We realize for many it is hard to believe they will ever own a home, never mind more than one! Especially if you live in an expensive real estate market like we do. If you’ve read our About Us Page, you know that we purchased 2 houses in 3 years – and still own both. We want to share more about how we did this so you too can start building your own real estate empire.
The start of our real estate empire
When we decided that we wanted to own our home, we weren’t sure what we were looking for. As our searched progressed, we realized we wanted control of our property and to not have to deal with Stratas. Eventually, we found our first house. It wasn’t exactly the neighbourhood we thought we would buy in (but since have grown to love the area and bought our second house fairly close by). Regardless, the house had room for us to live upstairs and the basement was perfect for renovating into a large 1 bedroom, self-contained suite. The house itself was also still waiting on probate to clear so we were able to negotiate a good price. We said throughout house hunting we weren’t afraid of doing some work – this was our opportunity to put our money where our mouth was.
While it was our goal to own a second house and keep our initial purchase as a rental, we hadn’t actually planned to purchase again so quickly. It was only because the house across the street was for sale and having a viewing. As nosy neighbors, of course we had to check it out! We were surprised at the price the house was listed for, compared to the layout. It was comparable to our upstairs configuration but didn’t have a basement suite – or even room for one. How could it be listed for more than what we had purchased and improved our house for?! The open house was the nudge we unknowingly needed. We decided to find out what our house could be worth. Thus, we were unexpectedly on the path to purchasing house number 2.
Purchasing and renovating our second house
To do this, we needed to have our house officially appraised for its value. We could then use the equity to help purchase and renovate our second home. Between the market increasing, updating and adding the basement suite, our home’s equity had increased enough that we could use it for a good portion of a down payment on the second house. After benefiting from adding a rental suite once, we were eager to do it again. Unfortunately, it was a competitive time in the market. We were about to take a break from the hunt when we took just one last look at our real estate search results. That’s when we found it! Our second house needed more work than our first but because we had some experience we felt confident we could handle it. The house was also bigger and we gained more space for ourselves. We were able to add a self-contained, 2 bedroom plus den basement suite which supplements our mortgage payment.
Looking back, we made a few mistakes. First, should have been more in tune with the market. If we were, we would have been ready for this next step, not surprised by it. Another thing we would do differently is not spend quite as much on some of the updating we did. While we were mindful of the standard of the area we were in and didn’t over indulge, we may have saved more if we looked at our houses as rentals, not homes we would be living in long term. In fairness, we did think we would be living in our first house longer before moving. Reflecting, we didn’t truly understand the financial power that updating and adding a basement suite until we had done it. This was one of the reasons we started this blog for you – yes, you!
Build your own real estate empire with the BRRRR strategy, sort of
Little did we know, we were using a version of the BRRRR Strategy:
Buy, Rehab, Rent, Refinance, Repeat.
While many use this strategy to purchase rental properties, we have slowed down the process by living in the upstairs unit while renting out the bottom for a time before moving on. As we are not full-time real estate investors (yet?), 3 years was the right time for us between purchases and renovations. Using this strategy, you can accumulate a real estate empire relatively quickly without having to save for a full down payment on each property. Obviously, this is something to speak with your mortgage broker about.
To get to the stage we are at, we have had to make some trade-offs along the way. These include:
-putting in a lot of our own time (sweat equity)
-living in older homes
-having 1 bathroom
-sharing laundry with tenants (first house)
-being mindful of tenants living below us
While these are first world problems, they are different from what many would say is their ideal situation when purchasing a house. A lot of people are trying to move out of multi-unit rental situations and into their ideal living space. We still aren’t necessarily in our forever home and we are OK with that because of the position it has put us in.
Where we are at right now
We are now in a position that it’s cheaper for us to own than rent. In time, we will gain more cash flow from our properties. In fact, in less than 15 years, we will be able to replace about half of our current income. That is unless purchase a third property and do it all again. Some of you may be thinking that 15 years is a long time. To put it in perspective, we won’t be 50 and will be generating about half of our current income. What would you do with 50% more income?
Of course, we will need to invest some of our earnings back into the properties for upkeep and maintenance. If we stay on top of this, hopefully we won’t have any unexpected repairs. We should also mention that we have had amazing tenants and haven’t had any horror stories (knock on wood). Obviously, our goal is to always have great, respectful renters. Granted, we are early in building our real estate empire and rental experience. We’re still learning and look forward to sharing more with you!
How big do you want your real estate empire to be? Let us know in the comments!
Denise and Sean