Real estate investing can provide its owners with anything between a little extra cash flow, a safety cushion of equity, or generational wealth. But, of course, it all depends on your goals, how you structure them, and what you put into them.
There are a few things I wish I knew when I invested in my first rental property. I learned how to estimate the cash flow, repair costs, and identify a marketable product. However, I didn't know or consider how location impacts growth opportunities, how to add value through forced appreciation, and how inflation impacts the rental market.
Before investing in a rental property – it is essential to start from sound financial footing. There is a high transaction cost to buying and selling real estate. If you are not in a good financial position, you may be tempted to sell your investment in a year or two.
When deciding on your investment strategy for your first property, you will have to choose between buying a single-family residence (SFR) or a multi-family building. While many people see purchasing a single-family as a steppingstone into multi-family, that is not necessarily the case.
How To Pick A Property
Many investment styles can work. Real estate investing is not a one size fits all sort of process. It is crucial to figure out your preferred investing model, define what property fits this model, and find a property that fits these criteria. Suppose you do not set out with this level of intentionality.
BRRRR Method- The BRRRR Method stands for Buy, Rehab, Rent, Refinance, Repeat. It is a way to recycle your principal investment by causing forced appreciation and refinancing your initial principal out of the property.
This strategy focuses on buying a property that needs improvement. It is similar to the BRRRR method but does not necessarily get refinanced after completion. Instead, most value-add investors sell the property to lock in their gains.