SPECIAL: How does BRRR work?

The BRRR property tactic (Buy, Refurbish, Rent, Refinance) is a popular approach among property entrepreneurs looking to maximise returns with minimal upfront capital. This method is particularly appealing to those interested in building a portfolio quickly and efficiently by recycling their initial funds.

Step 1 Buy: Purchase a property, often one that needs refurbishment or is undervalued. The aim is to buy below market value, ensuring there’s room for significant capital appreciation after improvements are made.

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Step 2 Refurbish: The next step is to refurbish the property to increase its value. This might involve anything from cosmetic updates like painting and new flooring to more extensive renovations such as replacing kitchens, bathrooms, or even structural work. The goal is to add enough value to make the property worth considerably more than the purchase price and renovation costs combined. Certain things will probably add value (better kitchens, bathrooms, paint and carpets etc), whilst certain things won’t add alot of “bang for your buck” – for example fixing a roof. Why? Because people expect to have things like functioning roofs and floors! They don’t really pay extra for having it. But this could be used to secure a discount when buying. As a rule of thumb, aim for adding £3 in perceived value for every £1 you spend on refurbishment.

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Step 3 Rent: Once the refurbishment is complete, the property is rented out to generate cash flow. By renting the property, investors start receiving a regular income, which helps cover mortgage payments and other expenses – as well as start to make back the original investment.

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Step 4 Refinance: After the property is rented, investors can refinance based on the property’s new, higher value. This allows them to pull out much of their initial investment (often up to 75% of the property’s new value) and use it to repeat the process on another property.

Considerations. This tactic offers several advantages. It enables investors to grow their portfolios without constantly needing new capital. By refinancing, they can recycle their initial investment and keep building. Additionally, the tactic creates long-term rental income, provides potential capital gains and builds equity with each successful deal. However, finding suitable properties and securing them at the right price can be very time-consuming – and everything rests on the ability to carry out the work on-time and on-budget – never-mind assessing those budgets in the first place. The time aspect is particularly important, as you’ll likely be on an (expensive) bridging loan during the project, which can take 6 to 9 months generally-speaking. All that makes this property tactic easier said than done.

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What do M2P do? Married2Property aims to create social good through by property – by housing more vulnerable groups of people – giving them a stable platform from which to try and improve their lot in life. We also offer Landlords competitive and hassle-free solutions for their property problems.