Are you interested in flips, refurbs and BRR(buy refurbish refinance)? All can be a potentially great way of making money through property.
However, that’s only if you work out the deal properly, taking into account all of your expense and comparing it to potential profit. And there are many ways to structure finance for a deal, as we’ll go on later to discuss in this blog post.
First though, here’s a little of each of the above property strategies:
Flip and Refurb
This is a property that you’ll sell on very quickly. It will often be below market value (BMV) e.g. a probate property, which needs refurbishment. You do the work and then put it back on for sale at the new, increased value.
BRR
It could be that after you’ve re-furbished then re-financed your property, you may want to ‘hold it’ rather than sell i.e. collect monthly rental income. Alternatively, you could sell for a lump sum to put towards buying your next BMV property.
What is Your Pipeline Like?
If you’re leaving a full-time job to concentrate on property then cashflow is important. You’ll need to be able to take care of ongoing financial liabilities, after all.
So, it’s important to realise that each flip, refurb, BRR deal usually takes around four to six months to complete. That’s four to six months without any cash coming in – unless you have two or three such deals ongoing consecutively.
You can expect around £20,000 per deal. That sounds modest until you realise it’s possible to do five such deals in a year, bringing you in an annual profit of £100,000. Five smaller deals probably aren’t as risky as one big deal and yet, these will still reap you a similar amount of profit (and you’ll sleep better too!).
What Should you Look for in a Flip/Refurb/BRR?
There are certain processes you should always go through before buying a property for a refurb etc. These are:
▪ Research: Get to know your favoured area well. Find out details such as if there is local legislation about to be introduced, what the potential margins are, what do you need to deliver in order to attract renters or buyers.
▪ Growth: What’s it been like lately? Is it the kind of area where growth has always been level, so it’s better to do a straight-forward flip than a BRR.
▪ Metrics: Are other properties selling locally for the price you want to sell your potential refurb property for? If not, then walk away.
▪ Rental Prices: What exactly are the properties your market is in renting for? What exactly are they selling for?
▪ Infrastructure Changes: Find out if anything is planned e.g. a new main road could lower prices.
▪ Demand: Is there a lot of people looking to rent in the area? What about buying – find this from estate agents – and who are they i.e. families, young professionals etc?
▪ Regeneration: Some councils offer grants for refurbishing older, run-down properties on particular streets. Speak to the council’s Housing dept to find out if that’s the case for your location.
▪ Legislation: Planning is a massive minefield on its own. Usually, a flip or a BRR will not need planning unless you’re putting in some kind of extension or Article 4 restriction applies in that area. There’s been lots of changes in last year e.g. use class changes, development change, space standards change. You should keep on top of it.
How Sourced can Help you?
Sourced Network franchisees benefit from a support team and up to date training, ensuring they are equipped with the knowledge they need to carry out their projects successfully.
To find out more, download your copy of the Sourced prospectus.
Author
Chris Kirkwood
