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Buying BRRRRS Method Property
“B” for Buying BRRRRS Method Property is the 1st Letter in the BRRRRS Acronym. There are pages below for each of the other five Letters, “Renovate-Rent-Refinance-Repeat-SELL.”
There is also a short Blog on why I called this Strategy “The Ultimate, Perpetual Buy To Let Strategy” when I released it in 1998.
The success or failure of every BRRRRS Project is dependent on the decisions made when buying BRRRR Method Property, to which we have added the last Element, the “Sale” of a BRRRRS Property, because the Profit, which becomes a Capital Gain when a BRRRRS Property has been Rented, is determined by the Buy Price and the extent of the Renovation Improvements and not the eventual Sale Price which is Market Driven and broadly outside your Control to affect.
In most Locations, from high cost to low cost, you will find 3 supplies of unmodernized, low EPC BRRRRS Property.
Provided that you are using local/neighbourhood Labour in your Builder Power Team, a 4th Source are the Builders you employ, my policy was to pay my Builders £250 for introducing a Property that I bought.
In order of reliability and number of qualifying Properties, the Sources are:
- Auctions,
- Estate Agents
- Investor Marketing such as “We Buy for Cash, Same Day Decisions” either using Leaflet Drops or Location Advertising in the local Press.
I buy mostly through Auctions because I regularly find that the type of Properties I want, Terraced Housing, feature strongly in Auctions and I can rely on the Auction Timetable to deliver an Unmodernised Property when I am ready to start the next Project but I am quite prepared operate my mini Strategy of Stacking the Purchases where you buy and board until you are ready to start work.
The Auction Timetable is 3-4 weeks between Catalogue Release & Auction Day followed by another 2-6 weeks between Auction Day & Completion of Purchase, a total of 6-10 weeks with a low probability of a Property bought at Auction failing to Complete whereas some 30% of Estate Agents sales fail after an Offer has been accepted.
The release of the Auctioneers Catalogue triggers off the BRRRRS Property Due Diligence, which involves covering everything in Buying BRRRRS Method Property through to Completion of the First Sale, which, at the earliest, will be during the Second Six Months of the First Year, when one of the Properties bought during the First 6 Months could be offered for sale to take advantage of the CGT Exemption to restock the Capital Pot if all the Dates lined up. Click & Go to Selling BRRRRS Property.
The Property Due Diligence covering the “Sale” will concern the potential Buyer of the Property, who and where they are, what they want and what are they prepared to pay. Because Timing is critical, ideally you want to sell to a First Time Buyer or fall back on OwnCo Ltd. The pros and cons of selling are covered in the Blog, Selling BRRRRS Method Property.
Buying BRRRRS Method Property involves the Solicitor, Builder & Letting Agent from your BRRRRS Power Team. Most Investors will also instruct a Surveyor, but I do not for reasons explained.
Before you start Buying BRRRRS Method Property, you should have discussed and agreed with all the Members of your Power Team the BRRRRS Method Strategy, the BRRRRS Cookie Cutter that you are going to operate, and particularly with the Builder, and the Builder Cookie-Cutter that you are going to operate, as you can’t expect the Builder to view all qualifying Auction Properties with you without payment and you can’t afford to pay for Abortive Visits, more under Renovating BRRRRS Method Property
BRRRRS Due Diligence starts with identifying the Investment Location and Neighbourhood, continues with conducting Due Diligence on each Property and the intended Customers, whether Tenants and/or Buyers, which are covered in the Blogs, Renting BRRRRS Method Property & Selling BRRRRS Method Property.
The one Variable that does not apply to buying most alternative Property is that, with the BRRRRS Method, you are expecting to carry out substantial Improvement Renovation Works which will have a substantial effect on the Renovated Value but, be careful not to over-spec the Improvements. Gold taps will only enhance Values in Neighbourhoods such as Mayfair, London, and not downtown Barnsley.
Becoming Expert in Renovation Works takes time and application but remember you can become a Buy To Let Investor without Renovating Property but, when you have Fixed Up your first three Properties, the ability to Repeat your
Investment Strategy will depend on Market Driven Increases in Values which today are too volatile to be relied on, hence the reason why BRRRRS is the Ultimate Strategy.
The answer is that Sale Price Variables over which a BRRRRS Investor has no control or even influence are quite common, but few Buying Price Variables, where the Investor has little control or influence.
The Buying Price, the Price you Pay, is involves developing several Skills at Negotiating Property Prices Down in the case of Estate Agent Asking Prices and a different set of Buying Skills to Winning The Bidding War at a Hammer Price that is Above the Guide Price. But Negotiation Skills still come into play with Pre-auction Offers and Motivated Sellers or Unsold Offers with Highly Motivated Sellers.
As a Novice Investor is essential that you Succeed from the Get-Go to win the Confidence of all your Power Team Members, right down to the Labourer in your Renovation Team, and you will find potential Members of your Power Team that are familiar with all the Variables in your BRRRRS Method Strategy and the several associated Cookie Cutters which should make Success quicker and easier to achieve.
Since 1998 when I started increasingly buying at Auction, my experience showed me that the best and safest type of BRRRRS Method Property is an Unmodernised Terraced Houses needing a Full Gut Renovation, and, since 2007, when EPCs were first introduced, Properties with Low EPCs, E, F, G or Listed with the following attributes.
- The Property must be Habitable and Mortgageable with Utilities, Water & Drainage connected.
- The Mortgage may be subject to Retention until Essential Repairs & Renovations are complete, but the Property must be Mortgageable when purchased.
- Terraced Houses, because 27% of the UK Housing Stock is Terraced Houses.
- The percentage provides Choice.
- Has prices ranging from 10k to 1 million+ which suits all Budgets,
- Are the 1st Choice of most First-Time Buyers.
- Makes the “Sale” Element of BRRRRS, easy to achieve.
- Unmodernised, because the 4th Letter is to Refinance the Added Value resulting from Renovation Improvements, 3rd Letter, and Repeat the Strategy.
Low EPCs. Buy to Let Investors cannot legally rent Property Rated EPC’s F or G. In 2024, it will be illegal to let Properties with an EPC E Rating.
Most EPC E Rated Properties are Unmodernised providing BRRRRS opportunities.
Successful BRRRRS Method Investors require a Steady, Reliable Source of Property to make good the 5th Letter of the Acronym, “Repeat”, which is why all the Cookie-Cutters are such an important part of the BRRRRS Method Strategy.
In the UK, Property Auctions are where the greatest number of Properties suitable for a BRRRRS Method Strategy, are offered for Sale, see our Monthly Auction Properties for BRRRRS Renovation.
The majority of Properties in these Auctions are Unmodernised Terraced Houses.
Every week there are opportunities to make Pre-Auction Offers, Underwrite Hammer Prices, Offer on Unsold & Withdrawn Properties and the supporting Professional Advisers, Solicitors, Bridging Finance Brokers, Architects, Valuers need to fully understand the Processes involved, making each transaction easy to complete within the Time Limits set down by the Parties involved.
It is easy to revise Sale Dates on Estate Agent Sales, and Sale Dates often are, but Auction Dates do not change. At best, the Property may be Withdrawn by the Seller, not the Buyer, but the Auction will still happen providing that there are still Properties to auction.
Learn What You Need – At You Own Speed – All Online – We have been Training & Operating the BRRRRS Method for both our Students and Buy To Let Investor Clients since 2002 when we relocated our Investment Location to Durham and launched the precursor to the Ultimate Strategy, called Mushroom, which was based on Unmodernised Terraced Housing developed for Miners in County Durham.
The Locations where we have developed Terraced Houses throughout England & Wales since 1998 are, Southampton & Portsmouth, West London ELA In Wandsworth, Oxford, South Wales Valleys, M62 Corridor & Co Durham.
We offer an Affordable Expert Service which includes a range of unique Ingredient & Strategy Calculators to help reduce the risk of each of the 6 Elements in the BRRRRS Method, the Ultimate Perpetual Buy To Let Strategy.
For more Help & Assistance, Email me, David Humphreys.
