Advise on My BRR deal in Birmingham

Discussion in 'General Property Investment Discussion' started by AIbz, May 21, 2019.

  1. AIbz

    AIbz New Member

    Good Afternoon All,

    I would like to share a current BRRR (Buy Refurbish Refinance Rent) deal I am closing in on, please let me know if this stacks up.

    3 Bedroom Mid terrace House in Birmingham that requires modernising (no structural work, just new kitchen, bathroom, replaster and decorating. This is a probate sale where the owner has sadly passed away and his three sons selling, Asking Price: £130,000 Negotiated to £117,000 as I am cash buyer and able to proceed quickly and also I think the Brexit uncertainty has reduced the number of buyers recently. Therefore the figures are:

    House price: £117,000

    Stamp Duty and Legals: £4,500

    Renovation Cost: £15,000

    Holding cost for 6 months (Utilities, Council tax, water): £1,500

    Total Invested: £138,000

    Expected Market Value after Renovation: £160,000 (based on 4 properties with: identical layouts, within 1/2 mile radius) I know I will have to convince a RICS valuator.

    Post Renovation Mortgage to 75% LTV, therefore: Mortgage on House: £120,000

    Money left in Deal: £18,000

    Rent: £750 (based on local comparison and estate agent recommendations for the area)

    Mortgage Interest (2.5%rate): £250

    Management fee (10%): £75

    Maintenance and Insurance: £75

    Net Profit (before tax): £350

    ROI = 4200/18000 = 23%

    Capital appreciation has been approx. 4%/yr and hopefully continues in this area of Birmingham, although might slow down for the short term. I am planning to hold on to the house for 20+ years. Please let me know what your thoughts are. This is the first BRR project I am undertaking and hope it goes well.

    Many Thanks
     
  2. Longterminvestor

    Longterminvestor Active Member

    On the surface this looks a very interesting deal. One question, how are you funding the renovations - cash or bridging loan?
     
  3. AIbz

    AIbz New Member

    Hi,

    I will be cash funding this project. Will be happy to have your views on this. I have tried to find properties I can add value to with a decent margin and this is the best I can do at the moment. Cheers.
     
  4. Longterminvestor

    Longterminvestor Active Member

    An initial 15.9% jump in value is good, the gross yield of 5.625% is not exceptional but on the whole it doesnt look too bad.
     
  5. SteveK

    SteveK New Member

    Probates are great for BRRR. They almost always need a refurb having been the family home for decades and probably going untouched for a generation! Couple this with very motivated sellers keen to 'cash-in' their inheritance asap, you have a very good change of picking up a deal! I am always looking for these kind of deals and have developed a strategy to spot them, which yields many results on a daily basis! Happy to discuss further if of interest to anyone?
     
  6. realdeals

    realdeals Active Member

    The deal is self-financing and you still have some income left over. Pulling out your cash after the refurb and refinancing is a wise move as it ensures you still have a pot of cash for the next deal. After 20 years the property will be paid off, will likely have increased in value and you will also have earned some profit as well. Obviously it wont all be plain sailing but I think the deal looks fine.
     
  7. diyhelp

    diyhelp Active Member

    Once you have started your property portfolio you can then look to bring in different risk profiles. Therefore, taking on this relatively conservative property is the best thing to do just now.
     
Loading...

Share This Page