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(BRRR) Buy Refurbish Refinance Rent
Loans & Mortgages

Buy Refurbish Refinance Rent loans & mortgages explained:
The property investment strategy to Buy Refurbish Refinance Rent (BRRR), is probably the number 1 property approach undertaken by investors to create a profitable property business and recycle funds to create deposits for future deals.

Also referred to as the Buy Refurbish Rent (BRR) and the Buy Refurbish Refinance Rent Repeat (BRRRR) strategy. All three terms and abbreviations refer to the same strategy. The financing forms two parts:

Step 1

Bridging / Refurbishment / Conversion loan – To acquire and carry out the works

Step 2

Mortgages – Refinance onto a long-term BTL mortgage to repay the loan and release funds back to the customer so as little capital is left in the property to maximise Return on Investment (ROI)

What properties can be financed for BRRR?
Any property; residential, commercial or mixed-use in any condition. Derelict, unmodernised or empty properties tend to work best as they give the most significant opportunity to add value and recycle more of the initial deposit.

Key Features: BRRR Loans & Mortgages
  • Typical interest bridging rates and fees – Call our advisers
  • Typical interest mortgages rates and fees – Call our advisers
  • Loans from £100,000 to £50 million; subject to affordability and credit criteria
  • Mortgages from £100,000 to £50 million; subject to affordability and credit criteria
  • Loan to values up to 85% for light refurbishments (100% with cross charges)
  • Loan to value up to 75% (+100% works) for Heavy refurbishments and Property Conversions
  • Loan Terms: 1 to 24 months / Mortgage Terms: 1 to 30 years
  • No previous experience is required but preferred on large, more complex projects (or the appointment of a project manager)
  • Payments: interest only / capital repayment / part capital / interest compounded / rolled or retained (no monthly payments)
  • Purchase / Refinancing / Capital Raising (any purpose)
  • No minimum outside income / All income types
  • No max of number of rooms / units
  • All credit histories: High Net Worth to Credit Repair
  • All applicant types: Individuals / Corporate (Ltd Co’s) / SSAS etc
  • All tenures: Freehold / Leasehold (no minimum term)
  • EPC-enhanced products available

What is the BRRR Strategy?

  • Buy – A run-down/unmodernised property is purchased, preferably at below market value (BMV) using bridging finance.
  • Refurbish – Value is added to the property by modernising, obtaining & implementing planning or permitted development rights. The works can be a light refurbishment, which is a quick project, or a heavy refurbishment which involves extensions/conversions. The key requirement is to add value to the property.
  • Refinance – The short-term bridging loan is refinanced onto a long-term buy-to-let mortgage at a lower interest rate for typically 25 years. The buy-to-let mortgage is based on the increased value after works are completed and at a typical 75% loan-to-value.
    Therefore, sufficient funds are available to repay the bridging loan, the interest, the acquisition costs & the costs of the works; generating a deposit for the next project.
  • Rent – The property is rented out to produce cash flow to the buy-to-let mortgage and a profit for the investor.
  • Repeat – Refinancing is used to do it all over again, in order to grow the property portfolio and generate a larger monthly cash flow.

An Example of the BRRR Strategy

Property
Market Value
Property Cost
Works Cost
Value Post Works

Client acquired a 3-bedroom semi-detached house from an elderly couple in need of refurbishment/modernisation.
£150,000.
£140,000 – Discount agreed with a 28-day completion using a bridging/refurbishment loan.
£20,000.
£220,000.

Buy

Refurbish

Refinance

Rent

  • Property = £140,000
    Stamp Duty = £4,200
    Legal Costs = £1,200
    Total = £145,400
  • 85% LTV Bridging Loan = £119,000
  • Deposit = £21,000
  • Total Costs Upfront = £26,400 (Deposit, Stamp Duty & Legal Costs)
  • Works included a new bathroom, kitchen, flooring, general decorating & works to raise the EPC to a C rating.
    Total = £20,000
  • Works completed within 20 working days
  • Property value after works = £220,000
  • Refinance onto a 75% LTV BTL mortgage = £165,000
  • Bridging loan to be settled = £119,000
  • BTL mortgage £165,000 – Bridging loan £119,000 = Capital Raise amount of £46,000 to be used towards the next project
  • Rent from tenant = £1,200 per month
  • BTL mortgage payment = £700 per month
  • Rent £1,200 – Mortgage £700 = Net Profit of £500 per month

Can I use a Buy-to-Let (BTL) mortgage for Buy Refurbish Refinance Rent (BRRR) or is the only option a Bridging loan?

It depends on the level of works 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 liveable condition. The vast majority of BRRR properties are in a poor condition 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.

How are the returns compared with a conventional Buy-to-Let (BTL) investment?

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.

FAQs

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:

  1. Buy a bargain – These properties usually don’t attract many buyers because of their conditions, so make an offer below the market value and say you can complete in 4 weeks.
  2. Add value in the refurbishment process and get a good contractor to carry out the work.
  3. Use a broker/adviser that knows the process inside & out, to make sure you can refinance as soon as the property is finished.

Our advisers offer a free consultation, so please give us a call or use the “Get in Touch With Us” form at the end of this page

Advantages of the BRRR Strategy

  • If done correctly, the BRRR strategy has proven time and time again to work for investors.
  • We have worked on projects where clients have refinanced and managed to pull out their entire investment effectively, achieving 100% financing based on the purchase price and cost of work. This resulted in an infinite return on investment for the investor.

Disadvantages of the BRRR Strategy

  • If you don’t buy a property at a competitive price initially, then the strategy tends to fail from day 1. It is hard to add significant value to a property if the initial purchase price is high. There is a saying, “the profit is in the buying, not the selling”
  • Control your refurbishment costs. Consider a fixed-price contract with the contractor, because if costs rise during the project, this will mean your ability to refinance and extract your cash reduces.

How can YOU benefit from our advice?

  • If speed is essential to the transaction, our advisers will prioritise your case to ensure deadlines are met.
  • Our Advisers understand the BRRR strategy and have a good deal of experience; what they will do is present the refinance options at the same time as the bridging loan options to purchase the property. This way, you can see the total calculation of costs and how much deposit you are likely to be able to pull out of the project.
  • We offer a FREE assessment and have a no upfront fee policy. Our typical fee for 99% of our clients is capped at £395
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