This illustrates the journey to GENERATIONAL WEALTH
This is one of my earlier Renovations with Roland projects for an investor client.
The two investors were new to real estate investing and sought to grow their income while working full-time jobs, like what was detailed in previous postings.
The property below exemplifies the vision I provide for my clients as a Licensed Broker/Mentor/SME, serving as their trusted guide in utilizing real estate to build wealth or generate passive monthly income.
Within the first week on the market, we received 8 offers, ranging from the asking price of $169.8k with a $3k seller's contribution to a Friday offer at asking price with $0 seller contribution, closing in 21 days.
When we first encountered this house, it was in dire condition—a mere shell, scarcely resembling a home. However, through extensive renovation, it underwent a remarkable transformation. We removed the roof and added a full second floor, complete with two bedrooms, a full bathroom, a laundry room, and an upstairs living room. Essentially, it became a brand-new construction, with only the original foundation remaining unchanged. Additionally, we expanded the footprint on the main floor to include a luxurious owner's en suite.
This is how you build Generational Wealth Renovation project sold, above asking price. $0 Seller Closing Cost Contribution $92k Gross Profit For The Investor
Here are the numbers: Purchase Price - $65k Renovation Cost - $117k Approximate Carrying Cost (monthly mortgage/loan/utilities/staging) - $23k This should have been significantly lower, in the $12k - $15k range which would have brought another $8k - $10k (5%) back to the investor. Total invested by the client is $205k Sold for $296,750
Investor GROSS PROFIT RETURN of $91,750 (44.75% ROI)
Pro Tip: Have A Plan & Exit Strategy AND Most Importantly A Willingness To Adapt & Be Patient When Executing
BRRHSR, which stands for Buy, Rehab, Rent, HELOC (Use to acquire low-cost, free & clear passive income rentals between $50k - $70k each that get $850-$1250/month rent), Sell (After collecting rent for 2-5 years to recoup some of the investment money & as well get more on the back end money on the sale due to further appreciation over time), Repeat.
The initial phase of my strategy involved executing a light rental renovation on this property immediately after purchase. It remained a lightly renovated rental property for three years.
The next step involved undertaking a comprehensive retail renovation with the aim of selling the property. Unfortunately, just as I completed the renovation & was preparing to list it on the market, COVID-19 hit. Consequently, I had to pivot my exit strategy. Instead of selling at a lower price, I opted to convert it into a high-end rental, generating $2100 per month, as I owned it outright. I planned to reassess the market after a year.
During the summer of 2020, I arranged for a bank appraisal to secure a HELOC, which assessed the value at $270k. Subsequently, I tapped into a portion of the HELOC to invest in more affordable, debt-free rental properties located in smaller sub-cities, bolstering my passive income portfolio.
Throughout the year, I noticed real estate prices maintaining stability & even appreciating due to a scarcity of supply compared to demand. By summer 2021, the Fair Market Value (FMV) had risen to $280k - $300k, a significant increase from the HELOC appraisal nine months prior, driven by heightened development & renovations in the nearby area.
Armed with this new market value knowledge, I moved on to the third phase — "Sell." When my tenant moved in, he expressed interest in buying the property within a year or two. After one year of renting, it to him, I informed him that I would not be renewing his lease & planned on selling the property. However, since he had shown interest, I gave him the first option to buy it. He eagerly accepted. I connected him with my lender who handled my HELOC on the property, leveraging the existing appraisal & guiding him to secure a lower interest rate than what he had received from his primary banking relationship.
Successfully got it under contract without having to list it on the market.
Utilizing BRRHSR - Buy, Rehab, Rent, HELOC, Sell, Repeat: 4 years of actual rental time): Generational Wealth & Passive Income via Buy/Hold/Sell Strategy = Gross Profit Margin on the sale $135k + $58k in Passive Rental Income for 3 Years for a Total $193k over 5 years
This house was in dire straits when we first laid eyes on it—a mere shell, barely recognizable as a home. But through extensive renovation, it underwent a remarkable transformation, essentially becoming a brand-new construction save for the original foundation. We even expanded its footprint by 600 square feet to accommodate a laundry closet, hallway, and a luxurious owner en-suite.
Key Figures: Initial Purchase: $49k Renovation Expenses: $145k Total Project Investment: $194k Final Sales Price: $274k (listed at $280k) Impressive Gross Profit Margin: 41% (around $80k)
Key Metrics: Initial Purchase: $92k Renovation Costs: $38k Total Project Investment: $120k HELOC Appraisal Value: $208k Impressive ARV Increase: 60% ($88k) Total Equity: $116,000 Lender Offered 80% Equity Line of Credit: Approximately $92,800 ($116,000 x .80 = $92,800) Investor Utilizes Portion of $92,800 at 3%-5% Interest to Reinvest for Higher ROI in Another Asset.
I sold the renovated home for $255k on a $260k asking price (current value is up almost 20% to approximately $294k two years later) for my investor client.
My investor made approximately 38%-40% gross profit of this renovation project.
This illustrates the journey to GENERATIONAL WEALTH
Here's how you can achieve a $45k gross profit in just 6 months, even if you encounter setbacks. My client successfully sold this renovated property for $235k. However, they had already acquired the property and hired their own contractor before seeking my assistance. Unfortunately, I believe their choice of contractor resulted in missed opportunities for improvement and lower overall quality of work, potentially costing them an additional $10k - $20k in resale value. Despite these challenges, the client still managed to achieve a gross profit margin of approximately 23%, resulting in an estimated net profit of $45k after closing.
Five critical mistakes: Attempted to find the investment property independently, lacking access to the resources and expertise of a realtor. Partnered with a realtor without first aligning on short and long-term goals, leading to misdirected efforts. Didn't engage a realtor experienced in assessing renovation opportunities and profitability. Failed to bring in a contractor to evaluate necessary repairs and provide accurate cost estimates.
Overpaid for the property without considering realistic resale values based on comparable homes in the area. Despite these challenges, there's still a silver lining. Originally intended for rental or Airbnb use, the property's acquisition cost and basic renovation expenses would have resulted in a lengthy ROI of 11 years, far from ideal for Atlanta's market standards. After discussing the ROI dilemma, we pivoted to a profitable exit strategy. Identifying similar homes in the area, we found one across the street that sold for $202k two years ago (with an estimated $20k appreciation), and another for sale nearby at $250k. By planning a strategic rehab between these price points ($207k - $237k).
Key Figures: Initial Purchase: $119k Renovation Expenses: $71k Total Project Investment: $190k Final Sales Price: $235k (listed at $245k) Impressive Gross Profit Margin: 23% (around $45k)
I stumbled upon this video from nearly six years ago, dating back to January 2018, detailing the anatomy of a renovation fix and flip. It serves as a prime example of the pitfalls of not leveraging a Subject Matter Expert (SME) and attempting a DIY approach. However, it's never too late to adjust course and steer towards success.
Key Insights: Develop a Comprehensive Plan, Including Exit Strategies, and Maintain Flexibility and Patience During Execution Achieving Generational Wealth and Passive Income through Buy & Hold (with Forced Appreciation) - Strategic Real Estate Investing, Yielding Over 400% Appreciation in less than 9 Years
I purchased and renovated this property over 8 years ago.
The total investment (acquisition + renovation) in this property amounts to approximately $70k. The renovation was comprehensive, covering about 90% of the property. This was executed when renovation costs were lower than current rates in Atlanta, enabling me to adopt a Hold Strategy for this property rather than pursuing buy-and-hold investments in smaller sub-cities, as I currently do for rentals.
The Gross ROI stood at 22% for breakeven.
In the summer of 2020, I had a HELOC bank appraisal conducted, resulting in an appraised value of $215k. Since then, the Current Fair Market Value has surged to $300k - $330k. Surrounding neighborhoods feature several renovated homes ranging from $300k to $800k.
The key takeaway is to devise a strategic plan before initiating any acquisition process.
This is how you build GENERATIONAL WEALTH AND PASSIVE INCOME
BRRRR....“buy, rehab, rent, refinance, repeat,” and describes a strategy and framework used by investors who wish to build passive income over time. This acronym represents steps that should be implemented in the exact order they appear. First, an investor purchases a property that they proceed to rehabilitate. The newly revitalized property is then rented out to tenants for an extended period, through which the rental income can enable the owner to pay the mortgage, earn profits, and build up equity over time. Once a sizable amount of equity in the property is built up, the investor can then purchase a second property by refinancing the first, and so on.
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Below is a strategic example of this strategy executed by one of my investor clients:
I advised my investor to keep this fully renovated property in his portfolio, thus giving him multiple exit strategies and income-producing strategies since the area was rapidly developing.
My investor client had multiple goals he wanted to achieve:
* He wanted to help his two 20 something-year-old sons have a place of their own to live in (rather than paying high rent elsewhere) as they begin their adulthood.
* He rents the property to his two sons (at a discounted rate) and two of their friends. The benefit of that is he has two responsible eyes maintaining the property.
* Since my investor owns the property free and clear he was able to leverage the significant equity in the property.
* The investor was able to pull out approximately $140k of the $280k available on this property (the value has since gone up to the $320k - $340k range). By doing that he was able to strategically reinvest those funds into other income-producing opportunities.
* Lastly he was able to create a positive passive income of $1200/month above the carrying cost.
A few years later he then sold the home he was able to sell it. Purchase Price: $99k Renovation Cost: $100k Sale Price: $316k
Gross Profit of 60% (approximately $119k) + the rental for 3 years.
Upon our initial encounter with this house, its condition was dire—a mere shell, hardly recognizable as a home. Nevertheless, through extensive renovation efforts, it underwent a remarkable transformation. We replaced the roof and introduced a full second floor, featuring a guest bedroom, a full guest bathroom, a laundry room, and a luxurious owner's en suite retreat. Essentially, it evolved into a brand-new construction, retaining only the original foundation. Furthermore, we expanded the kitchen's footprint to enhance both its entertaining and cooking space.
This exemplifies the path to GENERATIONAL WEALTH
Key Figures: Initial Purchase: $60k Renovation Expenses: $138k Total Project Investment: $198k Final Sales Price: $279k (listed at $289k) Impressive Gross Profit Margin: 40% (around $81k)
In my pursuit of establishing a Unique Competitive Advantage within Atlanta's Short-Term Rental marketplace, I embarked on crafting an environment that serves as an inviting haven for a diverse range of guests. From facilitating off-site team-building activities to hosting corporate retreat strategy meetings, and from accommodating in-town visitors attending conferences to arranging family reunions and holiday gatherings, the homes curated under my vision cater to a myriad of purposes.
My approach was visionary, centered on crafting a space imbued with warmth, comfort, and versatility. Rather than mere accommodations, I envisioned the homes as vibrant settings for major entertainment events, celebrations, and enriching experiences.
The true magic unfolded with the creation of an entertainment oasis! Rainy day? No problem! I transformed an open space in the basement into a cozy Theater Room and Game Room, complete with arcade machines, a pool table, and more.
Moreover, understanding the vast potential of the expansive outdoor space, I took several steps to enhance privacy and leisure. First, I installed an 11-foot fence to provide a measure of seclusion. Then, I envisioned the installation of a 15x26 swimming pool surrounded by a 3-tier deck, offering guests a space for leisure and friendly competition with games like basketball, mini-golf, or cornhole. Additionally, to further elevate the backyard experience, I incorporated an outdoor bowling lane, offering endless opportunities for fun, skill-building, and team bonding.
On the upper deck, creating a space for stylish relaxation was essential. Guests can unwind in the deck lounge area with a mounted TV, and outdoor couches.
I designed a lower level with a cozy gas fire pit nestled beneath a stunning wood pergola, creating an inviting space for relaxation and socializing.
We began with a solid foundation, as the main floor of the home had undergone renovations in the past. However, its style was dated, reflecting trends from 15 to 20 years ago and in need of a refresh to align with the aesthetics of the 2020s. The basement, on the other hand, remained untouched for over 40 years, with some areas still in the framing stage.
For this project, we embarked on a comprehensive gut renovation, starting by removing walls that separated the front living room, family room, dining room, and kitchen, creating a spacious open-concept layout. We also vaulted the ceiling in the family room to enhance its sense of space. The kitchen received a modern update, drawing inspiration from chef-inspired designs. To unify the flooring, we raised the sunken living room floor and installed matching hardwood throughout. Additionally, we converted the front office into a welcoming guest bedroom.
One of the significant improvements was the merging of two rooms to create a luxurious ensuite with a stunning bathroom and walk-in closet.
Moving downstairs, we replaced all the old tile flooring and upgraded the aged drop tile ceilings with sheetrock and recessed lighting. We installed a second full kitchen in the basement area to enhance functionality. In a previously unfinished and framed room, we transformed it into a fabulous theater room and a dedicated workout space. Finally, we added a brand-new ensuite downstairs, complete with a relaxing bathroom retreat.
We began with a solid foundation, as the main floor of the home had undergone renovations in the past. However, its style was dated, reflecting trends from years ago and in need of a refresh to align with the aesthetics of the 2020s.
For this project, we embarked on an extensive renovation, beginning by repurposing the carport space to create a brand new ensuite owner's suite featuring a luxurious spa-like bathroom.
Following that, we revitalized the tired-looking sunroom by installing fresh matching hardwood floors, upgrading to new sheetrock and insulation, and eliminating the dated popcorn ceiling, transforming it into an inviting game room.
Turning our attention to the backyard, which was essentially a neglected space resembling a mud pit, I approached it with a visionary mindset, aiming to infuse it with warmth, comfort, and versatility. Instead of just providing basic accommodations, I envisioned the homes as dynamic settings for significant entertainment events, celebrations, and enriching experiences.
The true transformation occurred with the creation of an entertainment oasis! Recognizing the vast potential of the expansive outdoor area, I implemented several enhancements to promote privacy and leisure. Firstly, I erected a 14-foot fence to offer a sense of seclusion. Then, I envisioned installing a 15x26 swimming pool surrounded by a 2-tier deck, providing guests with ample space for relaxation and friendly competitions such as mini-golf and other outdoor games. Additionally, to further enhance the backyard experience, I designed a lower level with a cozy gas fire pit nestled beneath a stunning wood pergola, creating an inviting space for relaxation and socializing.
In my pursuit of establishing a Unique Competitive Advantage within Atlanta's Short-Term Rental marketplace, I embarked on crafting an environment that serves as an inviting haven for a diverse range of guests. From facilitating off-site team-building activities to hosting corporate retreat strategy meetings, and from accommodating in-town visitors attending conferences to arranging family reunions and holiday gatherings, the homes curated under my vision cater to a myriad of purposes.
My approach was visionary, centered on crafting a space imbued with warmth, comfort, and versatility. Rather than mere accommodations, I envisioned the homes as vibrant settings for major entertainment events, celebrations, and enriching experiences.
My approach was visionary, centered on crafting a space imbued with warmth, comfort, and versatility. Rather than mere accommodations, I envisioned the homes as vibrant settings for major entertainment events, celebrations, and enriching experiences.
The true magic unfolded with the creation of an entertainment oasis! Rainy day? No problem! I transformed an open space in the basement, a second full kitchen, a fitness room, a second owner's bathroom with an ensuite and a cozy Family Room and Game Room, complete with arcade machines, a pool table, and more.
