Real Estate Investing Personal Finance

The Book on Rental Property Investing: How to Create Wealth and Passive Income Through Smart Buy & Hold Real Estate Investing (Summary)

by Brandon Turner

Brandon Turner's first real estate deal was a disaster. He bought a house to 'live-in flip,' ran out of money, did terrible DIY repairs, and ended up selling it for a meager $2,000 profit after months of stress. So how did he go from that failure to owning thousands of rental units? He discovered that the goal isn't to get rich quick, but to buy assets that other people pay for.

Stop Looking for Deals; Build a Deal-Finding Funnel

Successful investors don't just stumble upon good deals. They build systems that consistently bring potential properties to them, filtering the bad ones out and leaving only the best prospects.

Instead of just browsing Zillow, an investor might set up multiple 'lines in the water': automated alerts from the MLS, building relationships with wholesalers, sending direct mail to distressed homeowners, and even driving through neighborhoods looking for neglected properties ('Driving for Dollars'). This funnel might analyze 100 properties to find 10 worth making an offer on, to ultimately buy 1.

You Can Analyze a Deal in 5 Minutes with the 50% Rule

To quickly assess a rental property's potential profitability, assume that 50% of the gross rental income will be consumed by all operating expenses, not including the mortgage payment.

If a property rents for $2,000 per month, the 50% rule estimates that your total expenses (taxes, insurance, repairs, vacancies, etc.) will average around $1,000 per month. If your mortgage payment is $700, your estimated monthly cash flow is $300 ($2,000 - $1,000 - $700). This allows you to rapidly discard deals that clearly won't cash flow.

Buy, Rehab, Rent, Refinance, Repeat (BRRRR)

The BRRRR method is a powerful strategy to build a portfolio with little of your own capital. You buy a distressed property, fix it up, rent it out, and then refinance it to pull your original investment back out to use on the next deal.

An investor buys a run-down house for $100,000. They spend $25,000 on renovations, and the newly fixed-up property is now worth $175,000. They rent it to a tenant and then go to a bank for a cash-out refinance, getting a new loan for 75% of the new value ($131,250). This pays off the original $125,000 investment and puts $6,250 back in their pocket, all while they own a cash-flowing rental with no money left in the deal.

Get Paid to Live for Free Through 'House Hacking'

House hacking is the strategy of buying a multi-unit property (like a duplex or fourplex), living in one unit, and renting out the others. The rent from your tenants can cover your entire mortgage and living expenses.

You buy a duplex for $300,000 with a low-down-payment FHA loan. Your total monthly mortgage payment is $1,800. You live in one unit and rent the other identical unit for $1,900. Your tenant is now paying your entire mortgage plus an extra $100, effectively eliminating your housing cost and allowing you to save aggressively for the next property.

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