The BRR strategy (Buy, Refurbish, Refinance) is a popular property investment strategy that involves purchasing a property, improving it and then refinancing once the work is complete.
Rather than buying a finished property and holding it in its existing condition, a BRR investor looks for an opportunity where refurbishment could improve the property and potentially increase its value and rental appeal.
But BRR isn't simply a case of buying a property, renovating it and automatically getting your money back.
The purchase price, refurbishment costs, final valuation, rental income and available finance all matter.
In this guide, we explain how the BRR property strategy works and what investors should consider at each stage.
What does BRR mean in property?
BRR stands for:
Buy: purchase a property with investment potential.
Refurbish: carry out appropriate improvements to the property.
Refinance: apply for longer-term finance after the refurbishment is complete.
Some investors then retain the property as a buy-to-let investment, although the appropriate strategy will depend on the property and the investor's individual objectives.
Step 1: Buy
A successful BRR project starts with the purchase.
Investors using this strategy will often look for properties requiring improvement rather than homes that have already been fully renovated.
The important point is that a property requiring work isn't automatically a good BRR opportunity.
Before purchasing, an investor should consider factors including:
- Purchase price
- Property condition
- Refurbishment costs
- Professional and finance costs
- Local rental demand
- Potential rental income
- Comparable property values
- Likely value after refurbishment
- Time required to complete the works
- Contingency for unexpected costs
The numbers need to be considered as a whole.
A low purchase price can look attractive, but significant refurbishment costs or an unrealistic expectation of the final value can quickly change the viability of a project.
Step 2: Refurbish
Once the purchase has completed, the next stage is refurbishment.
The amount of work required will depend entirely on the property.
A relatively straightforward project might involve decorating, flooring and improvements to the kitchen or bathroom.
A more substantial refurbishment could involve electrical work, plumbing, heating, structural work or changes to the property's layout, subject to any necessary permissions and professional advice.
The aim should be to make improvements appropriate for the property and its intended market.
Investors should create a refurbishment budget before committing to a purchase and include a contingency for unexpected work.
Older properties in particular can reveal additional issues once work begins.
Can refurbishment increase a property's value?
Improving a property's condition can affect its market value, but an increase should never be assumed.
The eventual value will depend on factors including the property itself, its location, comparable sales, the standard of the refurbishment and market conditions at the time.
This is why comparable evidence can be important when assessing a potential BRR opportunity.
Looking at what similar renovated properties have actually sold for can provide useful context when estimating a potential end value.
However, the eventual valuation will be determined independently when refinancing and may be higher or lower than an investor initially expects.
Step 3: Refinance
After the refurbishment has been completed, an investor may decide to refinance the property.
A lender will assess the application according to its lending criteria and will normally require a valuation.
The amount an investor can borrow can depend on several factors, including:
- The lender's maximum loan-to-value
- The property's valuation
- Expected or actual rental income
- The applicant's circumstances
- Affordability and stress-testing requirements
- The property type and condition
- The lender's individual criteria
Refinancing should therefore never be treated as guaranteed.
Even where refurbishment has been completed successfully, the property may not receive the valuation originally anticipated, or a lender may offer less borrowing than expected.
A simple BRR example
Imagine an investor purchases a property for £120,000.
They then spend £20,000 refurbishing it.
For simplicity, assume the combined purchase and refurbishment cost is therefore £140,000, before Stamp Duty, finance, legal and other costs.
After the refurbishment, imagine the property is independently valued at £170,000.
If a lender were prepared to offer a mortgage at 75% loan-to-value, the maximum loan based purely on that valuation would be:
£170,000 × 75% = £127,500
This doesn't mean the investor would automatically receive £127,500.
The actual mortgage available would depend on the lender, rental assessment, borrower, property and lending criteria at the time.
The example simply demonstrates how the refinancing stage of a BRR strategy can work.
Can you get all your money back from a BRR?
You may hear BRR described as a way of "recycling" your original capital.
In some circumstances, refinancing may allow an investor to release part of the capital invested in the property.
However, investors shouldn't assume they will recover all of their original money.
Whether capital can be released, and how much, depends on the final valuation, outstanding borrowing, loan-to-value available and the lender's criteria.
Purchase costs, refurbishment costs, finance costs and taxes should also be taken into account when calculating the investor's total capital invested.
What costs should you consider with a BRR property?
The refurbishment isn't the only cost.
Depending on the transaction, costs can include:
- Deposit or purchase funds
- Stamp Duty Land Tax
- Conveyancing
- Surveys
- Mortgage or finance fees
- Broker fees
- Refurbishment
- Building insurance
- Utilities during refurbishment
- Council Tax where applicable
- Compliance and certification
- Valuation fees
- Contingency
- Holding costs while work is completed
Understanding the total cost of a project is important when deciding whether an opportunity works for you.
What are the risks of BRR?
Like any property investment strategy, BRR carries risk.
Refurbishment costs can increase
Unexpected problems can appear once work begins, particularly with older properties.
Work can take longer than expected
Delays can increase holding and finance costs and postpone the point at which the property can be let or refinanced.
The final valuation may be lower than expected
The amount spent refurbishing a property does not automatically translate into an equivalent increase in market value.
Refinancing isn't guaranteed
Mortgage products, valuations and lending criteria can change.
Rental income can vary
Expected rent should be researched carefully. Properties can also experience vacant periods and unexpected expenditure.
Property values can fall
Property prices can move in either direction. Investors should consider whether the investment still works if circumstances change.
Is BRR the same as buy-to-let?
Not exactly.
Buy-to-let describes purchasing a property with the intention of letting it to tenants.
BRR describes the process of buying, refurbishing and refinancing a property.
A property can therefore be both a BRR project and a longer-term buy-to-let investment.
Is BRR right for every investor?
No single property strategy is right for everyone.
BRR may appeal to investors who are comfortable managing refurbishment, understanding property finance and taking on the additional risks involved with renovating a property.
Other investors may prefer a property that is already in lettable condition.
Your available capital, experience, objectives, appetite for risk and desired level of involvement should all be considered.
Finding BRR property opportunities
The property you buy is one of the most important parts of the BRR strategy.
Before proceeding, investors should assess the purchase price, refurbishment requirements, comparable property values, rental market and total costs rather than relying on a projected end value alone.
At Vantis Property Group, we source UK residential property opportunities for investors, including properties that may suit refurbishment and buy-to-let strategies.
Looking for your next property investment? Join our private deal group for access to the latest opportunities we source.
Frequently Asked Questions
What does BRR stand for in property?
BRR stands for Buy, Refurbish, Refinance. It involves purchasing a property, carrying out improvements and potentially refinancing it after the work is complete.
How does BRR work?
An investor purchases a property, completes a planned refurbishment and then applies to refinance. The amount of finance available will depend on factors including the eventual valuation, rental assessment, lender and borrower circumstances.
Does BRR guarantee an increase in property value?
No. Refurbishment may improve a property's condition and potentially its value, but the eventual market value cannot be guaranteed.
Can you release money through refinancing?
Potentially. Whether capital can be released depends on the property's valuation, existing borrowing and the mortgage available. Investors shouldn't assume all of their original capital will be recoverable.
What is the biggest risk with BRR?
There isn't one risk that applies equally to every project. Common considerations include refurbishment overruns, delays, lower-than-expected valuations, financing changes and rental or property market conditions.
This article is for general information only and does not constitute financial, mortgage, tax, legal or investment advice. Property values and rental income can rise or fall. Finance is subject to lender criteria and individual circumstances. You should obtain appropriate professional advice before making an investment decision.