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BRRR 3 Bedroom terrace in Birmingham


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Good Afternoon All,

 

I have been reading your comments on this forum and found them all to be very informative with great content. I am excited about joining the discussions. 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

(The above figure is 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 BRRR project I am undertaking and hope it goes well.

Many Thanks.

Ahmed

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