With Precise bringing their popular refurbishment product back to market this week, our property team present two strategies property investors can take with their Buy, Refurbish, Rent projects.
There are two options to consider when looking to finance a BRR strategy: the rate chase and the leverage chase.
Strategy One: The Rate Chase
What is the rate chase strategy?
The rate chase option provides investors with a low interest rate refurbishment bridge and a guaranteed exit to a long-term investment product. The investment mortgage is put in place when a tenancy is in situ and the refurbishment works are complete.
This product is ideal for investors seeking the comfort of a guaranteed exit, coupled with competitive interest rates on both the bridge and the longer-term mortgage product. This is where the Precise Refurbishment BTL product, or similar, would be used.
How much can I borrow?
On average, using this option, the bridging facility will cover 65% of purchase price and the term mortgage will lend to a maximum of 75% of purchase price. This means the investor will have to fund the deposit and the cost of works. Also note, the automatic refinance is based on the original purchase price. Therefore, the investor is not able to immediately access any equity gained as a result of value increase. Any equity release would need to take place at the end of the fixed term period.
Strategy Two: The Leveraged Solution
What is the leverage solution?
The leverage option allows the investor to use a different provider for the refurbishment bridge and the mortgage facility.
The benefit of this is that the investor has access to a pool of lenders that will provide funds towards the purchase price and also provide funds for the cost of works.
How much can I borrow?
The maximum loan offered is driven by a number of considerations. Typically, the refurbishment bridge will lend up to a maximum of 75% of purchase price.
Investment mortgage products will lend to a maximum of 75% of market value, at the time of refinance. Adopting this financing strategy will allow you to refinance up to 75% of the uplifted market value (providing the refinance is after month 6), allowing the investor to release profits sooner than in the rate chase pathway.
Rates for the initial bridging facility may be slightly more expensive, but this option can significantly reduce your equity input. This enables the investor to access deals that would not be attainable if chasing rate, or to undertake multiple projects at once.