Now we want to go a little more in depth and talk about a house hacking strategy that is used by some investors.
One particular investment technique is coined as “BRRRR.” This strategy means you Buy, Rehab, Rent, Refinance, Repeat. What house hackers do, is that they buy a fixer upper multi-unit or multi-room property at a relatively lower price. Obviously, most investors will find the right property with the use of a good real estate agent who has experience with these kinds or purchases and investments (www.aminvali.com).
Once they find the right place and buy it, they then fix (rehabilitate) the place and make it livable again, using personal funds, a line of credit from their bank, or an investment partner. The extent of the upgrade is dependent on the initial purchase price of the property and the strength of the rental market in the area. If the rental market is quite good and rent prices are relatively high, then you will have to invest more in upgrades to justify the high rent prices and avoid issues with finding quality tenants.
The house hacker/investor will then rent out all but one unit/room (which is kept now their primary residence) keeping in mind that the monthly rental income has to be equal to or higher than the total combined monthly expenses of owning and maintaining the rental property. This includes taxes, HOA fees (if applicable), insurance, any joined utilities and so on.
At this point the house hacker is making money because the renters are covering all the expenses, their equity ownership in the property is increasing as the renters pay off a piece of the mortgage every month, and the renovations have increased the value of the house without the loan amount having been increased.
Then the investor (house hacker) refinances the property. Since the property value is increased, the loan amount will increase as well, and the surplus can be used for two things, some will be used to pay off any outstanding debts accrued during renovations (if any) and the remainder will be as a down payment on a new investment property, hence the last R in the formula, Repeat.
Many real estate empires and successful investment companies have been built this way. Find out how you can start your investment career as soon as tomorrow (Amin Vali Real Estate Investment).
Civil Engineer, MBA, Real Estate Agent
Cell phone: +1 (949)220-1000
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Realtor in Zutila Inc.