If you’re interested in UK property investing, you may have heard the term “BRR” being used. It’s an acronym that stands for Buy, Refurbish, and Refinance, and BRR is a popular investment strategy used by property investors to build wealth in the UK.
In this article, we’ll take a closer look at what BRR means, how it works, and some of the benefits and drawbacks of this investment strategy.
What is BRR?
BRR stands for Buy, Refurbish, and Refinance. It’s an investment strategy used by property investors in the UK to purchase properties that need renovation, renovate them to increase their value, and then refinance them to release equity or generate cash flow.
The basic idea behind the BRR strategy is that an investor purchases a property that is undervalued due to its poor condition or outdated features, completes a refurbishment to increase its value, and then refinances it with a mortgage that is based on the new, higher value of the property.
The BRR strategy can be used to generate cash flow by renting out the property, or to release equity that can be used to invest in additional properties or other investments. Here at Aventine Property, we offer deal sourcing services-from initial research to property completion.
How does BRR work?
The BRR strategy involves three main steps: buying a property, refurbishing it, and then refinancing it.
- Buy: The first step in BRR is to identify a property that is undervalued due to its condition or other factors. This may involve searching for properties that are being sold at below market value, such as distressed properties or properties that have been on the market for a long time.
- Refurbish: Once the property has been purchased, the next step of BRR is to refurbish it. This may involve a variety of improvements, such as updating the kitchen and bathroom, adding new flooring or lighting, or even making structural changes to the property.
- Refinance: Once the refurbishment is complete, the property can be refinanced based on its new, higher value. This can provide an opportunity to release equity, generate cash flow through renting the property, or use the funds to invest in additional properties or other investments.
Benefits of BRR
There are several benefits to using the BRR strategy in the UK property market:
- Increased potential for profit: By buying undervalued properties and adding value through refurbishment, investors can potentially generate a higher return on investment than if they simply purchased properties at market value.
- Access to financing: Refinancing the property based on its new value can provide access to financing that may not have been available if the property was purchased at market value.
- Diversification: Using the BRR strategy can allow investors to diversify their property portfolio by investing in properties that may not have been affordable at market value.
- Control over property value: By adding value through refurbishment, investors have more control over the value of their properties, as opposed to simply buying at market value and hoping for appreciation. Further explanation of BRR method explains here.
Drawbacks of BRR
While the BRR strategy can be a successful investment strategy for UK property investors, there are also some potential drawbacks of BRR to consider:
- Risk: Any investment strategy that involves BRR purchasing and renovating properties carries a level of risk. Unexpected costs or delays during the refurbishment process can impact profitability.
- Lack of liquidity: Refinancing a property can take time and may not always be possible, which can limit liquidity.
- Knowledge and expertise: Successfully executing the BRR strategy requires a certain level of knowledge and expertise in the property market, construction, and financing.
- Market conditions: The success of the BRR strategy is heavily dependent on market conditions, including property values and financing availability.