In a recent video, I head to Coventry to visit one of my student’s (Hannah Boden) Buy Refurbish Refinance Rent (BRRR) project. Hannah only ended up leaving £15,000 in the deal after a total refurbishment. She will also get roughly £1000 per month in clean profit for renting it out as serviced accommodation. Watch the full video (above) to see how she did it!
A lot of people ask me about how to find good BRRR deals. A lot of different factors go into finding and assessing a BRRR deal and before going forward with a project, you should make sure you get the correct training. However, a good rule of thumb is that unmortgageable properties often make great Buy Refurbish Refinance Rent projects. In this article, I will give you 3 benefits of buying unmortgageable properties.
1. Limited competition
When a property is in such a state of disrepair that it isn’t habitable, it is not possible to get a mortgage on the property. This limits the amount of people able to buy the property. First time buyers and amateur landlords are likely to avoid the property. This means that there is limited competition for these properties even when the rest of the market is booming.
Limited competition means that you are likely to get a better price for these properties. This means that in many cases they are perfect for a BRRR project. Of course, you still need to know what you are doing, as you will have competition from other clued up investors that are ready to act fast for the right property.
2. Stamp duty saving
If a property is uninhabitable, you don’t need to pay the residential rate of stamp duty. There are many things that make a property uninhabitable and not all of them are very hard to fix. Anything from having no kitchen to not having a hot water system can qualify depending on the specifics. This can be a huge saving when purchasing a property.
Of course, this isn’t straightforward and you should seek independent professional advice about your specific circumstances. Make sure to speak to a legal advisor familiar with this exact area, and ask them to talk you through the Bewley v HMRC (2019) decision and its implications.
3. Competition incorrectly estimate costs
If any of the aforementioned first time buyers and amateur landlords are able to pay cash, or are able to access bridging loans, they will likely incorrectly estimate the cost of fixing up such properties. In Hannah’s case, highlighted in the video above, she was able to do the entire refurbishment for £60,000, but many amateurs could easily think that it would cost that much to deal with the structural issues alone!
It is important to have a power team around you that can estimate jobs properly and to get the correct training, so you have a good idea of what things will cost yourself. If you want to start your BRRR journey, why not book a £1 ticket to the Property Millionaire Intensive? I hope to meet you there!