What is Buy Refurbish Refinance Strategy?

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The BRR or Buy, Refurbish, Refinance strategy has become one of the most sought-after techniques among property investors who want to build a large portfolio. It not only helps them expedite the growth of your property portfolio but you can pull out some or all of your actual investments as well. If you too are a property investor and have got the determination to build an enviable portfolio, continue reading as we are going to take a detailed look at the Buy, Refurbish, Refinance strategy.

The Buy, Refurbish, Refinance strategy

This strategy involves three simple steps – you buy a property at a negotiated price, add value to it through refurbishment, and apply for refinancing to take your initial investment, rent out the property and repeat. But to make the most out of it, you need to apply your judgment and invest some serious efforts.

First, you purchase a property to which you can actually add value by refurbishment. Here, realistic judgments need to be made on the amount of refurbishment you can genuinely do and how much money you can spend on that work. You also need to figure out the potential increased value of the property after the refurbishment is completed. Be sure not to invest more time and money than you’ll be able to regain.

The next step is to have the property revalued by a surveyor to know its new value. You should understand that the refurbishment of a property to increase its value doesn’t necessarily need to involve a lot of work. Minor works such as including a new kitchen or bathroom or replacing the windows or just giving a fresh coat of paint can increase a property’s value dramatically. Since the success of this strategy depends on how much significant value is added to a property and its refinancing, you must provide the surveyor with everything you can, related to the refurbishment. These essentially include a schedule of works, before and after pictures, and before and after comparisons. The key objective of this step is to get the accurate new value of the property.

The third and final step is to refinance according to the new value. It’ll help you pull out the initial funds and refurbishment costs, and reinvest that money in purchasing your next property.

The BRR strategy – A simple example

Assume the purchase price of your chosen property is £80,000. And you’ve managed to negotiate a 75% mortgage, which means you’ll be getting £60,000 from the lender.

Now, you’d need to make up the  25% of the purchase price which is £20,000. You’d also need to bear the purchase costs (£5,000 for example) and say, a refurbishment cost of £5,000.

So, your total investment (25% of the purchase price plus purchase costs plus refurbishment cost) becomes £30,000.

Let’s consider the property, after refurbishment, gets revalued at £125,000 and you still manage to get a 75% mortgage after renegotiation. So, now the amount you’ll receive from your lender is £93,750.

You’ll be left with £33,750 once you’ve repaid the original mortgage. So, through the process, you’ve successfully recouped your actual investment of £30,000 while still having some profit.

You can re-use the recouped amount to purchase another property while receiving a standard rental income from the first one and having your equity in it.

Wrapping up

Though the Buy, Refurbish, Refinance is a highly effective strategy that works almost all the time, there’s a downside to it as well. For example, when mortgage finance is restricted or property prices are going down, you may not be able to refinance, which might make this strategy an unsuccessful one. To avoid this situation, it’s extremely important to understand the local market, where you are going to buy the property, thoroughly. You also need to have an effective plan B and a substantial contingency fund to handle any unexpected eventualities.

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Reserving Your Property

What Are The Steps?

1. One of our dedicated consultants will contact you to discuss your new property purchase and answer any questions you may have.

2. We send you our Non-Disclosure & Non-Circumvent Agreement and Finders Fee Agreement for you to sign. These standard agreements protect all parties involved from disclosing confidential information about the vendors and the deal or contacting them directly.

3. You Pay your Finders Fee. We understand that you may feel uncomfortable paying your Fee at this stage, but this Fee is fully refundable and gives you exclusivity to the deal so that no other buyer can access it.

4. We arrange for you to go and view the property. We believe it is important that you or your representative view the property you are about to purchase to make sure that it is the right fit. We ask that you make yourself available to view the property promptly as most of the vendors are looking for a quick sale and require speed and certainty.

5. After viewing the property, we will discuss your feedback. You decide whether you wish to proceed with the purchase/ rental.

6. If you wish to proceed, that’s fantastic. We will send you a Purchase Agreement and request some basic information: Full name and address of the buyer, proof of I.D, address, and solicitor details etc.

7. If you do not wish to proceed, that’s ok too. We will refund 100% of your Finders Fee. You email [email protected], and we will ensure a full refund within 48 hours of your email.

Sourcers Info

1. Upload Your Property to our Portal

After you have created your User Account, you can proceed to upload your property deals.

2. Assessing your deal

One of our Support Team will review and assess your property and will call you to finalise the details if required.

For us to assess and publish  your property, you will need to upload:

Full Address
Pictures of the property
Videos if available
Comparables of similar properties sold in the area and for sale
Rental comparables

If we are happy with everything, we will publish your property live on our site for waiting buyers to access.

3. Prospective Buyer

As soon as your listing is live, our buyers will be able to view the property details and contact us to reserve your property. Our Support Team will speak with the buyer to formally reserve the property and arrange a viewing. We will liaise with you to fix the most convenient time with the vendor for viewing.  There is a better prospect of agreeing on a sale if the buyer views the property quickly, so we ask that you are flexible & prompt with the viewing arrangements.  

4. Completing Your Sale

Once the buyer has agreed to purchase your property, our team will manage the process until completion. We are available to assist with all matters to get the deal closed as quickly as possible. 

We are available by email: [email protected]

We are transparent about our fees, and we split the Finders Fee on a 50/50 basis on properties sold.