A question i get asked a lot…
“What’s the first deal that you should do when you want to get into this game?”
There’s so many different ways to get in the real estate business, but for most people, it tends to be residential property. Residential property is pretty accessible because we’re all familiar with it. You rent it to live in and you buy it to buy your first home or whatever. That was one of the ways that I got into this business and, by getting in at a good price, obviously the prices rise.
Or what people often do is they decide that they buy their first place, which might be a small apartment and then as they get a little bit older or maybe they’re in a relationship now, they want to move to a bigger place. They decide they’re not going to sell that other property as they want to keep it to rent. These are all ways that you can do it.
The other thing is the B-R-R-R strategy. One of the benefits of that strategy is that you can basically add value in a fairly tried and tested way and the banks are all familiar with it. What does B-R-R-R mean? B is for buy, R is for refurbishing or renovating, R is for rent and the last R is for refinancing.
When you have a property done up and you have a tenant in there paying you a nice rent, you will be able to go back to the bank and with the improvements that you did you can easily get an additional bit of finance.
You might have put down say 20k and borrowed 80k and you have a property worth 100k, but then after the refurb that you’ve done maybe it’s worth 150k. If you spent 10k doing the property up it means there is a 40k profit there that can now be extracted.
The idea is that you’re hanging on to the property you bought, and keep the game going. You use that 40k to go again and put it into your next deal, so you have your second deal on the go while you’re collecting rent from the first deal and you just keep recycling it. Keep doing that over and over again.
There are other ways to do it like development. One of my first deals was the development of a small site. I got planning permission for four houses, and before I knew it I was able to sell the property for a 100k profit, bought for 25k sold for 125k. That was my first taste of the possible opportunities from property investing so I got into it in a much more serious way after that.
If you want to know more about this kind of stuff I talk about it on my podcast Behind the Facade – https://anchor.fm/gavinjgallagher
Great blog Gavin and very inspiring