRRRR method, you’ll need a good contractor to take care of the remodeling. Unfortunately, if you’re purchasing out of state, you’ll likely be using a contractor with which you’re unfamiliar. This can create crunches when it comes to time tables and budgeting. When planning how long a home remodel will take [https://smartland.com/blog/how-long-will-my-home-renovation-take/], keep in mind that a contractor’s best intentions are often quite different than reality. A project expected to take six weeks may take three months. This can especially be the case if a contractor schedules in other projects for better-established clients while they’re working to finish yours. With rental properties, time is money, and any delays in remodeling mean that you’re left with a monthly mortgage and no way for the property to generate the income to cover it. Uncertainty Over Vacancy Once the remodel is through, it’s time to move a tenant in. The question is – can you find one? In an ideal world, you’ll be pulling up the “For Rent” sign the day after you put it out. The reality, however, is that locating a reliable tenant [https://smartland.com/blog/what-makes-a-good-renter-how-to-find-the-right-tenants-for-your-property/]can take time. The advertising, application, and screening process means that you may be without a tenant for weeks after it’s fixed up. A dip in the rental market could cause your newly-remodeled investment to sit empty for months. When investing out of state, many folks try to eliminate the unknowns by purchasing turnkey properties that are ready to rent on day one. By purchasing properties that are rental-ready and working with a turnkey real estate investment company [https://smartland.com/blog/how-to-find-the-right-turnkey-real-estate-investment-company-for-you/] to help them make choices that are best for their budget and future plans, a lot of the uncertainties inherent with BRRRR investing are taken off of the table.

Which Investment is Better for Your Future? Turnkey Real Estate vs. Stocks

Working your day-to-day job pays the bills, but if you’re hoping to generate additional income or are looking towards retirement in a few years, investing is an excellent way to put your money to work for you and help you meet your goals faster. Over the years, a great debate has raged on: is it better to buy stocks or focus on turnkey real estate investment? It turns out that there are pros and cons to each.

Assessing the Risk of a Turnkey Real Estate Company

Tom Ott provides 7 common red flags that you should watch out for when choosing your turnkey provider. If you’re looking into turnkey real estate investing, you’re certainly looking at the risks involved. But are you looking at the potential risks that could come from the turnkey real estate company you’re working with? We get it, more and more investors are becoming increasingly worried about the unpredictable stock market and escaping it to search for safer assets such as real estate. However, they don’t wish to become active landlords. They prefer becoming passive investors and are drawn to the world of turnkey real estate investments. Does that sound like you? Before you jump in, make sure you know who you’re working with and how to spot an untrustworthy turnkey real estate company.

5 Keys to Turnkey Real Estate Investing

Tom Ott reveals his 5 Keys to Turnkey Real Estate Investing that are sure to assist in developing a successful turnkey portfolio. If you’re planning to invest in turnkey real estate, there’s a lot you need to learn. Turnkey real estate investment is a lot more complex than investing in stocks and due to the legal, financial, and other requirements involved. Therefore, it is a good idea to educate yourself before you make your first turnkey real estate investment.

IMN Atlanta - Ground Up Vs. Value-Added Rehab vs. Re-Purposing:Where Are The Best Risk-Adjusted Returns?

When it comes to ground-up vs. value add in multifamily real estate, where are the best risk-adjusted returns? Smartland's EVP | COO, Steven Gesis, was featured on an Information Management Network (IMN) panel in Atlanta to answer this question. Steven had the opportunity to debate other panelists and present Smartland's multifamily real estate value-add strategy.