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phandley

Advice on strategy

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Hi, 

I currently have 2 BTL properties in West Yorkshire valued at approximately £80000 each. Both have the mortgages paid off, i've been away from the UK for 6 years working and travelling (Currently in Australia) hence why I haven't done anything with remortgaging etc. I will be coming back to the UK in the new year and looking on how I can use the value in the properties to my advantage. I will be remortgaging both hoping to get out 120000, I've been thinking about potentially buying 2 60k houses refurbing them, remortgaging on new value, letting them out and then repeating the process. 

OR

Buying maybe 7 properties with 75% mortgages, let them out straight away and focus on one at a time to refurb, for example if 6 are let out refurb one then move onto another when there is a gap in tenancy then when the refurb is done remortgage on the new value. 

Firstly I would be looking for cash flow then eventually done the line focusing more on capital growth. 

When I say refurbing I am mainly looking at properties that would need cosmetic upgrades, paint, carpets, potential new kitchen and bathroom etc. 

I will also be setting up a limited company to buy the new properties with. 

Thank you for your advice

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I'd consider strategy #1, for the reason you could start & stop at anytime with 1, 2 ... or as many as possible subject to your ability to manage the properties and or when you burn up the capital.

alternatively, consider also buy, fix & flip, buy say a 3 bedroom one cash below market. Refurb to a 4 bedroom rooming house, sell it on the basis the rental income of £350/room/mth.

Or, with it now being a 4 roomer, remortgage based on rental income - hopefully close to you could get close to 100% of your investment out, thus free cash flow (after expenses) based on close to zero investment

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Hi phandley

These sort of 'what strategy should I follow' questions are always difficult to answer when you don't have a holistic view of the person, their goals, preferences, etc.

So, all I can offer is that option 2 is probably more likely to produce a higher revaluation figure at the time of a revaluation than option 1. The reason for this is that with such a light refurbishment you probably won't do enough to persuade a valuer to uplift the value too much more than purchase price plus the cost of works, even if there are some higher value comparables. It might not be your goal to lift the value much more than this...but the best part of a BRR strategy is to extract as much of your initial funding as possible and that is usually arrived at by combining a discount on purchase with adding genuine value beyond a cosmetic refurb.

Replacing kitchens and bathrooms does count as adding genuine value...it's just that persuading a valuer to give you the premium on top of the cost after say 3-6 months from when you bought the property is often the tricky and uncertain part. There is less pressure on the valuer to look at your original purchase price after say 1-2 years have passed and so they are more likely to give you the true market value and so also a 'developer's margin' by that time. 

Option 2 also gives you quicker cashflow should you need that.

If you were undertaking more a project and spending say £20k+ each time, then I would probably say option 1 as then you would be more likely to persuade a valuer to uplift the revaluation figure and would also remove the cost of financing from the project costs (you would pay cash instead of bridging finance...you can't do such a project using a BTL mortgage product typically).

Hope that helps.

Richard


Richard W J Brown a.k.a. The Property Voice

Property Investment Strategist

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