First Western Federal Savings Bank
When it comes to growing your real estate IRA investments, there is a common strategy used that can have immense benefits and high returns. First Western Federal Savings Bank is proud to let investors and everyday folks across the country learn more about this BRRRR strategy, also known as “Buy, Rehab, Rent, Refinance, Repeat.” Our experts know this is a great way to gain more equity in your real estate property in a shorter amount of time; the key is to be able to revitalize and improve upon the property and then use current equity as capital to make additional purchases. If you’re interested in learning more about this method of financial gain, contact our First Western Federal Savings Bank staff about your options and read more in our blog post below!
Buy
To start off this strategy of building upon your IRA investments, the first step is to find a property with the potential to be rehabilitated and then acquire said property; after that, the goal is to pull out equity in order to finance another property acquisition and to have the process start all over again. First Western Federal Savings Bank knows it’s important, in order to be successful, to find a real estate property that you can add value to; a good rule of thumb is the 70% Rule, which means the cost of occurring a property plus the rehabilitation costs should be 70 percent or less of the end value of the property.
Rehab
Once you have a property that can work as a suitable IRA investment, now begins the process of rehabilitating it in order to increase its value in a cost-effective way. This is key because high-end finished and expensive upgrades can cost more than the value they add, which is why these types of additions should be avoided. Instead, start small: a rental property needs to meet all the basic needs of a potential tenant: being safe, clean, functional, and visually appealing. It’s important to invest in the curb appeal of your real estate property — whether it is residential or commercial. Because your iRA functions as the “property owner” as it were, your actual role in this rehabilitation process is limited; nevertheless it is your job to make key decisions on the specific upgrades and to ensure the right vendors are hired.
Rent
So by now, your IRA investment property is all sorted out and has received the necessary upgrades. In fact, the sooner you can get to this stage, the better because now you’re able to start renting it out to residential or commercial tenants. Now that you will function as a landlord of sorts, our First Western Federal Savings Bank staff recommend taking the time to really interview and screen possible tenants, and to ensure your property can be easily found by potential renters. It’s important to find someone who will take good care of the property, since it may be a significant amount of time before you can refinance.
Refinance
Now when it comes to the “Refinance” aspect of the BRRRR strategy, particularly in terms of IRA investments, it’s important to pull as much equity (a.k.a cash) out of your rental property so you can then buy an additional property to rehabilitate and reap the benefits from. Now, because non-recourse loans are required when it comes to IRA investments and real estate, the lending environment shifts a little; some lenders may not require a seasoning period before using appraisal value, but some do. At First Western, we can finance up to 60% of your total hard cost or 50% of the current appraised value.
Repeat
Now comes the easiest part of the entire BRRRR process: moving forward with another purchase of real estate, increasing your IRA investments, and then re-performing the rehabilitation and renting steps laid out above. If everything has been accomplished effectively, your IRA itself will own a very profitable and fully-functioning property — which is something you can keep up with by following through with this strategy time and time again.
The BRRRR strategy is an excellent way to grow and manage your IRA investments, and First Western Federal Savings Bank can help you through every step of the way. We specialize in helping individuals across the country make the most of their financial situations and acquire the right non-recourse loans to make the most out of their IRA. Contact us today to learn more about this process and to get our advice!