BRR Explained: Buy, Refurbish, Refinance, Rent
BRR (buy, refurbish, refinance, rent) is one of the most popular strategies with UK property investors because, done well, it lets you get much of your money back out of a property and use it again. Done badly, it can leave cash stuck in a property for years. Here's how it works, a worked example, and the checks to make before you commit.
How BRR works
- Buy a property below what it will be worth once it's improved: typically one that needs work, or a seller who needs a quick sale.
- Refurbish it to add value: kitchens, bathrooms, rewiring, layout changes, sometimes an extension.
- Refinance with a buy-to-let mortgage based on the new, higher value, releasing some or all of the money you put in.
- Rent it out, so the rent covers the mortgage and costs and leaves you a monthly profit.
Investors often buy with cash or short-term bridging finance, then refinance once the work is done. Many mainstream lenders want you to have owned a property for around six months before they'll lend on a higher value, though some specialist lenders will lend sooner. Check this with a broker before you buy.
A worked example
These figures are illustrative only, to show how the numbers fit together.
| Purchase price | £100,000 |
| Buying costs (legal, survey, stamp duty) | £6,000 |
| Refurbishment, including contingency | £25,000 |
| Total money in | £131,000 |
| Value after the work (from comparable sales) | £150,000 |
| New mortgage at 75% loan to value | £112,500 |
| Money left in (£131,000 − £112,500) | £18,500 |
Now the rent. Say it lets for £950 a month:
| Rent | £950 |
| Mortgage, interest only at 5.5% on £112,500 | −£516 |
| Letting management (10%) | −£95 |
| Maintenance and void allowance (10%) | −£95 |
| Insurance and other costs | −£30 |
| Monthly cashflow | £214 |
That's about £2,570 a year on £18,500 left in the property: a return on investment of roughly 14%, and you still own an asset worth £150,000. If the property had been valued at £175,000 instead, the new mortgage (£131,250) would have covered everything you put in: a "full money out" deal.
The example leaves out finance costs during the project (bridging interest and fees), broker and valuation fees on the refinance, and tax. Include all of them in your real figures.
The numbers that matter
- End value: the whole strategy depends on it. Base it on recent sold prices of similar, refurbished properties nearby, not asking prices. See how to value a property using comparable sales.
- Money left in: total cost minus the new mortgage. The lower, the better.
- Cashflow: rent minus every monthly cost, including allowances for voids and repairs.
- Return on investment: yearly cashflow divided by money left in.
- Stress test: lenders test the rent against a higher interest rate. Check the rent supports the loan you're counting on.
Risks to check before you buy
- Down-valuation: if the lender's surveyor values the property lower than you expected, more of your money stays in. Be conservative.
- Refurbishment overruns: older properties hide surprises. Get proper quotes and keep a 10 to 15% contingency.
- Lending rules and rates: rates, loan to value limits and ownership rules change. Speak to a broker early.
- Timescales: every month of delay adds finance costs and leaves the property empty.
- Rent: check what similar properties actually let for, not just what's advertised.
- Leasehold and title issues: short leases, restrictions and defects can affect lending. Check the tenure and title early.
BRR or another strategy?
BRR suits investors who want long-term rental income and are happy to tie up money for a few months while the work is done. If you want a quick profit, a flip may suit better. If you want higher income and can handle more management, an HMO or serviced accommodation might. The right answer depends on the property, so compare the strategies side by side before deciding.
How Dealcraft helps
Dealcraft's BRR calculator works out money left in, cashflow and return on investment for each property as you type, starting from your own mortgage rate, loan to value, fees and allowances. It shows comparable sales for the end value, the expected rent and a refurbishment estimate, and lets you compare BRR with flip, buy to let, serviced accommodation, assisted sale and short lease side by side.