Adapting the BRR model for the long term
When investors think of BRR (the Buy-Refurbish-Refinance model), they usually think of recycling money as fast as you can by buying a property for less than market value, doing a refurb to increase its worth and refinancing at the new value to release the funds and to do it all over again. However, Alex and Becky Allen have decided to take a slower approach.
When they first started investing in property, they bought some houses on five-year fixed-rate terms. Within that time, they have undertaken extensive refurbs, which should have increased their value. Combined with the rise in property prices in Swansea, they hope to be able to pull out some money for future deposits. Instead of refinancing immediately, they’re waiting for the fixed term to end.
While Becky still works part time in her corporate job, Alex is working full time in the property business. After university, Alex retrained as an electrician to understand the renovation process fully. Taking the slow approach to investing gives him time to manage the projects, and it keeps him in work.
Investing in Swansea – lower prices, better yield
Originally, they had wanted to invest in Cardiff as they knew the market well. However, they met someone who suggested they consider investing in Swansea. At the time, the rental rates between the two cities were similar, but house prices in Swansea were considerably cheaper, resulting in a greater yield.
In Swansea, they focus on creating student HMOs. They know the streets the students like to live in, and the recent investment in Swansea University over the past few years has made it a great place to invest.
A well-known benefit of letting to students is that there is a predictable cycle for marketing. Usually, once a property has been rented for the academic year, any additional refurb or maintenance works can only be done during the summer holidays. They hope that taking their time on the initial refurb, doing as much as possible upfront and ensuring it’s finished to a good standard will not only reduce maintenance calls from tenants, but will keep their properties at a high standard for a long time with minimal problems.
In-house portfolio management
Alex and Becky have opted for in-house portfolio management. Having worked with lettings agents in the past, they decided to make the transition to self-management during the pandemic. Although they were unable to do viewings, they increased their presence on social media and succeeded in creating a waiting list for each house.
Beyond portfolio management, they outsource as much as they can, and are conscious that they’re not able to do everything themselves. Over time, they’ve realised that spending time on the things they’re not as good at will eventually lead to wasted time.
Investor tips …
For future investors, Alex and Becky have the following advice:
- Due diligence will always be key
- Have a strong team in place
- Overestimate costs
To find out more about their journey and to see a couple of their case studies, check out their article in the September 2021 issue of YPN!