Categories: Podcast

249 – Our $300K BRRRR Project, Long Term Airbnbs, and Moving to Texas! With Sharon Tseung

Synopsis

Today’s episode is special because our guest is Sean’s fiancé, Sharon Tseung. In 2016, Sharon quit her job and traveled the world to become a digital nomad while building passive income streams. She is currently active on TikTok, Instagram, and YouTube, where she discusses side hustles and investing in personal finance to help more people achieve financial freedom.

Join us in this episode as Sharon and Sean provide a glimpse into their personal lives and how they manage their real estate investments.

Key points

BRRRR Strategy

BRRRR stands for Buy, Rehab, Rent, Refinance, and Repeat. It’s a strategy to earn some money out of a house you’re buying and then use that money to invest in other projects.

According to Sharon, as an example of how this strategy works, they have acquired a home for $120,000 and are now working on it. After they finish remodeling it, they’ll rent it out and then refinance it after six months to use the money for other projects.

Sean and Sharon shared that the entire process wasn’t easy. Initially, the wholesaler told them that the renovation process would cost no more than $75,000, but when they started getting quotations for more than that amount, they wondered whether the purchase was a good one. When they first saw the property in pictures, it was a disaster, and they even contacted some individuals to seek assistance with mold treatment. Still, even with all of the required modifications, they were confident that it would work out. The property has now been renovated and remediated, with an After Repair Value (ARV) of $300,000 or more, proving that it was a worthy undertaking. According to Sean and Sharon, they hope to rent it out by mid-December and refinance it by March.

Is there a reason to wait until March to refinance the property? Well, if they refinance the property right now, the bank would value the property based on the purchase price of $120,000, not the value after remodeling. The bank recommended that they wait six months after purchasing the property before requesting a new appraisal.

Airbnb Project

Sean explained that they have always planned to move to Texas because there are more opportunities there, but they didn’t want to sell his house in the bay area since he grew up there and was attached to it.

If you do traditional rentals in the bay area, the numbers usually don’t work because of the 1% rule. This rule states that the rent price should be 1% of the purchase price. A million-dollar house should be rented for $10,000 a month, according to this rule, but properties in the area don’t rent for $10,000 a month unless you’re in Palo Alto. This is where Airbnb comes into play.

If you can rent out your property for a shorter period on Airbnb, you could get more significant gains. In Sean and Sharon’s case, they’re renting out the property for more than 30 days because of city regulations, which they encourage property owners to be aware of. They plan to use their earnings from Airbnb to pay for their mortgages.

The downside of 30-day rentals is that you can have blank spots since some people have preferred dates that may not correspond with your property’s availability. For example, suppose someone wants to book in January, and another wants to book in mid-February to mid-March. In that case, you can’t have guests during the first week of February because if guests arrive in the first week, they’ll have to leave by the end of the following week since other guests will be moving in.

Moving to Texas

Sean and Sharon believe that relocating to Texas will provide them with several benefits. When they returned home from their moldy house project, they thought of moving there since they had already attended many meetups and met a lot of different investors and contractors—people with whom they may form partnerships.

Recently they bought a $280,000-property in escrow. They plan to move out in the next year or two and then either Airbnb it or rent it out in the long term. They said they are excited about what Dallas might offer them in the real estate business, with new people to network with and new assets to explore.