Goals show us where we want to go.
And to play off our real estate series:
“I want to acquire 6 properties within the next year”
That’s the goal.
Then there’s a strategy. The support for the bridge between tactics and goals Google defines a strategy “as a plan of action or policy designed to achieve a major or overall aim.” How are we going to acquire 6 properties within a year?
Tactics are the specific action item – the “everything in between”. Google defines tactics as “an action or strategy carefully planned to achieve a specific end”. What are the steps, or steps, I can take to bring this goal to fruition?
Let’s talk about a strategy we’ll be using to acquire these 6 properties.
The people over at Biggerpockets.com coined this phase the BRRR
An acronym for Buy rehab rent refinance.
Buy a property at a discount – say one that needs work. We bought a property for $100,000 with $25,000 down and carried a $75,000 loan.
Rehab that property to increase our equity. We put an additional $40,000 into the property to repair the roof, kitchen, bathroom, paint, and floors. The property we bought for $100,000 is now worth $200,000 after all the repairs are done.
Rent the property out. We then rented this property to a family on a year long lease for $1,500 a month. This tenant will be paying down the mortgage, thus increasing our networth a little bit each and every month.
Refinance that property to get our cash back out and do the BRRR again. All of our cash into the deal, the down payment and repairs, has us all in at $65,000. The property is now worth $200,000. The bank lets us do a cash out refinance. They put a new loan on the property and gave us 70% of the value in cash. 70% of $200,000 is $140,000. We also have a loan that we need to pay back which is $75,000. 140k – 75k = $65,000 which is all the money we have into this deal.
Since we got all (or sometimes most) of our money out of the deal – we’ll just repeat this process again and again until we reach our set goal of doors, pay them off, then keep growing.
And let’s not forget the other benefits of real estate besides mortgage paydown. Appreciation, deprecation, and cashflow.
And this is a strategy. One that we plan on using and abusing.
There’s other strategies to achieve this same goal too.
Maybe it’s to generate large sums of cash and dump the money into a turnkey company and let them manage the entire process..
Or it’s buying the biggest property one can afford
Maybe it’s using all the cash we have.
There’s different strategies, different ways to get from point A to point B, what matters is if we make it to point B – not how we get there (while keeping ethics in mind of course.)
And after strategies, we have tactics – but that’s for a new post.
What’s a strategy that you’ve found success with? or plan to find success with? Or that’s interesting to you? Let me know!
Joe DiAndrea 