All Forum Posts by: Jake Baker

@Yael Doron

Consider markets like Mesa, Glendale, Avondale, or Goodyear. These areas tend to have more affordable properties compared to central Phoenix and still offer strong rental demand and appreciation potential.

@Robert Ellis

Are you leveraging construction-to-permanent loans or private funding?

@Sol Romand

Rentals without windows can be challenging. Most building codes and HUD standards require bedrooms to have windows for egress and ventilation. Consider reconfiguring the layout to add windows where possible.

Residential conversions are costly, so working with an experienced architect and contractor specializing in adaptive reuse is critical. They can help you navigate code compliance, especially with accessibility and egress requirements, and provide a clear budget before you begin.

@Adam Aero

I completely agree with @Sofia Komrskova about doing it to code. 

Cost vs. Return:
Finishing the basement and adding bedrooms can add significant value, especially if your local market places a premium on additional living space. That said, weigh the cost of renovations against the potential increase in appraisal. Get an estimate from a GC to get a good idea of what is required.

Market Comparables:
Check what similar-sized homes with finished basements or additional bedrooms are appraising for in your area. An appraiser or local real estate agent can help with this.

@Nate McCarthy

Profit Splits and Contributions:
Dividing profits proportionally to investment (2:1:1) is common, but you could also account for sweat equity if one party is doing more work. For example, you could create a weighted structure where a percentage of profits is based on cash contributions, and another portion compensates for rehab or management efforts.

Rent Payments and Tax-Free Profits:
If you structure it as an owner-occupied property, the rent you pay could be shared proportionally, but tax-free gains on resale may only apply to your share, as you’d be the owner-occupant. A CPA familiar with real estate partnerships could clarify the implications for everyone involved.

A great attorney or CPA can help you iron out the details and ensure the partnership benefits all parties fairly. Best of luck. This sounds like an incredible learning experience!

@Kolby Knickerbocker

Every market has deals. You should invest where you feel you have a competitive advantage. I invested in Jacksonville, FL, because my old job would fly me there multiple times yearly. I learned about the city over time and began my out-of-state investing journey.

Whatever market you choose, be sure to nail down your buy box. This will allow your agents and wholesalers to assist you better. 
- Property type (single-family homes, duplexes, or small multifamily)
- Min/max square footage or number of bedrooms and bathrooms
- Desired cash flow or ROI metrics to ensure profitability
- Property Condition (turnkey, light cosmetic fixes, or heavy rehab)
- Neighborhood type (A/B-class areas for appreciation vs. C-class for cash flow)

I agree with @Evan Polaski that you need to know the market inside and out before you invest. No need to hit a grand slam on your first deal. A single is find if it means less risk. 

@Troy Smith

How to drive ARV (my opinion)
1. Improvements that drive the ARV the most: Roof, New Kitchen & Bathrooms, Flooring, Paint
2. Improvements that DON’T drive the ARV as much: Windows, Landscaping, Driveway, Rough Plumbing & Electrical

I agree with @Jaron Walling about meeting the appraiser at the property and providing documentation. This is critical. I will also have my agent there with me to offer comps to aid in their appraisal if they are receptive to it. 

@Jaedon Stout

BRRRR Strategy - This works well when buying properties below market value and rehabbing them to increase equity. The key is ensuring the after-repair value (ARV) supports refinancing to pay off the initial funding without overextending.

Fix-and-flip - This requires sharp numbers and market knowledge. Your clients should focus on properties with significant equity potential and work with experienced contractors to stay within budget and timeline—especially with borrowed funds on the line.

Avoiding Bad Deals - Encourage them to work with experienced agents, contractors, or mentors and always run multiple scenarios, including worst-case outcomes, to stress-test their numbers.

Reserves - Advise your clients to keep a reserve fund separate from their loan for emergencies, unexpected expenses, or delays.

@Lisa Albright

One thing to consider is your return on equity (ROE). If you have a lot of equity and little cash flow, you should consider accessing that equity to use elsewhere.

Another factor to consider is your interest rate on the debt. Consider a HELOC for value-added BRRRRs or flips if you have a low interest rate. If you already have a high interest rate, consider a cash-out refinance with a fixed rate rather than a HELOC.

A third option could be to sell. Consider the "2 of the last 5 year rule" to avoid capital gains. If the signs point to selling, consult your CPA about the tax implications.

@Thomas Farrell

The BRRRR is alive and well. However, it is not what it used to be. "Perfect BRRRRs" are rare nowadays. That doesn't mean you shouldn't BRRRR. It is a complimentary strategy to pull some of your money back and hedge your bet.

My view on making money in real estate: Cash Flow is a hedge against corrections. Cash flow (in my portfolio as a whole) covers my expenses. Forced Apperception (BRRRR or buying at a discount) is also a hedge against corrections. Forced appreciation allows me to build equity from the beginning of the investment, so if I need to firesale for an unforeseeable reason, I will not be underwater. Market Appreciation is the least predictable, but historically, where you will make the most money.

We still use the BRRRR strategy in Jacksonville, FL. It isn't easy to make things pencil, and I don't see it getting much better over the next 12 months.

I have changed my rental strategy to Co-Living (rent by the room). I don't use padsplit (weekly rentals); I rent on long-term leases in B Class neighborhoods. This plays into the affordability issues for tenants by allowing them to live in nicer neighborhoods for less money, yet I get monthly revenue comparable to short-term rentals.