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.
     
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