Back to all insights Rest estate has become more and more popular as an investment option. With a carefully planned and well-executed strategy, real estate investing can be a great way to diversify your portfolio and increase your revenue gains.
There are several investment strategies to consider, so it is best to work with our real estate investment brokers at IPRG. We will help you develop the best approach to diversify your portfolio to deliver the best return and align with your investment goals. Our top recommended real estate investment strategy is the BRRR method to ensure you’ll get the best when working with IPRG.
The BRRR method, once started, is a continuous method of purchasing and owning properties that will deliver on income if done strategically. Here is a breakdown of the technique to understand more of what you’ll get with IPRG:
Buy
The first step of the BRRR method is to buy a property that needs renovation and is below market rent. This type of property will likely be cheaper because the income is lower and underperforming. However, the investment up front may be substantial depending on how long you’ve invested in real estate, your capital, and how much renovation is needed. Still, it will pay off for you substantially in the long run.
Rehab
Once you’ve purchased a property needing fixing, invest in your return by making the necessary renovations to increase the rent roll and the annual collections. Your main goal here is to prepare the property to rent out at significantly higher prices than what is currently in place. It is essential to understand what the market value is for renovated apartments in the location you are purchasing.
Rent
Now that you’ve enhanced your property to appeal to renters, you’ll want to determine a rental price that will offer you profits. Then find tenants to rent your property. After you have tenants in your newly renovated building, you’ll receive a steady cash flow.
Refinance
Finally, you’ll want to refinance the current property in the BRRR method. You can convert the equity to cash through a cash-out refinance your property. Use this cash to purchase a new property, and the BRRR method starts again. This strategy provides you with a diversified portfolio by owning multiple properties and helps give a fluent cash flow. The renovations will help sell the property quickly when you’re ready, and IPRG can get you the best offer to maximize your ROI.
Deal Metrics
When purchasing an investment property to enact the BRRR strategy, there are metrics that your IPRG broker will help you determine if the property is worth your investment. Some of these metrics include:
- $/SF: Is the price per square footage of the building.
- Rents per Apartment: understand what studios, 1 BR, 2 BR, 3 BR, and 4 BR units go for in the area
- Cap Rate: The capitalization rate is determined by dividing the NOI (Net Operating Income) by the property price. This metric is used to estimate the rate of return based on the property’s income. The higher the cap rate, the better return on investment and the more capital you can pull out.
- Financing: Understand the financing market to determine what you will be able to cash out. A conventional bank will typically lend 70% of the property’s value for a cash-out refinance.
Bottom Line of Real Estate Investment
Purchasing and Owning a commercial real estate property like a multifamily building can be a very lucrative strategy. Leveraging financing from the bank is a great way to build equity. You earn monthly cash flow and have limited liability. You also have little to no of your own money in the deal and have received a tax-free loan to begin your next project.
On top of providing regular income and maximizing your revenue gain, owning a multifamily building can appreciate more quickly. There are also multiple tax-deductible expenses when owning a tenant-occupied property. Contact IPRG to get started on your real estate investment strategy.