We’ve all seen those enticing property shows where investors buy a run-down property, renovate it, and then either rent it out or sell it for a tidy profit. It’s the Buy, Refurbish, Rent (BRR) strategy, and it looks like a surefire path to property wealth. But is it really the golden ticket it appears to be?
At Flambard Williams, we’ve seen many investors drawn to the allure of BRR, only to find the reality far different from their expectations. Let’s debunk some common myths:
BRR Is Always Profitable
While TV shows might make it seem like every BRR project is a winner, the truth is far more nuanced. Success in BRR depends on various factors: location, extent of refurbishment needed, market conditions, and effective management. Many investors find their profit margins squeezed by unexpected costs and market fluctuations.
Refurbishment Always Adds Value
It’s easy to assume that any improvement will automatically increase a property’s value. However, over-improving a property or making changes that don’t appeal to potential tenants can actually result in lower returns. Careful planning and market research are crucial.
BRR Is Quick Money
One of the biggest myths is that BRR generates quick and easy profits. In reality, these projects can take considerable time, from finding the right property to completing refurbishments and securing tenants. Patience and meticulous planning are essential.
Anyone Can Do It
Many people believe they can manage all aspects of BRR on their own. However, successful BRR often requires a team of professionals, including real estate agents, contractors, property managers, and financial advisors.
It’s Less Risky Than Other Investments
While BRR might seem safer than other property investment strategies, it comes with its own set of risks. Market downturns, unexpected refurbishment costs, and tenant issues can all impact your returns.
So, what’s the reality?
As our expert, Jack, our Sales Director points out: “The reality is that the people that can make money in this field are typically tradesmen, people who are in the building industry and know how to do the majority of the work themselves and have the time to do so.”
Why? Because they can significantly reduce costs:
- They can do much of the work themselves, saving on labour costs.
- They have access to materials at cost price, saving 20%.
- They can often claim back 20% in VAT, another substantial saving.
This means they can purchase properties at higher prices and still make a profit, leaving fewer opportunities for non-industry investors.
Moreover, even if you manage to make a profit, you need to consider other factors:
- Capital gains tax on any profit
- Mortgage interest payments and potential penalties
- Redemption fees if selling within 12 months of getting the mortgage
- The value of your own time
As Jack concludes, “I am not saying that it cannot be done but you have to make sure you run the numbers with contingencies and be honest with yourself and ask the questions, do I really have time to deal with this?”
At Flambard Williams, we believe there are far easier ways to make great money in the property market that are completely hands-off. We’re here to guide you through these alternatives and help you build real wealth through property investment.
Curious to discover how our smart property investment strategies could work for you?
Contact us today on +44 020 7183 0646.
