When it comes to investing, there are many questions that frequently lead to added stress, and unfortunately, missed opportunities. One of these questions that many real estate investors struggle with is whether to invest in a “Fix and Flip” deal or in a “Buy and Hold” (rent) deal. This is an age old discussion that ultimately has no right answer…or does it?
Personal factors are likely the heaviest weighted reasons behind one’s investment choices. Some of these factors are age, goals, current financial situation, location, timing, etc. Certain types of real estate investing are better suited for the investor depending on their answers to these factors. Quick summary below:
- Buy and Hold: This is a great technique to build equity and source for residual income. Involves buying a property, renting it to tenants, paying off mortgage, and holding onto it for years to come for equity gains and cash flow.
- Fix and Flip: This is a great way to build capital quickly, but with some added risk. It involves buying a depreciated asset, fixing it up and selling it quickly at current market value.
There are plenty of pros and cons to each method. However, they really tend to relate more to one’s personal financial situation rather than actual economic efficiency. In light of this, let’s look at a third option coined: “BRRRR” by Brandon Turner. BRRRR stands for:
- B: Buy
- R: Rehab
- R: Rent
- R: Refinance
- R: Repeat
This simple acronym can help you remember the simple five steps required to maximize your investment potential. Not only do you get the instant equity from buying a depreciated asset and fixing it up, but you gain long term equity while tenants pay your mortgage off. When the mortgage is low enough, refinance your loan and repeat this process. This is the best of both worlds!
Bottom line, no matter which investment techniques you choose to deploy, investing in ANY real estate is one of the most important and smartest financial decisions you will ever make. So don’t put it off any longer, find a way to invest in the next good opportunity that crosses your path.
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