This is a question that Crystal and I get asked often. I am going to try to keep it brief, but we are going to cover a lot here. How do you find and decide what your first Real Estate purchase is going to be?
When buying your very first single-family investment property, the first thing you want to do is figure out what your angle is. What is your strategy? You need to determine how you're going to move forward.
There are three basic strategies you can choose for a single-family investment property:
Let's start with the fix and flip method. There are a couple of little easy rules I'm going to talk about to help you understand what you need to be doing for the flip. We're going to talk about a rule called the seventy percent Rule. Basically, what that means is you need to be all into your flip project for 70% of the ARV. That means, purchase and rehab. The purchase and rehab have to equal 70% of the ARV. The reason is that you need 30% for yourself for tax, any overages, and contingencies that may ultimately come up during your repair process. The way to figure your offer is to find the ARV using Comparable properties in the neighborhood. Then you will figure out what your rehab budget is going to be. This is what your equation will look like:
ARV X 70% - Rehab = Offering Price
Ex: 100,000 X 70% - 20,000 = $50,000
The second method I want to talk about is the buy and hold method. This is straight-up buying the rental property and renting it out. There is a rule that most people use, it’s called the 1% rule. What that means is the gross monthly rent should be One percent of the total purchase price. If it is, that will cover most mortgages and insurance while typically put one to three hundred dollars profit in your pocket. So what exactly does that look like if you have a hundred thousand dollar house? The rent should be $1,000 per month. If it is, there's a good likelihood that you're going to be making money. There are other factors that can play into your net profit, like insurance and location. Typically, however, it’s a pretty sound rule.
The third strategy that I want to talk about is the BRRRR strategy and that buys, rehab, rent, refinance, repeat. Basically, it's a hybrid of the Fix and Flip and the Buy and Holds strategies. You're going to buy a property that needs to be rehabbed and you should use that 70% rule we talked about above. ARV X 70% - Rehab = Offering Price. Once you have finished the rehab process, instead of selling you will rent it out. Make sure when you decide the rental rate you are getting the 1% rule. Your ARV is $120,000 you want to try to get $1,200/mn in rent. Once the property is rented out the plan is to Refinance. This is called a Cash-Out Refinance. You're basically putting a mortgage on it, pulling the extra cash out, paying off the loan you used to purchase the property and rolling the cash into another deal.
Crystal and I have completed the BRRRR strategy on two properties with great success. One tip from us: you have to be confident in your ARV estimate. Your refinance and rehab depends on the comps you pulled. The more practice you get with pulling comps and deciding the ARV on the property the better you will become at it. Crystal and I love this strategy and will continue to use this strategy in the years to come.
We hope this was helpful and gives you the confidence to go make your first deal. Drop us a question in the comments below. We will make a video or blog post to answer your question!
I will be a millionaire. I mean, I want to be worth a hundred million dollars been my goal for years and years. It's also a goal how many of us actually want to be in this seven-figure club though. Like most of us want to be there want to be rich they want to be millionaires. But what I want to talk about is what that actually means as far as like
Day-to-day life because I think that most people just see the rich as though they can just go on shopping sprees and vacations and do whatever they want to whenever they want to without a care in the world. And that's not true. That's not true at all. The only difference between the wealthy and average people is the way that they view money and wealthy people live within their means and whether they mean is you know going on vacations every other week or so or whether it's just able to make it without having to go in debt. The wealthy people live within their means, it's really the biggest thing. It really boils down to the things you do day-to-day for yourself to create wealth and long-term Financial Independence because that's really what we're all after investing.
All the money that you can Into Cash flowing assets and whether it's business or real estate or stocks and bonds or people startups. It's investing. It's really important that you have the wealth-building mindset and we did a whole video on what that means versus the consumer mindset and to build wealth for yourself. It is super important.
Ain't that you start changing your mindset into that wealth creation that wealth Max. Money is tool money is not for your pleasure money is for making more money and creating a life for yourself and you have to start viewing money differently with the walls building mindset. You can't sit there and you know a lot of the times we've heard growing up that money doesn't grow on trees or wait can't for that or you know just to get it negative talk about money. And if you have a negative talk about money, you're either going to be saving your money for a rainy day and then you're waiting for that rainy day to happen. So that rainy day happens or you're just going to be like I have the money to do it. Now. I'm going to go ahead and just blow my money now because I have it. I'm going to enjoy it but then you're stuck in the consumer mindset and you're not going to get out and so you really need to readjust your thoughts about money. I love Scott trench is one of the most impactful quotes from the book. He talks about everyone's heard. The Saying A Penny saved is a penny earned and Scott trench says that that's not true. Actually a penny saved is worth one point three pennies earned.
Depending on your tax bracket. The money that you save is actually you've already paid tax on it. It's already yours versus the money you earn your yet to pay tax on so that when you're just getting started is going to be one of the biggest mindset shifts you can make is spend your money very wisely because it is the tool that will set you free. Another tip is sort of cliche.
Say but really get outside of your comfort zone. I mean, if you're not happy with where you get comfortable being uncomfortable go to networking groups. Go listen to speakers. Listen to podcasts like do everything. You can get uncomfortable. I actually remember when we first moved here you found a real estate group that meets every fourth Thursday or something and you're like I'm going to go and I was like have fun. I'm staying at home. And because I was just like very uncomfortable. I didn't want to go out and meet new people and just kind of scared then he went by himself and he came back. He was I oh my gosh, I was so great and then we went to go to another one and then that ended up like bombing or something like they didn't show up and or maybe we just didn't see them, but we ended up meeting at a different table with another realtor and
talking with her and then like now we go regularly and we know most of the people there so get out of your comfort zone. It'll help you, in the long run, something else that you need to do focus on self-improvement focus on yourself. You are the one that is going to do this. You need to give yourself the tools to be able to do it. No one's going to do it for you. You've got to actually you've got to make the change and you have to learn what you need to sew.
Start reading start listening start watching YouTube videos. This is a great one. If you need to also start budgeting start finding out where you're spending money. Where can you stop spending money? And then instead of saying like I can't afford it start saying, how do I afford it? That's great. That word is so powerful. It's actually psychological. Actually studies have shown that the word if you just change your mindset by asking yourself how they've done functional MRI scans of the brain of people who ask how versus people who say I can't and the person who says I can't afford it. I can't do that. I don't know how to do that their brain shuts off. Its it is the end of the sequence in their brain, but for those people who ask how can I afford it? How can I learn to do that? How opens up possibilities their brains immediately start trying to solve the problem something else you can do to add to your financial Independence is add multiple streams of income and I know you've probably heard it before, you know, the average millionaire has seven streams of income.
Income and but honestly though that's true. If you are reliant on your paycheck, which comes from your time that you spent working you the amount of money you can make is tied to the amount of time you have to spend on it and there's a finite amount of time we have each day each week each year, too.
Make money in that way. Well, I'm not just that people say that they go to college to get a secured job, but it's not really secure. You can lose your job and need alike you make one wrong mistake or the company starts to go bankrupt. They're going to make cuts and you could be one of the first ones to be let go you think it's secure you think I've got a paycheck coming in every week. But really it's not secure.
Multiple streams of income whether passive or semi-passive. That is the only way you're going to be able to Achieve Financial Freedom early in life. We chose real estate it appealed to us, but it's by no means the only way to do it. You people have become very very wealthy in the stock market people have become very very wealthy with startup investing.
In start-up businesses apps and we won't we won't go into detail. But I mean we're working on more like he is working on two other ideas for our business that is completely not real estate the newsreels. So we're working on our second and third sources of income as we speak. The last one. I really want to talk about I hate the model of work 40 years during the best years of your life.
Life and hopefully have saved enough money for retirement by 65 and live a happy retirement and old age somewhere on some beach. I think that sucks. I hate that.
I would rather work really hard right now than take a micro retirement. And what I mean is a year two-three to do something very different with my life and then come back to work doing again things. I enjoy but taking time off coming back. There is no need to work in the best years of your life away.
For the hopes that you've saved enough money to live old age in some secluded area by your you know at the end of your life, I'd rather break it up, you know able to take time to go to the things that you want to do while you're still young actually. I've seen a lot of people posting about that. This is why you need to Vacation while you're young because there was a couple who is photographed on a gondola.
Something about an Italy and they're going down a little stream and it's an older couple the retired couple probably and they're like passed out in the boat. So they are tired so they missed an experience because they were sleeping on the boat. So do it while you're if you've built the life yourself that you enjoy why I stopped. I stopped working. I mean, I love what we do. It's so stressful and it's so much work and I love it to death. It's great. I say it's taking actually like six months break and then going back to work and taking another six-month break like two years later. Definitely. So I hope that some of what we have talked about will help that mind shift because that's the most important thing is to get your mind right before you get your life. Right? So we mind right before you get your life, right?
So those are just some of the things that we have been working on are still working on real and we just wanted to share with you. Thank you guys for watching. We are Bugay Investment Group.
Hey guys, so we're going to tell a funny story today. It's one that probably scares a lot of new landlords, but truthfully it's not that scary and it ours ended up being hilarious everyone. We tell the store to laugh. So we're going to talk about our first eviction. Okay, learning laughs like and how horribly it went. It was just couldn't have gone worse. I don't
I'm sure it probably could have oh, I'm just glad I didn't so when we bought our quad we inherited one of the tenants there. I'm not going to give her name. I walk up to introduce myself after we close and she informs me that she had not paid rent in a month and had no plans to in the coming.
Because she was out of a job and she had just gotten hurt and from the second we met her. She said hi, my name is and this is why I can't pay rent. It was instant excuses, you know the whole it was hilarious being the, you know, do it ourselves that we thought we were I we thought why not just try and get this eviction done ourselves. So we Google how to evict and I actually call
My friends who's a property manager in Murfreesboro sounded simple now just go to the courthouse and file the eviction. So I did I went down there and the lady at the desk told me that I needed to give 30 day notice. So I said, okay, I'll give her a 30-day notice.
And I went and I gave her a 30-day notice first. You you gave her like a 14-day notice. That's right. That's right. I gave her a 14-day notice this time at the property manager from Murfreesboro said you could affect them in two weeks. Just give them a 14-day notice. That's right. Yeah, so I gave her a 14-day notice. Yeah, and then he went to the courthouse and they said I needed a 30-day notice. So now we are you know.
44 days until she has to leave. I think we ended up did we do 30 days on top of the 14 or did we do yeah, we were required to do 30 days on top of the 14 we were trying to do it ourselves. We were stuck with a tenant for four months 44 days who was not paying rent. Well, and and so then you also called the lawyer because we were like well, I feel like we could get her.
Out sooner so he called the lawyer and the lawyer is like well, yeah we can we can do this this and this how many days could he have gotten her out three days. There was a three day turnaround if I had just gone to the lawyer first. Yeah, and it would have cost me 200 dollars give or take but he he could have gotten her out in three days. So we weren't able to do anything because we had already given her the notice and then the other notice.
Earth BL now of say giving her legal right to the place now 30 extra days. So so if you have to do an eviction contact a real estate attorney, or if you already have one contact them and ask them to have them do it and it's so much easier to do it. Yes. I think the worst part of the whole process was the the what she did she definitely
Lee calls them the walls and flush things down the toilet that should not have been there for a really funny video check out our Instagram account and you can see the plumbing accident the plumbing issues that we had because of this tenant mind. You wouldn't have had that had we gotten her out in three days. Probably she had 40 days to Stew on the fact that she didn't know she had no place to go so, you know,
Data for him, but she wasn't playing by the rules. So so anyway, we learned our lesson next time if we have to do another eviction. Hopefully we don't ever have to do another one but it's inevitable in the real estate world, right? And if we ever have to do another one, we're going to call our lawyer up and have him deal with it. Let's just talk about some of the things we're doing to make sure we don't have to evict in the future and we're trying to vet our tenants.
Pretty well, we actually use a service called neighborly. It's included for free through the Telus app, which is who does our software our are the software we use for our property management. They provide free tenant screening the check all the things in the background. Really what I'm looking for is past evictions any type of property damage insane amounts of debt.
That would just take away from their ability to pay rent are actually making money and enough money like over 2 times what the rent is but we also look at their past rental history not just for evictions. But how long have they been staying there? Do they apartment hop? So if they've been in one place for five years then absolutely come, you know, but if if they are alike.
Ain't one year this apartment the next year the next year the next year. It's kind of like oh, you know, we're we won't be guaranteed that they're going to stay with us long term expect the same and you're also not going to be guaranteed that they'll take care of the property as well. Right? So I think screening is the biggest thing, you know will work with people on the credit score, you know for the most part. It's just big red flag. So we
Watch out for and and we like to meet them, you know, when we which you do and you show the property you meet them and you see how their demeanor is now. And anybody that is going to be living in the premises. You need to be having them fill out the application as well. Yes, absolutely. So it's really it's not that scary. You know, don't don't let it hold you.
React there's nothing. You can't figure out even if you don't know the answer go ask somebody. Yeah, even in eviction on your very first run. Don't worry about it. Not a big deal. So we thought that story was pretty funny and very relatable. Thank you guys for watching. We are Bugay Investment Group.
I don't do any work. I don't look at any emails. I try not to look at social media at all until we're at breakfast or even after breakfast that hour and a half is just for myself. Hey guys, just coming to you real quick. We want to talk about our morning routine and what we do to get in the right headspace to make the most effective to be most effective in the day. So like what kinds of things do you do? Crystal? Well, I've been starting to get up an hour earlier. Yeah. I noticed that you are all about your morning routine much more so than I am and I need to get there. Yeah, you hate it whenever I wake up early and try not to wake you up, but you know, I wake up an hour earlier and go into the other room. I actually get my oatmeal and my hot tea and my pre-workout and I head upstairs and get into my little meditation room, which is just our bonus room. But sit there and I read for 30 minutes while I'm eating my oatmeal letting that get in my stomach. Then I start doing my journal. While I'm doing my journalism, I am drinking my pre-workout. So then the Pre-Workout starts setting in and then I take a minute to meditate and do affirmations.
And so before my workout, I bring John a cup of coffee. I do that and then I go downstairs. I work out. Once I worked out then I come inside I make my smoothie make us breakfast and then we sit down and have breakfast with each other and I don't do any work. I don't look at any emails. I try not to look at social media at all until we're at breakfast or even after breakfast that time is just for myself. What do you do for affirmations? I mean that word, affirmation, means a lot of things to a lot of different people. So like what does it mean for you? What do you do?
So I struggle a lot with believing in myself and always wanting like always afraid of being wrong. So I always just it's the same affirmation every day until like I get it in my head.
I am strong.
I am smart.
I am brave because I have a hard time of definitely just taken the ropes on things.
The other ones are I am intentional because for 2020 my word is intentional. I want to be more purposeful with what I am doing in my life and then I love myself. I think those five affirmations that I tell myself everyday help really some of the anxiety and stress that I have on a daily basis.
So I've read the book The Morning Miracle by Hal Elrod (https://amzn.to/385tKmY)
And if you haven't read that book check it out. It's definitely a good read. It's fast reading probably a day or two and it's very good. It's very informative and he's very thoughtful and about why he does what he does how talks about seven.
Different things he does in the morning meditation affirmations scribing exercise. There's a list of seven of them and obviously, I don't know all seven of them all the top of my head because I don't do all seven of them. I've actually adapted my own from his you know, The Morning miracle.
I do my own morning miracle. And basically I'm waking up and I'll meditate for a few minutes whether that's just me sitting trying to wake up half asleep still I'm sitting quietly collecting my own thoughts. Either that or I'm actually like doing like a meditation something like that. I do something to start off with that way get myself in the headspace. I need to start the day, I try to exercise every day and I'm using that term loosely. I'm just trying to elevate my heart rate a little bit. Even if it's just, you know hanging out 50 squats or max out push-ups or actually it going to hit the gym for a hard workout. You know, I'm just trying to get my butt blood pumping to get those endorphins rushing.
I'm also a big fan of affirmations just like Crystal what affirmations do you use? So do you mind sharing of course? I don't mind sharing mine is more about programming self-conscious. There is power there and it's one of those underlying principles across a lot of different books. I'll buy a lot of different authors over, you know decades and centuries of writing.
The subconscious has power and so things I repeat to myself emphatically and you know, very convincingly, you know, I repeat the net worth that I'm trying to get to myself. I repeat outlandish goals that I've set for myself this year. I try and give myself lines, I tell myself over and over again that I am where I want to be that I am going to be where I want to be.
Yeah, so my affirmations are a little bit different than your affirmations and that's because I write down at like I do the same thing but I write it down in a journal. So I have 10 goals that I want to accomplish but I write them down as if I've already accomplished them, so like one of them is I have like I ran a 5k. I haven't run a 5k, I've barely run a mile, but I want to make that one of my goals. So I write it down his if it's already happened. So he's just doing it in his head to wear as I'm writing it down. Well actually say it out loud. Okay. Okay, so you're saying it out loud, but I think that that helps. Yeah, if you hear it and say it'll help program. I think yeah more so you should just start writing it down so you can also so see it see it hear it say it and it's the very touch it. So anyway, also, we do our morning routine separately. We try not to be in the room together if he's in the room, then I'll end up going into the office and doing my routine in the office or vice versa. You can't really do your morning routine with somebody because your morning routine is about you and you really need to focus on yourself.
It's a very personal time. We work out together and it's probably the only morning routine that we have if you work out in the morning, usually, you don't.
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