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BRR Town House - Good Deal & How to calculate ROI after R&R?


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I'm just getting into this property thing, having been an accidental landlord in London. We sold the house last year to release equity for various reasons and are looking at re-investing some in the Notts area.

 

I am currently looking at a 2/3 bed townhouse in an area that I have long considered to be a growth area. It is currently going through a regeneration program (that links in with others such as 'the gateway to the City') and has seen investment from private p. development companies buying up plots of land for eco housing etc. The schools are improving, its located near the river, new tram link, great road links, business parks, city and hospital. It is also next to the town which I live, that is extremely popular (with property prices going over the 550k mark for a 4/5 bed semi) and becoming rapidly too expensive for many. The ripple effect has already started with house prices having increased 50-60k over the last year. Those selling  in the 'old' part don't hang around and prices have been driven up 20-25k since the start of the year. Wish I'd been able to get in earlier!

 

Anyhow the property I am looking at is in the 'newer' part, which is currently not so sort after. However it is on a lovely, quiet and well maintained cul de sac with lots of off street parking. It is less than 5 mins walk to the tram stop, riverside and there is a bus stop around the corner. The City Centre (and train station) is a 10-15 mins walk and it has castle views! There is easy access to the ring road and other main link roads and motorway. All of which, I think is great.

 

The property itself is approx 30-40 years old. It's a 3 storey townhouse with off street parking and a car port/garage on the ground floor. It is marketed as 3 beds "with flexible living" but in reality the room on the ground floor has the only garden access, is small and isn't really suitable as a bedroom. The kitchen and lounge are on the first floor and the bedrooms on the top floor. The garden is a decent size and probably too big for rental, as lets face it tenants don't look after them! My thoughts are to offer cash BMV, put in some carpets and paint then rent out whilst planning etc., is obtained and a builder becomes available (long waiting lists!). I have been told £675 pcm. Then when the planning comes in turn the car port into a double bedroom and extend into the garden (no planning) making another proper double, with a separate hallway and access to the garden. There is also a downstairs toilet that I'd look into converting to a shower room. I have had one quote for a builder for 40k (inc VAT) for this. The work would be solely to the ground floor so it is possibly feasible that I could rent as a 2 bed at a reduced rate whilst the work is completed, as the top 2 floors would be unaffected (other than noise and inconvenience)?

 

My question is whether the figures add up and how to calculate the ROI after refurb and refinance. I'd be buying cash. We would also have the cash for the refurb or could do a company to company loan at 3%. I have had a go at using a BTL BRR calculator but unsure I have filled it in correctly?

 

Property is on the market at 120k. Screenshot below. Any thoughts would be appreciated!

 

image.thumb.png.f7c285d650352f5b69eca2e9dec86dbe.png

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  • 3 months later...

Hi T

I haven't looked at your spreadsheet in detail. But if you are buying in cash I would envisage the following to work out ROI after refurb.

 

  • Cash purchase of property - £110,000
  • Stamp duty - £3,330
  • Solictor & survey fees - £1500
  • Refurbishment - £48,000
  • Total upfront costs - £162,800
  • Revaluation of property - £130,000
  • Difference between £130,000 and £100,000 gives you £20,000 profit
  • Minus your upfront costs in buying and refurbishing - £32,800 loss
  • So your ROI is -£32,800/£162,800 = -20%

I haven't done the refinancing option, but I think it would be the same but an extra step...


Is this your own spreadsheet? If it isn't I would recommended to build your own spreadsheets as you will have a better understanding of all the maths.

 

Cheers

 

Es

 

 

 

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