The BHIR Strategy
Over the years, I've used almost every real estate investing strategy, and if you watched my latest video, I talked about them, from starting with fix and flips, to then doing buy, renovate, rent and refinances (BRRR), to just straight buy and holds, to then falling into doing a hybrid strategy of all 3, which I called the Buy, Hold, Increase Rents (BHIR) Strategy.
I talk in depth about this strategy in my video, 'How to Build Wealth in Real Estate FAST', but in summary, it involves buying small to large multi-unit properties, and even commercial properties, at below market value.
Why are the properties below market value?
Because income properties are valued based on the return the property generates.
If the properties income is low due to low rents; below market value rents, then the property will be valued based on the return the property generates.
Here's an example of what I'm talking about, using cap rates, (I explain more about cap rates in this video), which investors use to quickly determine a properties value.
A property generates rental income of $1,000 per month and has expenses of $800 per month, which means it generates a net income $200 per month; $2,400 per year.
By using the capitalization rate formula, which is:
Net Income / Market Cap Rate = Property Value
And we are to assume the market cap rate for this property is 6%...
The property would be valued at approx $159,000
However, if you were to increase the rents by $200 per month, the property would increase in value to approx. $199,000.
