There is a lot that can be said about the challenges of getting started as a real estate investor. These range from “analysis paralysis” and getting the money together for your first deal, to finding your first property and having the confidence to put in your first offers.
These are real challenges. As your experience grows, you will learn how to deal with these more effectively, but changes and events beyond your control may still pose roadblocks along your road to real estate investing success.
Here are 3 common roadblocks that can slow you down when moving from one BRRRR deal to the next, the “repeat” step of the process.
No project is ever the same.
Common advice given to BRRRR investors is to build systems and parameters for deals. You could have systems for lead generation, writing offers, or templates for analyzing deals. An investment parameter could be deciding that you will never offer more than X% of ARV for a property.
The reality is that systems and parameters won’t work every time and may need to be adapted and updated over time. The systems and parameters you have put in place should be your “home base” and help you to decide when a detour is required. At other times, you will have to decide against taking a detour, and this can put the brakes on your next project.
Market Changes
The real estate market is incredibly dynamic. Things can change during a single BRRRR project, but also over longer periods. You will need to constantly adapt to market conditions.
You need to be aware of both global and local trends. For the global trends, you should add some reliable, research-based resources to your news feed to make sure you are up to date on what is happening nationwide. Is the Fed raising interest rates? Are supply chain issues around the globe causing prices of construction materials to spike? At the same time, you need to be an expert in your local market. There will be local trends and events that do not mirror global events. The big news of 2021 so far has been high demand from buyers combined with low levels of supply that have caused property prices to rise steeply across many markets. On the other hand, the sudden shutdown of a major employer in your city might cause local property prices to plummet or make it hard to fill a vacant rental unit.
When a property does not perform as expected.
The best-laid plans don’t always turn out how you expect. At least in the beginning, when you only have a few projects under your belt, the performance of a particular project can really slow you down, and, in the worst-case scenario, completely derail your plans. Perhaps your latest deal did not achieve the ARV you had hoped for, or an earlier property is not cash-flowing due to an unexpected vacancy. The more projects you accumulate, and the more experience you gain, the less of an impact the performance of an individual property will have on your overall portfolio. However, this will be a challenge in the beginning.
What Can you Do to Keep Moving Forward?
As a BRRRR investor, you have to continuously adapt to each project and change in the market. When you face a roadblock, you face two choices and one imperative;
Don’t be afraid to take a step back. If a particular property isn’t working out, you may have to let it go as a flip rather than hold onto it. Be aware of all the available exit strategies on your properties, and use them as needed.
Don’t be afraid to slow down. As frustrating as it might be, you may have to enter a holding pattern before you can land your next deal. If your existing properties are holding value, and are cash-flowing, but the market is going crazy, and you can’t seem to get your hands on the next deal, take a break and avoid taking too much risk.
Never stop putting one foot in front of the other. Even if you take a step back or slow down, you need to continue moving forward. Never stop researching the market, accumulating capital for the next deal, improving returns on your current properties, and learning your craft. Roadblocks can slow us down, but they should never bring us to a complete stop!