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Turnkey Property Investment: What are the Disadvantages and Advantages of the BRRRR Strategy?

Before you can take advantage of the BRRRR method as a real estate investor, you must know what the BRRRR strategy is. BRRRR is an acronym for:

  • Buy
  • Rehab
  • Rent
  • Refinance
  • Repeat

This technique is a widely used as a formula for consistent revenue generation, and many new investors view it as a surefire way to make long-term money. However, while it certainly can allow real estate investors to deliver excellent returns, it’s important to understand some of the issues that new investors sometimes experience:

  • Rehabilitation timeline problems. This is a particular problem for new investors who don’t have experience spotting potential rehab tripwires in investment properties, and who don’t know, or don’t have the resources to find the best contractors. While certain conditions will only reveal themselves in the middle of the renovation, some contractors could be the root of the problem. Standard financing could help mitigate the risk of rehab delays, but if your repayment schedule is high interest, you might be doomed.
  • Cost overrun. Failure to keep a close eye on everything being spent could lead to mounting costs. Make a budget for unforeseen expenses and don’t allow anyone who’s authorized to make purchases exceed your set amounts.
  • Poor appraisals. When your post-rehab appraisal came in lower than your initial estimated value, you could be unable to refinance, and paying back the lender could be a struggle. Worst case scenario: You owe more than what the property is worth.
  • Long vacancy. Failure to rent your property quickly is the most common and potentially devastating problems with rental property investment. An unoccupied rental property will cause you to hemorrhage money.

However, the BRRRR strategy certainly isn’t all doom and gloom, and when investors make it work for them, it can help them build significant wealth. If you pursue your plan wisely, you could reap the following benefits.

Unlimited ROI

What could be better? Using the BRRRR strategy means that it is possible to make an initial zero investment, because you use revenue from previous investment properties to fund subsequent ones.

Easy Scalability

You don’t have to be a billionaire to start your real estate investment venture with BRRRR – you can begin very modestly with a single or double occupancy property and gradually increase your portfolio both in the number of properties and value.

Proven Formula

No one should ever enter any investment scheme with the impression that it’s a guaranteed winner; due diligence must be performed and care must be taken to ensure preventable problems don’t derail the project. However, the BRRRR strategy is a fairly simple concept to follow for people with all levels of experience. Although it’s always possible for something to go wrong in any endeavor, the BRRRR strategy does work time and again in a variety of economic conditions and markets.

Incredibly Rewards

Yes, it is possible to reap financial rewards when you execute the BRRRR strategy, but it is also personally fulfilling to renovate a neglected property, provide a well-maintained home for a renter, and watch the money roll in when it all goes according to plan!

Turnkey Property Management Tips: Managing Tenants

Your ability to earn a consistent profit from your rental property will depend on three key factors:

  1. The quality of your property.
  2. The quality of your property management.
  3. The quality of your renter.

While it isn’t easy to maintain complete oversight and control over these elements, it is possible – to a degree – to have control over the first two. Properties can be well-maintained and renovated; roperty management teams can be replaced. It’s managing the last factor – the renter – that can be a struggle.

It’s true that finding a tenant that looks good on paper can be a strong indicator of whether he or she will be a great occupant. Having solid credit, a consistent employment history, and good income ticks most of the boxes. Unfortunately, there are variables that can be impossible to predict, and even the most responsible-seeming prospect can slowly reveal him or herself to be a complete nightmare once they move into your unit.

There are numerous ways a tenant can become problematic: Their noise level could encourage others to complain to the authorities; they can be combative with neighbors; they can engage in questionable or illegal activities out of your property; they can fail to pay rent and force you to pursue costly and lengthy legal action to get them out. However, while you might be nearly helpless to prevent or foresee the above issues before disaster strikes, you can actively prevent them from causing lasting damage to your physical property.

There are measures you can take to protect yourself and your property before your tenant moves in and while they are in residence. These precautions can go a long way towards ensuring that a problem tenant doesn’t inflict the maximum amount of damage.

Periodic Property Inspections

Before your tenant moves into your property, have a thorough, top-to-bottom inspection performed by an independent property inspector. While your own property manager will have a report on the vacant condition, it’s nonetheless smart to have another, separate report to fall back upon if the tenant claims faulty or damaged elements preexisted their occupancy.

Additionally, have your property management team inspect the property approximately three months after the tenant has moved in. The report will document how well the tenant is maintaining the residence, and include any signs of neglect, damage, and overall dirtiness that surpasses general untidiness. The report will also take the maintenance of the surrounding property into account. The manager may only need to conduct a sidewalk inspection to determine if the gutters are maintained, the lawn is trimmed and free of debris, and that there is no sign of overgrowth encroaching upon the structure.

If your manager discovers that your tenant is allowing your property to fall into ruin, steps can be taken to repair and restore the property before it becomes severe. The cost of undertaking the maintenance may be charged back to the tenant.

It is important that your tenants understand immediately that maintenance checks will be made periodically as a part of the rental agreement. This alone might help you weed out the tenants that have the most potential for becoming problematic. Ultimately, you may not be able to ensure perfect tenancy, but you can mitigate the cost of highly imperfect tenancy significantly.

5 Marketing Tips for Getting Your Turnkey Investment Property Occupied Quickly

You’ve got your rental property in incredible shape – all it needs is an occupant. What’s your first move? Any property owner knows that unoccupied units are incredibly costly. The following promotional and marketing strategies have been tried, tested, and deliver proven results when you want your rental occupied and occupied immediately. If your property manager isn’t executing the following five initiatives, your units may be unoccupied for far longer than necessary.

1. Hone your online marketing strategies.

At Turnkey Property Pro, we always ask prospective tenants how they located our ad. We’ve discovered that the overwhelming majority of prospects discovered our postings online. The most widely used resources are Facebook, Craigslist, Zillow, and Trulia. It’s a fact – without online marketing, we’d have virtually no visibility.

Of course, online marketing isn’t a set it and forget it proposition – you have to have a deeper strategy than just listing the details of the rental. We want our properties to be viewed in the best possible light, so we have our properties professionally and beautifully photographed immediately after any renovations. (You may also consider employing a home stylist – it can make your property look Architectural Digest-ready.) So many renters either don’t have pictures or opt to use smartphone pics that don’t give the prospect the depth, scope, and potential of the property. You have to treat your rental the same way you’d treat a property you were selling for the highest possible price. Make it desirable.

2. Invest in High-Quality, Professional Signage

A few decades ago, this would have been a critical element within a renter’s promotional strategy, but prospects are far more likely to find your information online than by responding to a yard sign. Nevertheless, it is still crucial, and though the volume of prospective renters who contact you through your signage may be lower, they will likely be serious prospects with a great deal of interest. This is because these respondents are actively looking for rental possibilities in particular neighborhoods. It also means that your property left the prospect with a very good initial, real-life impression.

Whichever signage you use, it must transcend the stereotypical “For Rent” red and white sign if you want your property to attract high-quality renters. Remember – you want your sign to stick in the viewer’s memory and encourage action. The quality of your sign is a reflection of the quality of the property and your business.

3. Respond to Every Query

It’s not easy to answer every single question you receive about your rental – particularly when you can tell that the prospect is semi-serious at best. However, making a commitment to treating every caller with respect and investigating every potential lead will yield significant dividends in the long term. The more prospects you engage with, the better your chances of finding the best possible renter.

4. Use an Efficient and Effective Leasing Agent

The leasing agent you use will determine how well the above strategies are executed. If your agent is on-point, your property won’t be vacant for long. While it may be tempting to bypass leasing agents and show your property yourself, consider how much time you would have to dedicate to answering all of your leads, showing properties, maintaining your web presence, and renovating additional properties. Ultimately, a good leasing agent who shows your properties in the best light and attracts great tenants is worth her weight in gold.

5. Base Your Price on Your Market and Rental Quality

Every strategy you put in place to get your rental occupied quickly will be fruitless if you’ve overpriced your units. If your property doesn’t have the latest amenities and hasn’t undergone a significant renovation in over a decade, a low rental price – below market – will be your best bet towards getting your property occupied. Again, having an effective leasing agent will be instrumental in getting you an attractive price point.

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