Property Overview

• Location: Brentford, London

• Property Type: 2-Bedroom Flat

• Purchase Price: £300,000 (distressed property)

• Estimated Refurbishment Costs: £40,000

• Total Investment: £340,000
  
  

Financial Breakdown

1. Purchase & Refurbishment:

   • Purchase Price: £300,000

   • Refurbishment Costs: £40,000

   • Total Initial Investment: £340,000
     
     

2. Post-Refurbishment Valuation (After Repair Value - ARV):

   • Estimated ARV: £400,000
     
     

3. Refinancing:

   • Loan-to-Value (LTV) Ratio: 75% of ARV

   • Refinanced Mortgage Amount: £400,000 × 0.75 = £300,000
     
     

4. Capital Recovered:

   • Amount Recovered from Refinancing: £300,000

   • Equity Remaining in Property: £100,000 (25% of ARV)
     
     

5. Rental Income:

   • Estimated Monthly Rent: £1,800

   • Annual Rental Income: £1,800 × 12 = £21,600
     
     

6. Mortgage Payments:

   • Interest Rate: 3% per annum

   • Annual Mortgage Interest: £300,000 × 0.03 = £9,000
     
     

7. Net Annual Income:

   • Annual Rental Income: £21,600

   • Less Annual Mortgage Interest: £9,000

   • Less Estimated Annual Expenses (20% of Rental Income): £21,600 × 0.20 = £4,320
     
     

   • Net Annual Income: £21,600 - £9,000 - £4,320 = £8,280
     
     

8. Return on Investment (ROI):

   • Initial Cash Invested: £340,000 - £300,000 (recovered from refinancing) = £40,000

   • ROI: (£8,280 / £40,000) × 100 = 20.7%
     
     

Investment Insights

• Capital Recovery: By refinancing at 75% LTV, the investor recovers £300,000 of the initial £340,000 investment, leaving £40,000 tied up in the property.

• Equity Build-Up: The property now has £100,000 in equity (the difference between the ARV and the refinanced mortgage).

• Cash Flow: The property generates a net annual income of £8,280, providing a steady cash flow.

• ROI: With a 20.7% return on the remaining cash invested, this strategy demonstrates a robust return, showcasing the effectiveness of the BRRR method.