In this episode of Get Real Wealthy Season 2, Quentin discusses the renovation aspect of the buy renovate, refinance and rent, or the BRRR strategy.
Quentin says that when it comes to the BRRR strategy, it is crucial to keep your costs down. He says that add the buying, renovation costs, add them together and subtract the after-repair value, the spread that you get is what is going to be reduced from your 20% down payment. He adds that you have to have the renovation cost in mind. While keeping those costs down can be a challenge, but you're also trying to get the highest appraised value possible. It does not necessarily mean that the property has to have high-end finishes, it is about bringing it to its highest and best use.
He further adds “what it means is looking at a property seeing what it is now and seeing what it could be in the future after you added some renovations to it after you've solved the problem.” Essentially, you want to give the most value lift to the property. To keep your construction costs on budget, sometimes you buy a property, and you need to identify what your renovation costs are because you don't have the expertise to do it yourself. This is where you can ask general contractors for the services during the inspections of the property.
Perhaps two or three contractors, during the inspection process and get some quotes on the renovation costs for the particular property. He adds that what you're always trying to do is to see how you can increase the potential income from that asset, and that's why accessory apartments or accessory dwelling units can add value to a building. Quentin further says “I always suggest that you have a general contractor especially if you're doing it for the first time to handle all the day-to-day stuff. But you go in every week and make sure you understand the entire process and then you can always take it on yourself on the next project.”
In conclusion, he says that while it can be very challenging dealing with various municipalities and building inspectors in general. Just remember you're building to a building code and that's what you want to adhere to as best as possible.
- The Ultimate Wealth Strategy: Your Complete Guide to Buying, Fixing, Refinancing, and Renting Real Estate