In my latest short video clip on YouTube, I take a look at a house in Barnsley bought with the Buy Refurbish Refinance Rent (BRRR) strategy. The house was bought for £66K, the refurbishment was £12k and the end value is £120k. This allows the owner to pull his money back out via refinancing and rent the property for £1500 per month. BRRR is such an awesome strategy and means of building wealth and I am always impressed to see how people are using it.
Applying the BRRR strategy has helped build portfolios for many of my students starting with relatively small pots of money or investor financing. It is something that I think all property investors should understand and consider as part of their business strategy. In this article, we will take a look at the 3 things you need to get your first BRRR deal.
1. The Money
To do a BRRR deal you are going to need some money. You will be looking to buy rundown properties for cash and then refurbishing them to bring them up to market value. You can buy the entire property for cash or you can use a mix of bridging finance and cash. Bridging finance is a short term loan that you can use to buy a property before you move the property on to a mortgage post refurbishment. You can also use bridging finance for the refurbishment itself. It is important to fully understand the fees and interest involved in using bridging finance and to calculate them into your costs.
If you don’t have your own pot of cash to get you started, you can work with an investor. This could be a family member, a friend or someone you meet at a property event or training course. You will need to show them what skills you bring to the table whether that be building experience or the property training you have received. You may need to take a smaller profit split on your first deal just to prove yourself and gain a case study.
2. The House
You will need a house that is run down and is being sold well below the asking price for comparable properties in the area. Ideally the property will be unmortgageable; this could be because it doesn’t have a kitchen or a bathroom for example. This means that most retail buyers will not be able to buy the property and therefore there will be limited competition.
You will need to understand the types of problems the house has and the approximate cost of fixing them. This will come with experience and training. The costs and the necessary repairs can be confirmed further down the line with builder's quotes and eventually surveys.
3. The Calculations
You need to be able to calculate the costs of doing the refurbishment and the cost of buying the property. You also need to be able to calculate what the end value of the property will be. You can normally get a buy-to-let mortgage for 75% of the end value. If 75% of the end value is more than you will have to pay for the purchase and refurbishment, you can pull all the money you put in out. Next you will need to calculate what you can rent the property out for, and after the mortgage payments and other costs, what the net profit will be.
If you would like to learn how to do all this, why not book a free ticket to the next Property Millionaire Intensive? You can book your ticket here. It’s all about BRRR; if you are serious about property you need to know about this strategy. Who knows, you might even meet your next joint venture partner there!