Ofir Eyal Bar is an entrepreneur with a flair for real estate investments. As a successful business person with a penchant for property purchases and rehabilitation, Bar is a leading authority on assessing the merits of real estate transactions.Â
He is a firm proponent of the highly vaunted BRRRR Strategy. There is nothing cold about this technique; it is an acronym for buy, rehabilitate, rent, refinance, and repeat. This method of real estate management has proven to be a surefire way of delivering successful results in the real estate realm.
Each step in the process requires the entrepreneur to carefully assess a potential property on its merits. The decision to purchase property is one which should not be taken lightly. For most people, real estate purchases are the single-biggest expense item they will ever make. Price is the fundamental factor in being profitable with real estate purchases.
Of equal importance is the location of the property. As a landlord, or homeowner, the location of a property is often the biggest determinant of whether a property is desirable to renters and potential buyers. The property’s proximity to grocery stores, schools, entertainment facilities, gym and leisure clubs et al, is especially important. For fixed properties, location is paramount.
Before you get started, consider the type of property you are thinking of investing in. Is it going to be a piece of vacant land? An apartment building? A strip mall? A rental property? A home? Effective research must be undertaken to ensure that you make the right decision from the get-go. If possible, try to put down a sizeable deposit to reduce the required monthly payments on your mortgage. Many lenders expect a 20% down payment, so be sure to save up for your real estate investment.
Ready to Rehabilitate? Consider your Options
Entrepreneurs looking to rehabilitate a property will need to pay particular attention to the types of repairs that are needed. Projects requiring ‘systemic’ rehabilitation are incredibly costly to undertake. You may be able to share the burden of expensive rehabilitation initiatives by partnering up with other investors who will happily get involved in these types of projects.
A careful cost-benefit analysis needs to be conducted to ensure that the investment will be worth it. The price of making repairs is often a big-ticket expense that new homeowners don’t pay enough attention to. It’s important to objectively assess the types of repairs and upgrades that are necessary. Multiple quotes from reputable vendors and service professionals should be solicited before any major renovations are undertaken.
It comes as no surprise that high-end changes are extremely costly. The cost of raw materials, furnishings and fittings, and labour can easily break a budget. On the flipside, this may be necessary if you are purchasing a property catering to a high-end audience. In this case, skimping on costs and providing suboptimal quality will hurt your chances of successfully renting out your property at premium rates.
A discretionary budget is always needed over and above the purchase price of a property. This is something that property developers quickly learn. Repair work is invariably required on most every property that is purchased. The trick is knowing how much to spend, and what to spend your money on.
Some property developers are all-to-eager to get their flats, townhouses, or homes to market as quickly as possible. In this vein, they may often take shortcuts by applying cosmetic changes without repairing the underlying structural faults. Painting over wet drywall, rotten wooden beams, or simply covering up structural cracks is not the best solution. It takes investment to yield ongoing dividends. Liability issues are a bugbear for the property developer who tries to cut corners.
Refinance the Property for a Better Interest Rate
Once a property has been fully rehabilitated, its value will increase. This is a great time to attempt to refinance the property. Of course, a caveat is in order at this juncture. You don’t simply accept any refinancing offer that is presented to you. It’s important to shop around to score the best deal. As always, the devil is in the details so be sure to read the fine print. Once you sign on the dotted line, you are liable for the payments.
The satisfaction you get from successfully purchasing, renovating, and refinancing a property can be extremely rewarding. At this point in time, consider reinvesting your real estate profits into another property. There is significant potential in this market for innovative and savvy entrepreneurs. The aforementioned strategy is the best way to get warmed up for the real estate market. For additional property insights from Bar, check his website.
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