BRRRR … how to stay cool in today’s hot real estate market
Yes … its getting cold out … but the BRRRR I am highlighting stands for BUY, RENOVATE, RENT, REFINANCE, REPEAT
Recently I was asked if we are still buying properties. And the answer is yes. Even in this hot market. We just finished one last month and are working on the completion of another one right now. Here is a synopsis of what we’ve been up to this summer on the real estate end of things. Even in this hot market there are properties that will work.
BUY – The market softened abit after the Covid crisis hit in the sprint and we took advantage. We purchased one property in Lindsay with a joint venture partner and another in north Oshawa. They say in real estate that you make money on the buy. But at the time, I did not feel we were getting a great deal. For the first time we were in mulitples in Lindsay, and had to offer full list. In Oshawa, there were 10+ registered offers, but we did get the property for 35K over list. We knew the area was a good one and 35K in the long term would be a non-event.
RENOVATE – Both properties we did a duplex conversion. The Lindsay property already had a basement suite, but we had to spend about 35K just to make it legal. The budget on our Oshawa renovation is closer to 60K.
RENT – We have already fininshed and rented out our Lindsay venture. The Oshawa one is about a month out. Both places will have total rents in excess of $3200 a month.
REFINANCE – once the renovation is completed, we plan to bring back the appraiser and get the new value and are generally able to pull out our renovation costs. As the renovation and changes to the Lindsay property are not extensive, we likely will not refinance this year. The Oshawa property however should be a home run with duplexes going for top dollar right now.
REPEAT – And finally we repeat the process. We take out the refinance funds and do it all over again.
We like the BRRRR Strategy for several reasons.
* More cash flow – We love 2-unit properties because they have more income than single family homes
* Better price – Existing 2-unit properties will often go for a premium. And if you want to make money on the buy, this will be hard to do. Investors are not typically motivated sellers as properties are rented and cash flowing already.
* More choice – there are a lot more properties that can be converted to legal 2-unit dwellings on the market than there are pre-existing ones.
* Better condition– along with more choice and competitive prices you can often find new properties that are in much better condition that existing duplex options.
* Legal – In many cases existing duplexes are not legal. As a result, financing can be a challenge because the mortgage company realizes that at any point they can shut the basement unit down and your income has just dropped significantly. They are also harder to insure properly.
* Better choice of tenants – With existing 2-unit properties we must usually take on the existing tenants, which we did not pick.
* Higher Rents – Existing tenants often have below market rent values. Where as newer properties can command top rents.
If you’d like to see how a duplex as an investment property can help your wealth plan … pls contact us. Its our specialty.