[Case Study]
Full refurbishment and resolution of a structural issue saw 18% net ROI
Nestled in the small village of Catherington, situated just off the A3 and near the rolling hills of the South Downs. This two bedroom terraced house was a rare gem in an increasingly popular area. Offering tenants rural living but also a network of transport and local amenities.
Seeking a property using the buy, refurbish, refinance model (BRR). Whereby a property is bought, then value is added usually by refurbishment or creation of extra space within the accommodation. Then refinanced with the aim of pulling the initial investment back out.
The property
This two bedroom terraced property was found on an auction site. It was secured pre-auction for £181,000, some 20-25% below market value.
Traditionally auction properties are bought with cash or bridging or investor finance but timing allowed a mortgage to be secured before the auction date. Meaning immediately the numbers were working in our favour as the mortgage rate was much lower than those of bridging.
After initial viewings and inspection of the legal pack, the structural survey in particular was not happy reading. We were going to swerve the house. Thankfully having a very good relationship with our builder served us well. A second viewing reassured us that the structural issue was not as bad as the survey laid out. With the knowledge and guidance from our builder we were confident that the property was a good option to us.
The property doesn’t quite fit the traditional BRR model as cash wasn’t used and we had to wait for the 1 year fixed mortgage product term to pass before the property could be refinanced.
The structural work was completed and the house fully refurbished within 3 months.
Outcomes
Three days after the house was completed it was tenanted by a young, professional couple. They have remained there ever since, bringing in a NET income of over £7200 per annum.
After refinancing the property we now achieve over 18% on our initial investment. This property was purchased predominantly from a capital growth focus, so the returns are excellent.
