- Palak Shah, real-estate investor and former mechanical engineer, knew it was time to quit her job when a request for more flexibility at work was denied.
- She found real estate fascinating and approached the subject as a student.
- Today, Shah has 26 units and a portfolio that generates $1 million in annual revenue. And she built the enterprise in just three years.
- She says her strategy is simple and repeatable, and “supercharges” her deals with leverage and hard money lenders.
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Palak Shah, real-estate investor and former mechanical engineer, spent 17 years in the hustle and bustle of corporate America before she decided to throw in the towel.
“I had two kids within a span of two years,” she said on the “BiggerPockets Podcast.” “And then I went to my boss and I said: ‘I need some flexibility. I’ve worked for a long time in this business and in this company, and you know my reputation. I just need a few days working from home or something.'”
The request Shah made was not well-received. In fact, it was promptly denied.
That was the last straw. She quit.
“I quit my job 3 years ago. I built a $4 million real-estate portfolio — this year our revenue is about $1 million,” she said. “It’s been an amazing journey.”
How she did it: BRRRR
“I approached real estate like a student,” she said. “We do ‘BRRRR’ deals. That’s what I work on.”
For the uninitiated, “BRRRR” is an acronym for buy, rehab, rent, refinance, repeat. It’s a strategy that’s been extremely effective for Shah thus far.
The goal of the approach is simple: Find a distressed property, purchase it, rent it, get a new loan that covers the initial loan and repairs (refinance), and do it over and over. This way, Shah says you’re left with a portfolio that generates a good amount of cash, but at the same time, doesn’t leave cash in the deal.
What’s unique about Shah’s approach is she “supercharges” the BRRRR methodology by leveraging the initial funds and using hard money lenders — short-term, non-traditional lenders that charge higher interest rates.
Here’s a template she adheres to for a single family home BRRRR strategy.
(B) Purchase Price: $50,000-$80,000
(R) Construction: $30,000-$55,000
(R) Rent: $1,300-$1,600
(R) Refinance: $160,000-$180,000 appraisal
(R) Repeat
Today, Shah has 26 units, comprised of single family residences and multifamily units — and she’s used this template “again and again.” She says this system makes her strategy scalable and repeatable.
A 9-to-5 salary in one deal
As Shah’s real estate journey continued, she nailed a deal that covered almost all of her old engineering salary.
“If I really look at it, just that one deal covered a huge chunk of my 9-to-5 salary that I was making,” she said. “It’s insane to just compare that and realize what a fog I was living in before doing this.”
It all started when Shah stumbled upon three adjacent triplexes while scouring Redfin for deals.
The triplexes were on sale for $207,000 each, for a total of $621,000.
Upon further inspection, Shah found a wide range of issues with the properties. But she built the rehabbing costs — roofing, heating, and former tenant alterations — into her analysis.
Shah scooped up the properties for $125,000 each. It came out to $375,000 — or $246,000 below asking.
After the issues with the properties were corrected, the updated units appraised for around $100,000. All in, Shah paid $375,000 for the units, invested $250,000 in repairs, and paid about $50,000 in holding costs and interest. Shah brought $160,000 to the table from a home equity loan on her primary residence.
The rents are from the properties total about $12,000 per month, netting Shah $3,500 when all is said and done.
If she decides to refinance, Shah can pull out about $800,000 (80% of the property’s value) and more than cover all of her costs.
“I think the biggest thing is to have a strategy,” she concluded. “I think the real-estate investors that are successful decide something and go with it.”
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