Buy, refurbish, refinance, rent (BRRR) is a strategy used in property investing to pull money back out of a property deal. Rather than leaving in a 25% deposit, as is the case with standard ‘vanilla’ buy-to-let investments, the BRRR strategy allows you to purchase a property below market value, add value to the property, and refinance it at the new market value, pulling some or all of your initial investment back out.
Properties purchased using the BRRR strategy are usually acquired below market value and in need of refurbishment. Once the project is complete and value has been added, the property is mortgaged at the new valuation, your money is pulled out and you rent the property out.
The idea of BRRR is to use your initial investment to fund the deal, and pull it out once the project is complete. And the really great thing about this strategy? If you choose your deals wisely, you can recycle that pot of cash over and over again, pulling your money back out each time.
BRRR buyers often use bridging finance to fund the purchase, repaying the bridging loan once the property is refinanced with a buy-to-let mortgage.
“Rather than a traditional buy-to-let investment where you leave your deposit in, BRRR allows you to pull your money back out of the deal and repeat the process.”
What are the pro’s of BRRR?
One of the perks of using the BRRR, is of course the opportunity to recycle the same ‘pot’ of funds over and over again (so long as the deals are selected carefully, and the numbers and due dilligence are done wisely). By pulling your money back out of the deal each time, you’re able to grow your property portfolio relatively quickly without having to leave your initial investment in.
As we mentioned above, many BRRR purchasers choose to use bridging finance for this particular strategy. Using bridging can put you at an advantage when it comes to the negotiation process – bridging finance is designed to be quick, so in many cases you’ll be able to complete on your purchase a lot quicker than if you were buying with a mortgage.
Bear in mind that the property will need enough of an uplift in value to make this strategy financially viable. The new market valuation following the completed refurb will need to be enough to leave in 25% equity of the new value, repay the bridging loan along with any interest and fees accrued, and (hopefully) pull out some money to recycle for your next deal.
Another pro to the BRRR strategy is that it’s a fantastic way to grow your property portfolio quickly as opposed to purchasing straightforward, traditional buy-to-lets (where you would typically save a 25% deposit, leave the money in, save another 25% deposit for the second property, and so on).
Using bridging finance also allows you to buy properties that are unmortgageable in their current state – for example properties that are unhabitable or without a working kitchen or bathroom. This is a great example of how value can be added through refurb, before remortgaging to a buy-to-let mortgage once the works have been completed.
What are the con’s of BRRR?
Typically, BRRR deals require more work, time, research and due dilligence as opposed to a turnkey buy-to-let investment. Finding the deals can be trickier, as you’ll be looking for properties below market value and in need of repair in order to create enough uplift in the property’s value.
BRRR projects can be time-consuming to organise and manage, and you will be relying on a team of trades people to carry out the works to a satisfactory standard. There is also the risk of uncovering unexpected issues with the propety during refurb, so it’s important to due your numbers and allow for contingencies.
Overall, BRRR is a fantastic property strategy which, when executed wisely, can help to grow your property portfolio much quicker compared with some other property investment strategies.
Want to see real life examples (and figures) of property investment deals using the BRRR strategy? Take a look at our portfolio where you’ll see a project overview for each property, and a breakdown of the figures involved!