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Buying a Property to Refurbish and Refinance – What You Need to Know

Buying a Property to Refurbish and Refinance – What You Need to Know

As previously mentioned on this blog, the method buying a distressed property, refurbishing to bring up to correct market value & refinancing is by far the most common method for property investors to go down when they indulge fully into the property world.

The main reason for this is due to pure effectiveness, coupled with the fact that most training companies teach this as their main strategy. Usually, you can buy a fully functioning house for around £10-15,000 once refinancing, meaning there is plenty of room to maneuver when it comes to buying multiple properties at once.

Let’s break down the steps and go through all the essentials with this method;

Step 1: Buy the property

Sounds simple, but there are actually 3 methods of buying a house.

  • Buying with pure cash
  • Getting a mortgage
  • Buying with bridging finance
  • Raising finance from private investors

Whichever route you choose, there will always be positives and negatives. As a general rule of thumb, the more you leverage, the more you will be paying back in interest. This is completely dependant on your personal situation, so we advise you to speak to an accountant and mortgage broker before even considering completing on a purchase of a house.

Step 2: Refurbish the property

The steps for this should have already been carried out in your due diligence phase, so by now, you should know exactly what works need to be done, as well as allow for a contingency sum for any underbudgeting which may happen. We suggest getting educated in spotting what obvious signs of damage have been done to a house. Some of the most common defects include;

  • Dry rot
  • Damp/Mold
  • Subsidence
  • Asbestos

We recommend reading the book “Survey Your Home for Structural Building Defects” available from Amazon for help when getting started for this.

After you have done all the due diligence and calculated the refurb costs, you can now give your build team the go-ahead to start refurbing the property. This should take no more than 2-3 months (depending on if you’re refurbing into a single-let or an HMO/flip).

Step 3: Refinance the property

This is only legally allowed to do 6 months after the initial purchase. So by this point, you should have a fully refurbished house with tenants currently in your property paying your rent every single month. By month 6 you refinance the property and pull out most (or all) of your money. This is the exact method that many property investors use to recycle their cash over and over again until they run out of funds. As a general rule of thumb, if you have £50,000 in savings you should be able to buy at least 5 quality properties.

As you can see, it’s really not too difficult to land your first property, fix it up and then ‘flip’ it or refinance it! In fact, it’s actually quite an enjoyable journey for those who are looking to get the great returns and excellent cash flow that property investing can offer for you. Here in the UK, there is a ever growing demand for rental homes as more millennials are renting, due to a number of factors. This means the property investing industry is booming! We recommend to get in now whilst you still can.

If you would like to, we are always open to contact. We can help you with finding a deal, or we can advise you on the best people to talk to with your individual situations.

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