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Buy Refurbish Refinance Rent (BRRR) is an increasingly popular property investment strategy designed to maximise returns while rapidly growing a property portfolio. Investors begin by purchasing an undervalued or distressed property with the aim of enhancing its value through refurbishment. Once the property is refurbished and its value has increased, the investor refinances the property, typically at a higher loan-to-value ratio, enabling the release of additional equity. This equity is then reinvested into another property while the refurbished one is rented out to generate a consistent income stream. The BRRR strategy allows investors to recycle their capital, increasing portfolio size and rental yield efficiently.
The Buy Refurbish Refinance Rent (BRRR) strategy is flexible and can be applied to a wide range of property types. Most commonly, investors focus on residential properties that are undervalued or in need of refurbishment. These may include distressed properties, auction purchases, or older homes that require modernisation. Additionally, multi-unit properties such as blocks of flats can be suitable, especially if refurbishment can significantly enhance rental value. Investors may also target houses in multiple occupation (HMOs) or properties with development potential, where refurbishment can unlock further rental income or increased value. Each property’s potential for refinancing is based on its post-refurbishment market value.
Accurate property valuation is a critical factor in the success of the Buy Refurbish Refinance Rent (BRRR) strategy. After the refurbishment stage, the property’s increased value determines the amount of refinancing available. A higher post-refurbishment valuation allows for more equity to be released, which can be reinvested into further properties, accelerating portfolio growth. The better the valuation, the greater the potential for refinancing at a higher loan-to-value (LTV) ratio.
Lenders typically base their refinancing decisions on the property’s new market value post-refurbishment, so it’s essential to conduct thorough market research before purchasing. Understanding the local property market trends and ensuring that refurbishment work is done to a high standard can significantly impact the final valuation and, ultimately, the overall success of the BRRR strategy.
| Description | Details |
|---|---|
| Property | Client acquired a 3-bedroom semi-detached house from an elderly couple in need of refurbishment/modernisation. |
| Market Value | £150,000 |
| Property Cost | £140,000 - Discount agreed with a 28-day completion using a bridging/refurbishment loan. |
| Works cost | £20,000 |
| Value Post Works | £220,000 |
| EXAMPLE |
|---|
| Buy |
|
| Refurbish |
|
| Refinance |
|
| Rent |
|
It depends on the level of work involved. If the works are very minor some lenders may take a view, but these properties are not the properties you can add value to; therefore, tend not to work for a BRRR strategy as you cannot recoup your initial deposit.
Most lenders require the property to be in a lettable condition, which is a higher standard than a livable condition. The vast majority of BRRR properties are in a poor state and therefore the only financing option is a bridging loan, which benefits clients because they have no early repayment charges.
Each case and property is unique, so the best course is to discuss the property and project numbers with an adviser to see if it works with the BRRR strategy.
Buy Refurbish Refinance Rent allows investors with limited cash funds to recycle their cash deposits by adding value to a property, therefore not relying just on the valuation of the property going up in value before they can refinance to raise funds for their next purchase.
Waiting for properties to increase in value can take 3-5 years, but using the BRRR strategy, the value can increase in 6 months and funds can then be extracted for the next deal.
Advantages of BRRR | Disadvantages of BRRR |
Increased Capital Recycling: One of the main advantages of BRRR is the ability to recycle your capital. By refinancing after refurbishing, investors can release equity from the property, which can be reinvested into new purchases without the need to raise additional funds. | Initial Capital Required: Although the BRRR strategy allows for recycling capital, it requires a significant amount of upfront cash for the purchase and refurbishment of the property. This can limit entry for some investors. |
Higher Returns on Investment: Refurbishing a property increases its market value and rental yield. This allows investors to charge higher rents, improving the return on investment compared to buying a property in a ready-to-rent state. | Refinancing Uncertainty: The ability to refinance depends on the post-refurbishment valuation of the property. If the property does not increase in value as expected or market conditions change, it may be difficult to release the necessary equity. |
Potential for Capital Growth: The flexibility to convert commercial spaces to residential units under permitted development rights can increase the property’s value. Investors can leverage these opportunities to maximise capital growth over time. | Time-Consuming: The process of refurbishing and refinancing can be lengthy and complex, especially if the refurbishment requires extensive work. This may delay returns and tie up capital longer than anticipated. |
Portfolio Expansion: The BRRR strategy allows investors to scale their portfolios more rapidly than traditional buy-to-let. By continuously extracting equity and reinvesting, you can acquire multiple properties over time, creating a diversified and income-generating portfolio. | Market Risks: The BRRR strategy is sensitive to changes in the property market. If the market downturns or property values fall, it may reduce the potential for refinancing and limit profitability. |
| Flexibility in Financing: The strategy offers flexibility in financing options. Investors can use a combination of short-term bridging loans and long-term refinancing products, which can be tailored to the specific project and financial goals. |
For the initial purchase, you will typically need a 15-25% deposit for the bridging loan, which can come from your own cash sources or a private investor. The lender will require this deposit to minimise their risk.
We have several lenders that can lend 85% for light refurbishment projects. For larger projects such as a heavy refurbishment, you will need a deposit of 25% initially, but the lender can then provide 100% of the funding for the works.
Alternatively, we have arranged deals with 100% finance on the purchase, where the client could offer additional security over another property where there was enough equity to give the lender comfort to go to 100% of the purchase price. This area can get complicated so it is best to discuss on a case-by-case basis.
If you believe the property investor trainers; you can pull out or recycle all of your money and repeat, repeat, repeat forever.
These trainers are selling you a course that can cost thousands of pounds and they want to make it sound as easy as it can be!
However, we have seen cases we’ve refinanced, where the client has managed to recycle all of their deposit for the next deal, but this is only possible if your initial purchase price is a good one. You can then add significant value to the property through the renovation.
It is possible and we have seen these deals, but it’s not easy; like all vocations in life “Hard work pays off!”
Buy it right – It is extremely hard to add value to a property if the initial purchase price was high. There is a great quote from Sir Alan Sugar “The profit is in the purchasing”.
In a hot property market, it’s difficult to buy below market value; but for unmodernised, run-down properties, the market for a cash 4-week purchase (using bridging finance) becomes more achievable to obtain a bargain.
Add value – This is the key. The works undertaken must be of high quality and to such a level that the finished property’s value has increased to allow the funds you have invested to be recycled.
Deliver on time and to budget – If the project takes more time the bridging loan costs increase, and any cost that overrun dilute the increased value you are seeking to achieve.
We have financed properties where we didn’t recognise the finished property from the original we financed at the start. The WOW factor had been achieved, more space had been added, the project was delivered on time & to budget and the result was a large increase in value for the client.
We do see real-life cases we have refinanced, where the client has managed to recycle all of their deposit for the next deal, but it is not easy and like any career involves hard work and dedication.
From a loan application process perspective, we are able to obtain a credit decision for a BRRR loan within a few hours. This will assist you to secure the property.
The whole purchase can be completed within 4 weeks. We ask clients to keep in contact with us as the renovation is carried out, so we can start the application for the buy-to-let mortgage in plenty of time and get the bridging loan repaid at the earliest possible time.
An investment carries some element of risk but if correctly carried out, then this strategy has proven to be very profitable for property investors. The key success factors are:
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Our expert team of mortgage brokers are here to guide you through every stage of the process.
Important Information
ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
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