How to stay cool in today’s hot real estate market
Yes … it’s getting hot out … but there is a way to stay cool in this hot real estate market.
By implementing the BRRRR strategy – BUY, RENOVATE, RENT, REFINANCE, REPEAT you can stay cool even in hot markets.
Recently I was asked if we are still buying properties. And the answer is yes. Even in this hot market. We just closed on a raised bungalow in Collingwood we are converting to a 2-unit dwelling. And we have another Oshawa property closing that has the potential for a duplex conversion, land severance, and a coach house.
Even in this hot market there are properties that will work.
BUY – The market is going crazy, so we focused on appreciating markets with good locations offering a high degree of potential for further increases as well as the ability to create value through a conversion.
RENOVATE – For both properties we are doing upgrades to enhance the value. A second suite is our sweet spot.
RENT – Once complete we will rent out our new units. We have kept up to date on the rising market rents and local demand. We plan on being some of the nicest properties available attracting high demand.
REFINANCE – once the renovations are 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 our properties are extensive, we expect to be able to get at least 75% of our initial financial contribution back.
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. Whereas 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.