How To Pay $0 For A 12 Unit Apartment (BRRRR Strategy)

How To Pay $0 For A 12 Unit Apartment (BRRRR Strategy)

In this video, Tony Stephan will break down a full BRRRR strategy case study on his 12 unit apartment deal ==> https://www.youtube.com/watch?v=Msf0nsDILtY&t=21s

If you follow the BRRRR strategy like how Tony explains in this video, you can end up paying $0 for a 12 unit apartment building. Tony teaches you from his real world experience and shows you the blueprint to execute a 100% cash out refinance on a multifamily apartment building.

The BRRRR strategy in real estate investing stands for Buy, Rehab, Rent, Refinance, Repeat. It’s a method used by investors to build wealth and generate passive income through rental properties. Here's how it works:

Buy: Purchase a property, often at a discount. This is usually a distressed property that needs significant repairs, which allows the investor to buy it at a lower price.

Rehab: Renovate or rehab the property to increase its value. The goal is to make the property appealing to potential renters and increase its overall market value.

Rent: Once the property is renovated, rent it out to tenants. The rental income should ideally cover the mortgage, taxes, insurance, and other expenses, with some cash flow left over.

Refinance: After renting the property, refinance it to pull out some of the equity. The property should now be worth more due to the renovations, allowing the investor to take out a new mortgage that pays off the original loan and possibly gives them cash back.

Repeat: Use the cash obtained from the refinance to purchase another property, and repeat the process.

This strategy allows investors to build a portfolio of rental properties without needing to invest a large amount of their own money repeatedly. The key to success with BRRRR is accurately estimating the costs of rehab, the after-repair value (ARV) of the property, and ensuring the rental income covers all expenses.

Investing in apartment buildings, which typically refer to larger multifamily properties with five or more units, offers numerous advantages. Here are some key benefits:

Higher Cash Flow Potential

Multiple Income Streams: With many units, apartment buildings generate substantial rental income. Even with some vacancies, the overall cash flow remains robust.

Economies of Scale: Operating costs such as maintenance, management, and utilities are often spread across more units, reducing per-unit costs and increasing profit margins.

Scalability and Growth

Portfolio Expansion: Investing in one apartment building can significantly increase your portfolio size, making it easier to scale compared to purchasing multiple smaller properties.

Professional Management: Larger properties can justify the cost of hiring professional property management, reducing your workload and allowing you to focus on further investments.

Forced Appreciation and Value-Add Opportunities

Operational Improvements: Enhancing property management, reducing vacancies, or increasing rents can significantly raise the property’s net operating income (NOI), leading to higher property values.

Physical Improvements: Renovations or upgrades can justify higher rents, attract better tenants, and increase the overall value of the property.

Tax Benefits

Depreciation: You can depreciate the building (but not the land) over 27.5 years, which can offset a significant portion of your rental income and reduce your tax liability.

Deductions: Many expenses related to the operation and management of the property, such as mortgage interest, property taxes, insurance, and maintenance, are tax-deductible.

Cost Segregation: This allows you to accelerate depreciation on certain parts of the property, like appliances or fixtures, further reducing your taxable income.

1031 Exchange: When selling, you can defer capital gains taxes by reinvesting the proceeds into another property through a 1031 exchange.

Watch the full video here ==> https://www.youtube.com/watch?v=Msf0nsDILtY&t=21s

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