F&F, B&H, BRRR, House Hack, SFR or 2-4 Units What is your desire?

[Doug Crenshaw]

Hello all that are interested in what I have to say... If you are not interested then move on... What I have to say comes from many years of hard core live and learn lessons. If you want to go down the dark path that I have traveled then so be it... If you want a little advice to keep you off the dark path then read on! 

I have been working with RE Investors for the better part of 25+ years. I have seen the good, the bad, the ugly, and sometimes the disgusting... good and bad in investing in RE! So what is the best strategy? IMO the best investment strategy for RE investing is whatever makes you comfortable, while still making money in the current market that you are looking to invest!

Investing in RE is not something that any investor takes on as something that is easy and makes you a lot of money! Most of the time it takes money, blood, sweat, and tears! Mostly blood!!! LOL If you are thin skinned... then RE Investing is probably not for you and you better find another way to make money... like working more overtime for the "man"! I will say that over the years I have seen investors come and go with every imaginable way to do a deal. The bottom line is... we do RE investing to make money! I can tell you the one that made me the "most money", the one that "got away", the one that caused me the most "headaches", the one that "I wish I had done", the one that gave me the most "satisfaction", and the list goes on! The reality is that there is not one way or another to "skin the cat"! For the PITA lovers out there... no animals were harmed in that statement. 

"For REAL"... The reality is that if you find a RE Investing Strategy that you are intrigued with... then stick to it! Research, refine, make the mistakes, learn from the mistakes, adapt, overcome, persevere! That is what RE Investing is all about! If you have one strategy that works on a particular property, that doesn't mean it will work for ALL properties! Diversify your way of thinking and diversify your RE Portfolio! That is the way to "TRUE" RE Investing Wealth at it's best!

As an example... I had a guy that wanted to make 60 offers per month! That sounds great as a "RE Investor Friendly Agent"! BUT he wanted to use the 70% Rule ONLY! I also had to hand write all of those contracts and hand deliver them to all of the listing agents offices by the deadline time. If you don't know what that means then send me an email... and yes I know that dates me to the "old school" way of doing transactions! No need to remind me!  

In a BUYERS market that strategy will work a lot of the time. In a SELLERS market it will work against you most of the time. As a "RE Investor Friendly Agent" I will tell you what the "REAL" numbers are and if you want to go against the "REAL" numbers, I will also tell you the true outcome for your desire to do so! If you still want to go with your "unreal" number I will support you, because ultimately it is YOUR decision and I work for you... I may also tell you to go find another agent, but that is because I have been out there for so many years that I don't want to waste my time or yours! My job is to get you the right and timely information to make the most educated decision! In a Seller's market when you don't have time to waste... as well as in a Buyer's market where you usually have some time to work out the details... You have to know your "current" market or you may screw yourself anyway! Now back to my story... this guy... no matter what the value of the property was or where it was... all he wanted to know is what the ARV(After Repair Value) is and wanted me to make the offer at 70% Cash Deal. All offers were with a 3 day inspection and a 7 day close at the ARV number minus the 30%. While that is a great strategy... it doesn't always work in all markets and all properties within that market! He still managed to complete about 15 deals a year! How much he actually made... I am not sure...but I know what I made!!! The problem is he was a one trick pony. That may have worked back in the day... 30 years go, but in today's market you have to evaluate each property on it's own merit and figure out what is the best strategy!

Another strategy is the F&F(Fix & Flip) or the B&H (Buy & Hold)... Do you want to get money on the front end then go with F&F... or on the back end then go with B&H? If you were to find a property let's say at $100K and do $50K in repairs and turn a profit of $50K when you sell it at $200K? Or do you want to hold it for 7-10 years and get $100K while in the meantime gaining $500/mo income and having the tenant pay your mortgage for you while gaining in equity? That is the basic premise between F&F or B&H. If you are looking to build wealth quickly by using RE as the venue, then F&F is the way to go. If you are looking for more wealth with a longer term relationship and a greater return on investment, then go with the B&H strategy. It is much like a romantic relationship to make the decision... Do I want the immediate gratification of a one night stand? Or do I want a 30 year marriage that comes with all of the kids? In this case the kids will actually make you money and not cost you a college education only to return 10 years later with no job and want you to take care of them for the rest of their life while they play video games on XBox and have their friends over to eat you out of house and home! Then again I digress.... The concept is easy... the ability to discern the difference of the benefits from each strategy is the biggest difference for you as a RE Investor and what will work best for you!

BRRR... Baby it's cold outside! But only if you live up north...LOL Where I am in St Pete Florida below 60 degrees is cold outside! On a more serious note... in the RE Investing Strategy of a BRRR... it is to Buy, Repair, Rent, and Refinance (or some variation of the words...we used to say "Buy it and make as much as you can then sell or refinance")... it has now been shortened to the acronym of BRRR... In and of itself it is a great concept that may work in Nowheresville, America, but that doesn't mean it will work in Anywhere, USA. You again have to look at the market in which you are looking to do this type of strategy! Just because it worked once... doesn't mean it will work everywhere for every property! If I sound like I am repeating myself it is because I am! All strategies don't work in every market for every property! The concept of BRRR sounds very simple, but the reality is that it doesn't happen over night! This type of investment strategy takes time. The old line of "All good things come to those that wait"... I think they were talking about the BRRR strategy when they said that! LOL Maybe not, but if you think that you can "B"uy a property at $100K, put in $50K in "R"epairs, then "R"ent it for 1 year at $1500 (the 1 % Rule), and then "R"efinance it for $300K and take $150K in equity... think again! If you are able to get the $150K in equity from refinancing the deal you win! However, the property that you just refinanced at $300K has a monthly of (for the sake of easy numbers) double... Now you are at a negative cash flow every month. Some will say that is still a good deal, but the reality is that every property performs differently and the values are ever changing! If I could keep the same property that is making me $500/mo positive cash flow... why would I change it into a property that now costs me $500/mo? It is because it gave me $150K in cash to buy the next property! The deciding factor is WHAT works for you!

House Hacking! What does it all mean other than taking an axe and start chopping it down at the base of the house like George Washington on the Cherry Tree near the foundation until it falls to the ground in one magnificent pile of rubble!?!?!? Or for you "Tim "The Tool Man" Taylor" freaks out there that want to give a grunt or two and pull out the bulldozer...with the aspirations of then turning it into a $1Million Mansion in the heart of the ghetto!!!! NO!!! That is NOT what we are talking about! That is a whole other strategy of F&F usually done by the videography of the reality TV shows! What House Hacking is all about is being able to purchase a property at a price that will accomodate a tenant to pay for all of your housing expenses! That way you can live "free and clear" of all household expenses! The reality to this is that not every property will fit into this category and some will even fight you to the death to prove it to you! If you are looking for a property that will "supplement" your total monthly outgoing debt to help you pay for a property that you will be living in for a few years then this may be a strategy that will work for you! In the area I am in currently in... St Pete/Tampa market... this is like finding "the needle in the haystack with the horn of a mystical creature like a Unicorn with a horn the size of a twist tie and your arms tied behind you back and blindfolded with ear muffs on(by the way...I do know what ear muffs are and I don't need them in Florida and is why I choose to live here!!! Just sayin!) and it is 100 degrees outside! My point is again... all properties don't fit one or another RE Investing Strategies. You MUST have many bullets in your gun if you want to make the "big" kill.... I mean big deal! Did I just say again that Every Strategy doesn't fit every market? Oh...BUT I think I did!

Now to decide in what property will fit the desired Strategy that you want to pursue!?!?!?! Dilema number one! The vehicle in which you are to drive yourself to achieve your goals as a RE Investor come from within... YOU! Do you want a SFR(Single Family Residence) or do you want a Duplex? Triplex?, Quadplex? or a true Multifamily of 5+ Units? To give you a little heads up... Anything at 5+ units is traditionally called "Multifamily" dwelling. Yes when you have a Duplex there are typically more than one family living in the living SF, but when you go to 5+ units you are now into a "Commercial" property. Not that it is a bad thing, but the rules change! I cannot tell you how many investors I speak with that don't know the difference! When you get into 5+ units there are many more rules and regulations and not to mention the costs. From Insurance, purchase price, expenses, etc, but the upside is that again... I don't want to say it, but here it is... NOT every property will produce the same result! You have to look at properties individually and what the Return On Investment or the ROI will be for you at whatever level of purchase price you decide on whether it is a $50K property or a $5 million property! Not every property even within the same community will produce the same result. I had a condo that made me... out the door $200/mo net income. I kept it for many years drawing $200+/mo. I bought another in the same community thinking that I would get the same return. I only got $150/mo net income. Why the $50/mo difference? The view! After Condo fees, repairs, Cap Ex, taxes, insurance, etc... it came down to view! Who knew! I didn't 20+ years ago! But I do know now! Just because a property that is in the same town, same community, same street, same size... It doesn't mean that the value to someone else can't be different! So when I get asked... "Should I go with Single Family, Dulex, Triplex, Quadlex, or 5+ Units... My answer is EVERY time... "What do the numbers tell you?" It will ALWAYS come down to "What's in it for me!". Whether you are a buyer, seller, looking for a property for you and your family or an investment... it still comes down to "What's in it for me?". The question you have to ask yourself is "How much do I want to make on this property and how do I achieve that goal?". RE Investing is a wonderful world... "IF" and only "IF" you know where you are going and how you are going to achieve that goal!

In a final thought... The numbers will never lie to you! I tell all of my investors that so much they probably hate hearing it! If the numbers say that you will get $200/mo gross income, then don't expect $500/mo gross income. If the numbers say to buy at $450K, then buy it it $450K. And do it with passion, desire, education, and conviction, because it makes sense as a RE Investor! If your momma's best friend is a Real Estate Agent which is also a school teacher 9 months out of the year... You might second guess her thought process. Is she there for you? Or is she there to make a 2nd income by selling you down the river? You as the investor have to make a business decision on EVERY property that "sparks" your interest. Just because Billy Bob made money on a house in the neighborhood that you are looking at...doesn't mean you will! The BEST advice I can give on any and all RE Investments is that no matter where your personal level of expertise is... is to make the decision based on "What's in it for me?" and "What do the numbers tell me I should be at?". I will always advise my RE Investors to "interview" your prospective "Investor Friendly Agent". You need them to be smarter than you and advise you properly on any investment. However, I will say... like I do with all of my investors... "The decision is up to you to decide" whether it is what price to pay or how much you want to make on any given property or which agent you will use is TOTALLY up to you! Finding someone to help you through the process and is knowledgeable about investing... That falls on your shoulders! You ultimately are responsible for your own actions or reactions and your own business decisions! Finding someone that will not only get you the right information and the right advice is something that you will have to determine... Again that is up to you! When I found my broker to work for/with(Jeff Copeland) I had to interview multiple Brokers before I made my decision. I made it part of my own business model, much like I did when I went to work for Disney World in Orlando. I made appointments with the Food & Beverage mangers and I interviewed them to see if I wanted to work for Mickey Mouse. The one manger appealed to me and I got the job I wanted at the pay I needed. You also need to develop a "Master Plan" of what you want and how to achieve it. You as a RE Investor are in control of your own destiny. How you achieve it is up to you! By having a "RE Investor Friendly Agent", "Mortgage Broker", "Home Inspector", "Insurance Agent", "Contractor".... the list goes on... to make your RE Investment opportunity the best it can be is TOTALLY up to you!

If you want any specific advise on a property or what strategy you want to go with... I will be happy to shed my own light on it. I was taught by some really savvy RE Investors on how to do a good deal, but I also learned the ropes at the "School of Hard Knocks",  because I didn't listen and I know personally have a better way! RE Investing has changed and will always change in many ways, but the premise is ALWAYS "What's in it for me!"

Thanks for reading the entire blog and IF you have any questions please feel free to let me know! As you can tell... I'm happy to share my opinion!!

Sincerely!

Doug Crenshaw