BRRRR is it still worth it?

Toshka17

Hi guys ! I'm new here but been interested in investing in properties in a long time. Together with hubby we are thinking about starting BRRRR with some cheap property on the begining (around 50k) in need of renovation. Hubby is multi trade person and does full house renovations as job and I'm very hands on with all the works like plastering, flooring etc. we also have trade discounts on materials. My question is - is it worth it as a long term investment? We don't need massive cash flow from rent , it's more to invest money and have some kind of security for retirement. Anyone here done it and can share any tips? 

Section62

Toshka17 said:

Hi guys ! I'm new here but been interested in investing in properties in a long time. Together with hubby we are thinking about starting BRRRR with some cheap property on the begining (around 50k) in need of renovation. Hubby is multi trade person and does full house renovations as job and I'm very hands on with all the works like plastering, flooring etc. we also have trade discounts on materials. My question is - is it worth it as a long term investment? We don't need massive cash flow from rent , it's more to invest money and have some kind of security for retirement. Anyone here done it and can share any tips? 

Is your OH self-employed, and how busy is he with other jobs?  Will he have to turn down or delay jobs in order to do your own projects?  My experience of builders/traders is their own properties are often a bit of a state because they never have time to finish things... you'd need to weigh up what you'd lose by him working on your own jobs vs what he can earn working for others.  Also the emotional/family impacts involved in giving up spare time to do the renovation work if it has to be fitted in around work/other jobs.

You also need to be clear about your strategy - there's money to be made in renovation, and possibly money to be made in keeping hold of properties long-term.  But spending a lot on renovation of a property being kept long-term gives a different financial outcome because you can't take that profit early, and by the time you come to sell there's potentially another lot of work needing to be done to bring the property back up to scratch.

If you intend to do this for investment (as in keeping the properties) then you also need to have a plan to do something with them such as renting them out - even if you don't need to financially.  Becoming a landlord isn't easy, and is getting harder.

Overall, having the skills and know-how puts you in a better position than someone who just has the money, but it doesn't mean everything will be plain sailing.

Toshka17

Section62 said:

Toshka17 said:

Hi guys ! I'm new here but been interested in investing in properties in a long time. Together with hubby we are thinking about starting BRRRR with some cheap property on the begining (around 50k) in need of renovation. Hubby is multi trade person and does full house renovations as job and I'm very hands on with all the works like plastering, flooring etc. we also have trade discounts on materials. My question is - is it worth it as a long term investment? We don't need massive cash flow from rent , it's more to invest money and have some kind of security for retirement. Anyone here done it and can share any tips? 

Is your OH self-employed, and how busy is he with other jobs?  Will he have to turn down or delay jobs in order to do your own projects?  My experience of builders/traders is their own properties are often a bit of a state because they never have time to finish things... you'd need to weigh up what you'd lose by him working on your own jobs vs what he can earn working for others.  Also the emotional/family impacts involved in giving up spare time to do the renovation work if it has to be fitted in around work/other jobs.

You also need to be clear about your strategy - there's money to be made in renovation, and possibly money to be made in keeping hold of properties long-term.  But spending a lot on renovation of a property being kept long-term gives a different financial outcome because you can't take that profit early, and by the time you come to sell there's potentially another lot of work needing to be done to bring the property back up to scratch.

If you intend to do this for investment (as in keeping the properties) then you also need to have a plan to do something with them such as renting them out - even if you don't need to financially.  Becoming a landlord isn't easy, and is getting harder.

Overall, having the skills and know-how puts you in a better position than someone who just has the money, but it doesn't mean everything will be plain sailing.

Thank you for your comment! He is quite busy with work but taking a month or two off to do our own projects won't put financial strain on us as I have high income as well. 
Regarding family/life hard time during renovation - we know it very well as spent years renovating abonded bungalow we bought to  bring it to high standard while living in it - no floors, kitchen, for some time we had no roof neither 🙈 bought it for 130k now worth over 300k but it's forever home for us. 
Plan would be to spend max 10-15 k on refurbishment - but keep in middle standard as we are well aware after years of renting it will need another renovation. Then take some equity out for next project and rent it. We do save quite a lot of our income and looking at investments options rather than keeping money that will loose value over time

Bigphil1474

My mate did exactly that. He bought at the lower end of the market, fixed them up, rented out, and he's making a small amount of profit on the rent. His equity is building though, so although he has a relatively low return at the moment, he will benefit when the mortgages are paid off. I think he's got something like 14 properties now. The hard bit is always getting the trades to do the work, which you seem to have covered off. 

You can find alternative investments rather than just keeping the money. Maybe look into being a landlord as it's not an easy job.

Mgman1965

I asked my builder why he doesn't do flip development of run down houses.

To be told there's little money and big risks in it now.

His line on it is many sellers and EA's use a formula :-

Run down house fully modernised be worth £300,000

Cost of reasonable development £50,000.

Market House at £240,000 

Meaning not worth developer's time and expense.for £10k (or possibly less if anything if problems found).

Only be worth taking on for buyer to develop as home for themselves long term.

Auctions are a better option, but, unlikely to snap a bargain as every other bidder there knows as well as you do the figures and cost to profit of the properties up for auction.

Albermarle

Mgman1965 said:

I asked my builder why he doesn't do flip development of run down houses.

To be told there's little money and big risks in it now.

His line on it is many sellers and EA's use a formula :-

Run down house fully modernised be worth £300,000

Cost of reasonable development £50,000.

Market House at £240,000 

Meaning not worth developer's time and expense.for £10k (or possibly less if anything if problems found).

Only be worth taking on for buyer to develop as home for themselves long term.

Auctions are a better option, but, unlikely to snap a bargain as every other bidder there knows as well as you do the figures and cost to profit of the properties up for auction.

Although if you watch Homes under the Hammer and listen to the details of the property, you can normally have a good stab at what the sale price might be. Something like.
EA says when done up will be worth £350K 
You can have a guess at the cost of the work involved - say £50K.
Knock £20K off for legal fees, financing costs, contingency., auction costs. 
So probably will go for between £230K or maybe £250K  if the bidder is keen for the house/work .
Of course it can go lower or higher but usually it fits approx in this formula, especially if it is a bit more than a cheap flip.

ReadySteadyPop

Toshka17 said:

Hi guys ! I'm new here but been interested in investing in properties in a long time. Together with hubby we are thinking about starting BRRRR with some cheap property on the begining (around 50k) in need of renovation. Hubby is multi trade person and does full house renovations as job and I'm very hands on with all the works like plastering, flooring etc. we also have trade discounts on materials. My question is - is it worth it as a long term investment? We don't need massive cash flow from rent , it's more to invest money and have some kind of security for retirement. Anyone here done it and can share any tips? 

This is more what you are looking for....

https://www.vanguardinvestor.co.uk/

Property would be way down the list IMO.