Buy, Refurb, Rent, Refinance, Repeat - BRRRR Method in the UK Market

The BRRRR method is a way for property investors to grow a portfolio and maximise their investment.

It stands for Buy, Refurbish, Rent, Refinance, and Repeat - the idea being you buy a property in need of some work at a low price, do it up to a high standard, rent it out, and use a mortgage to release equity so that you have the liquidity available to do it again.

Over time, BRRRR means you can develop a sizeable investment portfolio of rental properties, each bringing in a comfortable monthly yield.      

Can an investment strategy that’s been a popular concept in the US work in the UK market? The answer is yes, provided you have the right expertise.

At Clifton Private Finance, we can help walk you through the process so that you can get the most out of this experience.

What is the BRRRR Method?

BRRRR is a popular strategy used to build a property portfolio. Done effectively, it has the potential to turn modest property investments into significant assets over time. The core system is simple to understand, though each stage requires careful consideration and expertise to execute efficiently.

Buy

The first stage is ‘buy’. Here, the idea is to obtain a property below market value.

The strategy relies on improving the value of the purchase, which is best done by buying a distressed property, often in need of significant renovations.

Unlike a traditional residential purchase, or even a standard buy-to-let, a BRRRR buy is unlikely to meet the criteria for mortgage approval, which means the capital needed to secure the property has to come from other sources, including:

• Personal investment capital
• Low-cost borrowing or investment from friends and family
• Specialised debt finance, such as bridging finance

All of these options present you as a cash buyer, able to move quickly and respond to opportunities as they arise. This is perfect for buying houses as soon as they enter the market, negotiating a discount, or obtaining properties at auction.

Refurb

Refurbishment and renovation are key components of BRRRR. Once you have obtained the property, it’s essential that work is done on it to bring it to the highest possible standard - this is where BRRRR properties gain their value.

Like with the property purchase, BRRRR works best when the costs and decisions for refurbishment are controlled and well-managed, maximising the final property value.

Rent

BRRRR shares some similarities to the ‘house flipping’ property strategy, but differs in one key aspect: that the property is kept to rent out. With BRRRR, you become a landlord with a long-term investment strategy.

Here, the choices made during the refurbishment phase have a significant effect, as a well-developed home will be more appealing to renters and increase rental income.

Refinance

Refinancing allows you to release much of the equity held in the first house, turning it back into liquid capital with a buy-to-let (BTL) mortgage. The rental income is then used to pay this monthly overhead, which may be structured as an interest-only mortgage to maximise monthly profits, or as a repayment mortgage when focusing on long-term gains.

Repeat

With the money provided by the refinancing of the rental property, an additional investment property can be bought through the same strategy, repeating the process. This forms the core function of the strategy, enabling you to continue to build a growing property portfolio through the ongoing acquisition, renovation, and rental of properties.

Is the BRRRR Method Effective?

People are always looking towards property to magically make money, and some hyperbole exists surrounding BRRRR that makes it feel as if it’s a system for printing money, while a few critics consider BRRRR flawed and unworkable.

The truth, as can be expected, is somewhere in the middle. BRRRR can be very effective, but it does require expertise and effort.

There are five key variables that determine the overall success of BRRRR. An investor who understands how to influence these variables will find the method effective.

1. Buy Price

BRRRR is designed to take a distressed property that can be obtained at below market value and refurbish it to increase its worth. Getting a good deal on a property, therefore, is the first variable that must be considered by anyone looking to make the most of the BRRRR method.

Not only that, but the market is competitive. House flippers and other landlord investors will be interested in the same property, making auction bargains more difficult and windows of opportunity extremely short. Building your network and having the patience to wait until the deal is right are further considerations.

Investors who can secure a good buy price and influence this first variable have a clear advantage.

2. Cost of Renovations

Along with the buy price, keeping down the cost of renovations is an obvious way to maximise profits, and it’s another area where expertise pays off. Budgeting effectively and understanding the pitfalls of a renovation project are essential to keep this key variable in check.

Having partners you can rely on is important, one of the reasons why BRRRR can become more efficient as time goes on and you build both in experience and your network of trusted contractors and suppliers. While early projects may overrun or require more flexibility in the budget, later refurbs can be done with the benefit of hindsight.

3. Price of Financing

Purchasing a property for BRRRR requires access to significant capital without delay. In order to take advantage of opportunities in the market, it is important that you act quickly. For many investors, bridging finance offers the most effective form of financing for BRRRR.

Bridging finance is short-term, exit-based funding that is designed to provide fast-access capital for property purchases and renovations, with a planned strategy of refinancing through a long-term mortgage once the property meets the criteria required for more traditional finance.

Bridging finance can:

• Provide the initial funding needed to buy a property privately or at auction
• Offer additional capital to pay for renovations
• Be obtained at very short notice to meet tight windows of opportunity

However, bridging finance will create additional costs that must be considered in your BRRRR strategy - and it’s important to keep these costs as low as possible.

At Clifton Private Finance, we offer the funding expertise you need to lower the impact of finance, helping ensure profitability and investment effectiveness.

With access to the whole UK market of specialist bridging finance lenders, we can help you control this variable and get the bridging loan you need to make BRRRR cost-effective.

For a deeper understanding of bridging finance and how Clifton Private Finance can help you obtain a fast loan to secure property, read our in-depth guide.

4. Property Valuation

One of the key aims for any BRRRR strategy is to boost the value of the rental property as high as possible, increasing both its market value and rental income. With renting at the core of the BRRRR process, it’s important to evaluate the area’s rental income trends, understand the market, and refurbish the property accordingly.

This may mean, for example, adding en-suite facilities to a house intended as an HMO for student lets, or looking to improve the master bedroom size to entice family interest. Developing the property to meet the rental expectations will help you strengthen this valuation figure.

It’s also important to consider the house price for refinancing purposes. The mortgage size will be influenced by the property’s market value, greatly affecting the funding available for later rounds.

Experience and research in both rental needs and general market trends will impact this important variable.

5. Terms for Refinancing

The mortgage strategy for BRRRR creates another opportunity to influence the variables and improve the return on investment. One significant consideration that greatly impacts decision making is whether your BRRRR strategy is for long-term investment or short-term profitability and liquidity.

Long-term investors may want to consider a full repayment buy-to-let (BTL) mortgage (capital plus interest), while those focused on the short-term should look to an interest-only BTL mortgage to keep monthly costs low.

Long-Term Repayment Strategies

Those looking to develop equity in property for a long-term investment plan will benefit from paying the principal of the mortgage, building equity in each house by using the tenants’ rental payment to amortise the mortgage.

Over the investment period, the mortgage is repaid such that at the end of the term, you own the property outright. This has numerous advantages, including offering mid-stage equity should you wish to adapt the strategy and leverage property further to expand the portfolio.

However, a repayment mortgage will put significantly more pressure on monthly cash flow, reducing immediate profits. Additionally, during void periods where properties are vacant, the mortgage obligation may impact personal finances.

Short-Term Interest-Only Strategies

BRRRR investors looking to maximise immediate profits should look to interest-only BTL mortgages, reducing monthly repayments significantly by offsetting the principal repayment to a final exit at the end of the term.

Properties leveraged by interest-only mortgages do not guarantee equity growth. This comes through added value from renovations and ongoing market forces, rather than regular mortgage principal repayments.

Landlords intending to use their BRRRR portfolio to provide an ongoing monthly stipend benefit from the low monthly obligation of an interest-only mortgage, where the tenants’ rent payments are used to cover mortgage payments, ongoing management and maintenance, and a profit margin.

How to Keep Refinancing Costs Low

The cost of your mortgage is one of the most important ongoing variables. With external geopolitical events affecting interest rates and a range of banks and lenders offering mortgage products, expertise in this area is vital to lower costs and improve both rental profits and long-term equity efficiency.

A view to flexible terms, strategic use of fixed rates, and thorough calculations that consider fees and alternative remortgage products is key to making BRRRR method strategies successful.

The immediate impact of refinancing within the BRRRR framework is also considerable, with a direct correlation between the level of finance obtained and the ability to repeat the process.

Here, obtaining a higher loan-to-value (LTV) mortgage can make all the difference between being able to take on another property or not.

Clifton Private Finance is here to guide you through the complicated evaluation and comparison of mortgage products, match you to a suitable lender, and help you achieve the lowest rates and most flexible terms

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Finance to Repeat: The Core Principle of the BRRRR Method

BRRRR is not a get-rich-quick scheme, but requires some careful planning and strategic understanding.

The idea is simple - buy something cheap, make it valuable, rent it out, do it again. However, putting it into practice effectively requires nuance.          

One of the most significant components of BRRRR is obtaining a final mortgage large enough to fund a repeat of the process.

As a standard BTL mortgage typically offers 75% LTV, it can be understood that the total outlay for a BRRRR property must not exceed 75% of its final value if the process is to repeat smoothly.

Consider this illustrative example:

• Property purchased: £150,000
• Stamp duty, legal costs, and other fees: £10,000
• Finance costs: £3,000
• Renovation costs: £25,000
• Total investment: £188,000

This property must, therefore, reach a market value of £250,000 to meet that 75% LTV refinance hurdle (£188,000 is 75% of £250,000) - quite an uplift for a house initially purchased at £150,000.

At Clifton Private Finance, we work with specialist lenders who are willing to consider configuring the mortgage to meet your BRRRR project needs.

Many BRRRR method landlords successfully repeat the process with slight diminishing returns, finding cheaper projects or improving the refurbishment process to make better gains. Building a BRRRR portfolio is possible through a spread of strategic initiatives, influencing each of the five key variables as much as possible.

BRRRR Method Financing

Funding presents an initial stumbling block to many looking to develop a portfolio through the BRRRR method. However, the support exists to present opportunities for investors with a reasonable initial investment and the focus to develop a clear BRRRR plan.

Stage 1 Funding: Personal Investment and Bridging for Purchase and Refurbishment

Alongside initial investment and money that can be raised at a low cost through personal means, such as friends and family, bridging finance offers the power needed to make starting on a BRRRR venture possible.

Bridging loans can be secured through multiple properties as collateral and provide flexible funding with minimal restrictions.

This means the money obtained through bridging can be used not only to buy the initial property, but also to pay for the refurbishment costs.

For BRRRR method investors, it’s often better than a mortgage in the first instance for both its flexibility and short-term, exit-based structure.

Bridging finance:

• Offers leveraged finance on new properties regardless of condition, where a mortgage can only be obtained for habitable homes. Bridging loans significantly widen the pool of properties for BRRRR investment.
• Provides rapid funding with a much shorter application process. This is essential for buying at auction or seizing opportunities that may arise through private transactions.
• Can be secured by both the rental property and existing homes or other properties, potentially increasing buying power to an effective 100% of the investment cost and renovation.
• Has a flexible repayment exit, often allowing for early repayment to reduce interest costs without incurring additional charges.

Your Clifton Private Finance adviser can discuss the potential bridging finance configurations, comparing lenders and products to find the right bridging finance for your BRRRR project.

Stage 2 Funding: Mortgage Refinancing

A BTL mortgage, either interest-only or repayment, is used to repay the stage one funding and provide the capital reset to repeat the process.

Secured against the new property once refurbishments are complete, a mortgage is based on the full market value and rental yield of the property and doesn’t require any additional assets.

The mortgage replaces the short-term bridging finance with a long-term structure with a lower interest rate and stable monthly repayments.

Working with Clifton Private Finance gives you the expertise you need to get the best out of your mortgage, with the wide range of lenders and products compared to find a deal that best fits your BRRRR structure.

Stage 3 Funding: Remortgaging

The mortgage market is often changing and adjusting to both the national economy and trends, and the wider geopolitical world. Regular re-evaluation and remortgaging can help you keep monthly payments low and cash flow stable while your portfolio grows.

The Clifton Private Finance mortgage team will remain alongside throughout your BRRRR journey, providing advice and support as well as access to the best mortgage deals whenever a remortgage proves beneficial.

Stage 4 Funding: Portfolio Mortgages

Landlords who have built a property portfolio that exceeds three properties may want to migrate to a centralised portfolio mortgage.

These combine multiple existing mortgages into one optimised structure, using the equity spread across several properties to command the best rates and offer the greatest flexibility.

As your BRRRR method investments grow, your Clifton Private Finance adviser will assess the specialist portfolio market with you, finding the larger-scale finance that properly suits your circumstances.

The Pros and Cons of the BRRRR Method

For patient investors looking to build a strong portfolio of rental properties in the UK market, the BRRRR method offers an effective and disciplined strategy. Undertaken with care and the support of an experienced finance partner, it can offer both passive income and substantial returns.

Some of the advantages of the BRRRR method include:

• A well-developed plan for future property purchases that encourages focus on minimising costs and maximising return    
• Potential to make significant returns on initial investment capital    
• Flexibility to meet both short-term and long-term strategies, or a combination of both    
• Ongoing development of a network of partners for property purchase, refurbishment, and finance    
• Potential for equity building for future use in both property and unrelated investment projects    

Considerations and disadvantages include:

• Requires care and expertise in several areas of property management    
• Opportunities for distressed properties and other worthwhile investments in the UK market are competitive    
• Rental property maintenance and management can be time-consuming    
• Void periods can be costly    
• Wider market volatility can have a significant impact on margins    

Develop Your BRRRR Method Portfolio with Clifton Private Finance

At Clifton Private Finance, we are experts with property-based finance, with a team of specialists available to help you make informed decisions on your funding options.

Our established relationships with top decision makers across the wide range of UK banks and private lenders gives you access to tailored finance solutions suited to your specific circumstances.

Partnering with Clifton Private Finance provides long-term support for:

• Obtaining first-stage purchase finance for auction and short-window opportunities    
• Bridging options that leverage multiple properties to provide high-value funds    
• Additional capital for renovations and refurbishment    
• Specialised bridging exit and refinance solutions    
• Market-focused remortgage options    
• Portfolio mortgages developed for long-term investment goals    

To discuss your options for investment property in the UK, book a consultation with one of our experts today.