47% Capital Gain on Acquisition: BRRR is about the B, Not the R
Friday 28th February 2025
Buy, Refurbish, Refinance and Rent (BRRR)
As a continuation of yesterday’s post, Buy, Refurbish, Refinance, and Rent (BRRR) is a popular investment strategy for many who aspire to build a sustainable portfolio with a finite pot of cash.
I see many offers on the internet from agents to investors which are being sold via the traditional high street method, which now includes Rightmove, Zoopla et al. The risk increases substantially if you do not get the Buy (B) right. If you do, it’s like a 100m race and you’ve been given a 50m start, or a boxing match between a heavyweight and lightweight. If you are buying well, which in most cases is by auction or genuine (not marketing ploys) off-market, you are more than halfway there.
The example here is a THREE bed terrace, underented, in a road where TWO beds were on the market for £110,000 and £125,000. It’s a long story, but we secured it prior to the auction for £75,000 after our first offer was rejected. There’s a whole seminar or book about the psychology of sellers at auction and this acquisition is a classic case study.
The valuation for mortgage purposes was very conservative, at 47% higher than the purchase price just six months earlier. No works were undertaken at the property; instead, the rent is collected and placed in a pot to forcefully appreciate the value when the time comes.
This is what the aspiring BRRR investor should be targeting. If you buy well, substantially below market value at auction (knowing what you are doing), then the world is your oyster.
Be very sceptical of many of the ‘deals’ being pushed on the internet. A £3,000-£6,000 sourcing fee may be costly indeed, in terms of ‘opportunity cost.’
As ever, buy wholesale distressed assets, not retail.
