Buy-and-hold real estate investing is a strategy for wealth building that does not require a large infusion of cash to get started. With a little bit of research — and a lot of elbow grease — it can be a great way for beginners to start investing their money.

Buy-and-hold real estate investing, also known as the BRRRR method, is a strategy in which investors buy properties in need of rehabilitation, rent them out, and refinance them to repeat the process.

It’s a great way for those new to real estate investing to have greater control over short- and long-term investments.

The Benefits of BRRR

Tax Benefits

A buy-and-hold investment offers tax benefits via a 1031 exchange if you sell a property and invest the proceeds into another like-kind property.

This can be especially profitable if you’re utilizing a 1031 exchange in Florida, a state with few regulations and a white-hot housing market.

Save Money on Property Management

More money will flow back into your pocket if you manage your properties. Some investors may not have the time or expertise to act as property managers, but if you do, it’s a great way to improve your return on investment.

Earn Passive Rental Income

Once you’ve completed the buy-and-hold process, rental income is passive. You’ll need to complete repairs as needed and clean units between tenants, but it can be a low-maintenance way to earn extra income if done correctly.

Utilizing one of the best home rental websites will allow you to quickly and easily find a tenant. This is how you build wealth. Your investments make money for you. 

Investment Appreciation

In addition to passive income, real estate values generally appreciate. In 2021, the average home price rose by nearly 17%. That beats the stock market’s rate of return by 7%.

How To Get Started

There are six steps to a buy-and-hold real estate investment strategy.

Step 1: Work With the Best Realtor

A crucial step is to locate the best property, so you’ll need to start with a great Realtor. You can save money on this step by using an experienced discount broker to save money on commission. 

Step 2: Buy the Right Property

Once you secure a Realtor, you can start looking for the right property. 

• Look for properties that will provide at least a 1% monthly return on investment. For example, if you buy a property for $200,000, your rental income should be at least $2,000 a month. Have your real estate agent perform a comparative market analysis of similar homes that have sold recently in the area to ensure you don’t overpay for a property.
• Avoid condos, properties with homeowners associations, and properties in historic districts. These are typically more challenging for new BRRRR investors and can eat into the bottom line.
• Purchase a “value-add” property. This investment requires a little sweat equity to bring out its true value. If the work’s already been completed, your return on investment will plummet.

Step 3: Be Smart About Remodeling

That “value-add” property is going to need some work. You’ll have to put some money into it upfront, but there are ways to save while you make improvements.

Ensure you always pull permits so there are no building code violations.

1. Use a cash-back credit card. If you spend $100,000 rehabbing and charge it to a 2% cashback card, you’ll save $2,000.
2. Use professionals when you need them and DIY the rest. For repairs, such as electrical and plumbing, that are highly technical or require a licensed contractor, let the professionals handle it. Do it yourself if you’re just refreshing the paint or making small cosmetic repairs. Having reliable contractors can be a godsend.
   

Step 4: Choose Good Tenants

Rental properties are a lot like your children. No one will care for them exactly the same way you do. That said, taking the time to pick the perfect tenants will help you protect your investment. 

• Start with a solid lease agreement. This might require a conversation with a  lawyer, but it’s worth it to draft a document that is clear, specific, and free of loopholes.
• Consider a property manager. This can add anywhere from 8–10% in monthly expenses, but if the property is large — or you don’t have time to do the job — it might be worth the cost.
• Screen tenants carefully. If you choose to manage the property yourself, take time to find excellent tenant screening tools. You’ll want to look specifically for good credit and a rental history free of evictions.
• Be fair. Treat every tenant exactly the same way, regardless of circumstances. You might be tempted to offer benefits and exemptions to some tenants, but resist that temptation. In the end, the BRRRR method is a business, and a consistent approach is best for you and your tenants.

Step 5: Refinance

You’ve bought, rehabbed, and rented your property. Now it’s time to refinance. 

• Choose a lender. Credit unions and small community banks tend to have more favorable rates. Online banks are another resource, often with lower — or zero — closing costs. Don’t forget to compare rates and fees.
• Get an appraisal. This helps you realize the fruits of your labor during the rehabilitation phase.
• Make sure you can cash out. Your lender should be able to offer a new mortgage that’s higher than the original. Cashing out puts money in your pocket for the final step — building your portfolio. 
• Mind the seasoning period. Some lenders require you to keep your first mortgage for a set period of time before refinancing. 

Step 6: Start Looking for a New Property

With your refinancing complete and your cash in hand, it’s time to look for your next property.

Before starting your search, take time to reflect on what worked and what didn’t in your first buy-and-hold real estate investment. There’s no sense in making the same mistake twice.

All the investment books in the world don’t replace experience, so figure out what parts of BRRRR worked for you.

As the world experienced its second year of the COVID-19 pandemic, the virus made its mark on the housing and job markets. In 2021, more than 47 million Americans resigned from their jobs, creating a movement dubbed the Great Resignation.

At the same time, the housing market boomed, driving up home prices with more people looking for homes than selling.

Bidding wars have become the norm and not the exception. Buyers have been forced to do out-of-the-ordinary things like pay cash, waive home inspections, or offer appraisal gap coverage in the event house doesn’t appraise.

To say that real estate markets have been different would be an understatement.

A recent study conducted by Real Estate Witch surveyed 1,000 many Americans who were part of the Great Resignation about why they left their jobs and how their priorities in life have shifted.

As more companies seek to hire or retain employees by allowing them to work from home, workers are growing more accustomed to having flexibility in where they live. Working remotely has become far more commonplace.

A home close to work is no longer a top priority, allowing people to purchase houses in less urbanized areas with lower costs of living.

Let’s take a closer look at the study’s findings, including how the Great Resignation and the housing market are affecting each other.  

A Change in Culture and Lifestyle

Experiencing a once-in-a-lifetime pandemic seems to have shifted the mindset many employees have about their needs in a job and workplace.

The pandemic was at the forefront of employees’ minds as they changed jobs, with 80% of respondents saying it influenced their decision to quit. Of those, 41% said their employers didn’t implement enough health and safety measures and 28% did not want to follow newly established protocols.

Asked to list the main reasons why they left their jobs, the most common answer (31% of respondents) was that workers quit to leave behind toxic work environments that included discrimination, harassment, and a lack of work-life balance.

Early in the pandemic, many jobs shifted to a work-from-home structure. During this time, some employees found they enjoyed working from home because it freed them from stressful workplaces. 

Others enjoyed the extra time that working from home gave them for their personal lives, particularly by cutting down on commuting and after-hours work functions.

The appeal of escaping the office and establishing a better work-life balance has led to increased interest in online jobs that offer more convenience.

With people shifting to work from home, houses are becoming more than a place to live. Homes have to meet more needs, serving as an office, gym, classroom, and more. With the freedom of working from home and the need for more space, many homeowners in 2021 wanted to trade in their smaller homes in more expensive zip codes for larger homes with a lower price per square foot. 

When looking for a home that has multiple functions to meet, it’s important to know how to find a real estate agent who can help you locate properties that fulfill your growing list of needs.

This also became a peak time for real estate investors looking to take advantage of the 1031 exchange and roll over the profits of their investments by buying new properties in places like Texas, which has a lower cost of living than other parts of the country and is in demand for buyers and renters alike. 

Financial Considerations at Stake

With housing prices and inflation on the rise, it may be surprising to find that salary was not the primary consideration for all of the survey respondents.

As they quit their jobs, 80% of employees received a counteroffer from their employer.  

A counteroffer might have persuaded some to stay on board, especially those who did not have a new job already lined up. 

Of the 55% of people who had a job lined up before quitting, 53% left to take a job that had a decrease in salary while 42% reported an increase in pay.

On average, respondents reported an $8,000 annual pay cut, and many said they would’ve taken an even bigger cut to leave their job in exchange for better working conditions or an opportunity to work from home.

For households experiencing a drop in income — either by going from two salaries to one or having an overall reduction — many were looking to trim expenses by moving somewhere with a lower cost of living than their current community.

Employees working from home have more freedom to choose where they live, allowing them to take things like personal and lifestyle goals into account instead of having their options limited to places close to their employer.

As people look to save money when house hunting, it’s important to work with a real estate agent who can not only get you a bargain on your new home but can save you money throughout the process.

One way to do this is by working with a real estate agent who charges a lower commission fee than traditional realtors. While most agents charge 2.5% to 3% of the purchase price, some agents are willing to work for a flat fee or a rate of 1% to 1.5%.

Having commissions set in stone is one of many common real estate myths.

Quick Decisions and Long-term Outcomes

During the height of the housing boom in 2021, homeowners in the process of selling were accepting offers almost as soon as they listed their homes on the market, with buyers making quick decisions to find the home of their dreams. 

Many employees moved equally fast when deciding to leave behind their old workplace. Nearly one in four people resigned after mulling it over for less than a week.

About half of the employees gave one week of notice or less, while one in four gave their employers zero notice, quitting the same day.

Looking back at their decision to quit, respondents had mixed feelings. In their responses, 56% had some regrets about quitting, but 58% also said they wouldn’t return to their old jobs without major improvements. While some were anxious or stressed about leaving their employers, most expressed feelings of relief, happiness, and excitement.

Many people quit on short notice whether they had another job lined up or not. Only 55% of those surveyed had a new job lined up before quitting. However, out of the 1,000 people surveyed who quit in 2021, 35% still do not have jobs. Of that group, 50% of people have been unemployed for at least six months. 

Out of those who quit their job without another gig lined up, 56% said they don’t regret it. 

Of those who left for new jobs, they were 47% more likely to be very satisfied with their new role in comparison to the one they quit. And out of those who quit their jobs for new ones, 44% are considering leaving their new jobs within the next six months.

Where things evolve from here is anyone’s guess but the smart money is trending towards more flexibility on where you work.