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Is BRR out if the question for the foreseeable?


nataliej

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Hello!

I was hoping to buy a residential property at the end of the year, and follow the BRR where I add value to it and then refinance to pull out some cash

However all I've heard is that prices are going to drop/crash after the stamp duty tax relief ends early next year, so I'm not sure if now is a right time to use this approach? However I was relying on it to raise some cash to invest in a BTL

Is BRR completely out the question now for the foreseeable? Or is there still leeway to add value and refinance after 6 months/a year? In the property market?

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Natalie

I think the benefit of a BRR strategy is that you are buying at a deep discount and so will be less impacted by a price drop. A price correction might just mean that you are unable to pull as much much money out of the deal at the end.

I think the difficulty you might find at the moment is that there is lots of competition for good deals which can push prices up. 

No reason to give up though you might just need to work a bit harder.

Good luck.

David M Slater ACMA 

Accufy Accounting  - Proactive accounting for property investors 

0208 242 4926    info@accufy.uk

 

 

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  • 4 weeks later...

In my view, BRR is very difficult with Residential property in England at any time! BRR relies on you getting a deep discount on your purchase price. However, there is so much competition to buy residential properties in the UK, that discounts are difficult to find. England is a small place, so many investors buy all over the country. 

BRR is very popular in North America. But North America is much bigger. Properties are bigger, and there is less competition for deals. It's much easier to buy a cheap house and then refurb it.

Another problem you face is with financing. You need to finance the purchase of your property, and then refinance it 6 months later to release your capital. If you use a mortgage to purchase your property, then your existing lender won't agree to revalue your property upwards after 6 months.

You'll need to fund your initial purchase with cash or bridging, and then get a mortgage. Bridging is very expensive, and you may not have the funds to buy in cash. 

 

_______________________________________________________________________________________________________________________________
Vin Gupta
Property Investor and Developer
UK Property Blog: https://evolutionblogger.com/article/uk-property-articles
Travel Blog: https://soulfultravelguy.com/

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  • 4 weeks later...

Tough, as has already been said getting a bmv purchase will be no easier or harder, competition is also high. As has already been mentioned, getting cash out the deal could be tricky so I’d shy away from any real short term bridging options unless it was an unbelievable bmv deal. You can always flex your strategy though, why not find something that needs light refurb or non all , and cash in some yeild on a 2 year fixed? Depending on where you are buying location wise , prices will likely have ticked up by then and you’ll have cash in the bank plus if you can save privately as well then great. Don’t hang around forever waiting for the perfect deal ,  if may never come and you will be losing out every month in the meantime. 

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On 12/15/2020 at 11:06 PM, ayns said:

Tough, as has already been said getting a bmv purchase will be no easier or harder, competition is also high. As has already been mentioned, getting cash out the deal could be tricky so I’d shy away from any real short term bridging options unless it was an unbelievable bmv deal. You can always flex your strategy though, why not find something that needs light refurb or non all , and cash in some yeild on a 2 year fixed? Depending on where you are buying location wise , prices will likely have ticked up by then and you’ll have cash in the bank plus if you can save privately as well then great. Don’t hang around forever waiting for the perfect deal ,  if may never come and you will be losing out every month in the meantime. 

From what I've seen, you can do BRR deals in smaller towns like Lincoln or Preston. You buy for £60k and refinance for £90k, after an £8k refurb. The problem with these deals, is that there isn't that much absolute profit to be made

In this market, I would stay away from bridging unless you have a lot of experience.  Refinancing with a mortgage lender is difficult right now, as they have all tightened up their criteria. You could get stuck on an expensive bridgin loan

_______________________________________________________________________________________________________________________________
Vin Gupta
Property Investor and Developer
UK Property Blog: https://evolutionblogger.com/article/uk-property-articles
Travel Blog: https://soulfultravelguy.com/

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