How Much Do You Need To Invest In BRRRR?
Discover how much you need to invest, what expenses to consider, what type of finance to use and how you should be reinvesting your income from Rent-to-Rent…
A BRRRR is when you're buying the property, refurbishing and refinancing. Some people like to include renting the property and recycling the cash, which is why there could be three, four or five Rs!
Essentially, you're improving the property to add massive value and then taking out your investment. And then repeat the process again and again and again.
So first thing, if you have less than £20-30,000, this is probably not going to be for you, unless you can use other people's money. In my opinion, if you want to get into property, Rent-to-Rent is the best strategy for you to raise the capital for property purchases.
I just want to put a disclaimer here. This is not legal advice, and it's not mortgage advice. I am just sharing my experience in property and how I have personally approached BRRRR's.
What I am trying to do by purchasing properties is secure my income. Most of my Rent-to-Rent deals are 3-5 years; at some point, I may have to renew the agreement or give the property back to the landlord. By purchasing properties through my Rent-to-Rent income, if I have to hand a property back to a landlord, I have replaced my income and benefit from the capital appreciation.
Listen to the rest of this episode to discover how much you really need, the financial products available for BRRRR's and how much you should be investing in the refurbishment….
Podcast Transcript↓
[00:00:00] How much do you need to invest in BR R I'm going to break it down on this episode. Plus here it is. Download your copy to my 21 rent to rent objections guide link in the district. Enjoy the episode
[00:00:21] I'm Simon. And a few years ago, I decided I wanted to make a change. I wanted to create a passive reoccurring income to support me and my family. And a legacy for the future, a future fast forward two years, and I've managed to generate over 10,000 pounds worth of monthly passive income. I've set up the business, scaled the business, and now systemize the business to free up my time.
[00:00:50] So join me to find out how I've done it. How well does it do minute every day and how you can do it to.
[00:01:12] Simon here and today we're going to be talking about how much money you need to invest in your BR ours. Okay. I'm going to be breaking down what expenses to take into account, how best to do this, what finance to use and how you should be reinvesting your rent to rent, cashflow into assets that you own for the long term.
[00:01:35] That sounds. You're in the right place. And if you're interested in rent to rent, you're in the best place in the world right now, I would say because I've got a special tree, I have released my ultimate guide to overcoming rent, to rent objections. ASHRAE 21 of the most common objections I've heard over the last few years, what they really.
[00:02:02] Because guess what prospects tend to lie and people say things to protect your feelings. So I break down exactly what they really mean when they say these objections. And of course, I then go into exactly how I overcome. Time and time again, so that you can do the same. This guide is guaranteed to improve your success rate, whether you're brand new to rent, to rent, or whether you've got multiple deals, there's objections here that are going to help you.
[00:02:34] I promise surf, that sounds like a bit of you check out the link in the description of this podcast. I'll post a link, go download it. Let me know what you think. Um, hit me up on. At Simon Smith online. And also if there's any objections I've missed, go over to Instagram, find today's podcast posts and comment on there.
[00:02:57] So we can start the conversation. So BR RS, you know, this is when we're buying property, we're refilling. Okay. We're refinancing it to pull our money out. And some people like to say rent in that. That's why some people have free hours, four hours, five hours to us. Um, there's even an offeree cycle, I believe, but essentially what you're trying to do is prove the income add massive value so that you can re finance, pull all your money out and go again and again and again.
[00:03:31] So first thing. If you've got less than 2030 K right now, it's probably not going to be for you. Okay. Unless you're able to use other people's money, you're not really going to have enough capital to do a BR right now. So rent to rent is probably going to be the best strategy right now for you to raise cash.
[00:03:53] If you've got 50, 60 grand, it might seem like you've got enough for a BR. But to the same degree, when I look back, I started off with a property purchase and ran out of money more quickly than I think I would have if I would've got a few rent to rent first, because I could have got the cashflow building before I then committed to a purchase.
[00:04:17] But look, disclaimer, I don't give legal advice. I don't give mortgage advice. Um, these are just my experiences. But the key thing with rent to rent is most of my deals are three to five years. So at some point you're going to potentially have to renew the deal, or you may lose the. So, what I'm trying to do is safe.
[00:04:38] God, my income, by making sure that I acquire some of my renter and properties as purchased, and I require a few other properties as I go along so that as I give back certain rent to rent deals, I've replaced the cash. So I've got the longterm cashflow. And of course the great thing about owning property is you also benefit from the capital appreciation.
[00:05:01] I E the value increase and property prices tend to increase every 10 years. They tend to double historically. So, you know, it's a great way of. You know, having your cashflow today, but then also having lumps of cash for later that you can cash in, um, for whatever reasons you choose. So yeah, if you've got 20, 30 grand, probably not for you, if you've got 50, 60 grand could be for you, but just think carefully, a lot of it would depend on where your based.
[00:05:34] Okay. So in my area you can get sort of two up two downs. You know, somewhere in between 80 grand in the less desirable areas, all the way up to around 200 grand in the nicer areas, I would say. So in terms of finance, in something like that, you're going to need to either be able to buy it outright, which is not easy.
[00:06:00] Um, but the benefit of buying it out right, is that you've not got mortgage. You can move quickly and then you can refinance. As soon as the refurbs essentially done. Second option is you can bridge finance. Okay. And bridging, you know, does what it says on the tin. It's basically a bridge, a short term finance solution for you to purchase the property, do the refurb, and then bridge onto the correct mortgage product.
[00:06:28] And then the final way of doing this. Through the correct mortgage. Okay. Not every mortgage is going to be suitable for this. So speak to a professional broker, but mortgages, you're going to need around 25% of the purchase, a bridge in sometimes a little bit more and obviously cash you're going to need the law.
[00:06:50] So let's take an example of a hundred grand property. Um, you know, on a bridge you might need around 30 grand plus, you know, certain extra fees on a mortgage you'll need 25% cash, as I said, all of it. So let's just, you know, let's just go for a mortgage right now and say 25. The next expense you're going to need when purchasing a property, does it matter which way you're doing it is the legals and they are typically around 1500 pounds.
[00:07:20] That's for your searches, for a survey for the solicitor and a few other expenses to erode into that process. So you got, you know, say 25% for the deposit, 1500 pounds for the, um, the, the legal. And then you might be looking at a few hundred pound for your broker. Next thing to take into consideration is stamp duty depending on the property purchase price, whether it's your first or second property and whether you're buying it in a personal name or.
[00:07:52] Company. So they should be the main expenses you'll need to actually purchased a property. And then of course you then want to be doing a refurb to add the value. And the role of thumb here is for every pound you spend, you want to be adding at least two, three pound of value, ideally three. So that means if you spend 10 grand, you want to be out in 30 grand of value.
[00:08:19] To the property price. Now, once you've done it. Your then essentially going to be looking at speaking with your broker and finding the best timing and the best way of refinancing that property. And when you do do that, there will be some additional expenses that you incur. And naturally the mortgage payments will likely increase because you've increased the value.
[00:08:46] But the idea is that you would then pull out a decent amount of your money and go again. And again, and for me, brr is the lifeblood of property investment because you can do it on. Buy to let you can do it in a hate. You could do on an essay. You could do it on a commercial unit. You could do on any type of property.
[00:09:08] You buy it below market value, you add value, and then you look to refinance and re cycle. So how much are you going to need? Well, look as I've said, if you've got less than 20 or 30, it might be best to start with rent to rent. If you've got 50, 60, and you're in an area where property prices are, you know, affordable, then it could be possible for you to get your first BR.
[00:09:31] Uh, or your next brr and still have 10 grand left for a couple rent to rent. Um, if you've got more than a hundred grand, then absolutely BR could be a great way to go and you might even be able to buy a property cash, um, which is a great way of doing it because it's no finance fees. You can move extremely quickly.
[00:09:52] As I said, if you've not already. Link in the description, go and download my 21 Venter and objections guide. And of course, whatever you do, don't wait 25 years. Get creative.
[00:10:17] Thanks for listening. For more information, check out Simon Smith, online.com. See you next time.