BRRR – Buy, Refurbish, Refinance, Rent problem?

BRRR – Buy, Refurbish, Refinance, Rent problem?

10:31 AM, 19th November 2021, About 2 weeks ago 24

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BRRR misery –  Hi all, I need some help in solving a current situation concerning BRRR.

I recently purchased 2 terraced houses next to each other to turn into 7 ensuite rooms and 2 x 1-bed flats to rent as service accommodation for £420k.

I had an initial Gross Development Value (GDV) valuation of £970k with refurb costs of £220k.

I have just had a surveyor report valuing the property at £250k and need advice legally or otherwise as to my options, of course, based on that valuation I can not refinance?

Many thanks

Anthony



Comments

by Ant1

12:42 PM, 20th November 2021, About 2 weeks ago

Thank you Graham a lot of the pionts you raised i coverd in my due dillegence before hand there are some pionts you have said which i will look in to
the valuer in part said its not a viable buiness its more suited to someone who wants a little extra income on that piont i calculated the income the brokers calculated the income and so did the management company all individual calculations all using 70% occupancy for a serviced accommodation its the devaluation of the property thats cause for concen as well
as mentioned before
Purchased for 420k£ valued at 250k£ after 220k£ spend

by Gary Bray

13:16 PM, 20th November 2021, About 2 weeks ago

Reply to the comment left by Ant1 at 20/11/2021 - 12:42
Hi Ant. Why not get a couple of valuations from local estate agents that deal in commercial? Preferably not linked in any way to the estate agent(s) that you purchased from. Tell them you're thinking of selling and see what their thoughts are.

by Suresh Parikh

18:14 PM, 22nd November 2021, About A week ago

Reply to the comment left by Ant1 at 20/11/2021 - 12:42
I understand your disappointment and puzzlement.
As you suspect, you paid an optimistic price.
Down to basics: it is supply and demand that determines price.
You fell into the category of a "special purchaser": two adjoining houses etc.
So you willingly paid more than the open market value arrived at in an arm's length transaction between a willing seller and a willing buyer.
For legal advice with a view to any legal action, you have to determine whether you were seriously misled (I am using simple non legal words): if so, how and by whom?
The only way to find the current value is to put it on to the market, and see what a willing buyer offers you.

by Ian Narbeth

10:36 AM, 23rd November 2021, About A week ago

Ant1, I'm not sure that my two happorth will help but your valuation of £970,000 seems very high.It is easy to believe that somehow a property is worth 15-20 times the gross rental income achievable but that is not how valuation works.

Anthony, a few questions:
1. What gross rents were you forecasting?
2. What percentage voids were you predicting?
3 What are your projected monthly expenses for Council Tax, cleaning, maintenance etc.?
4 What is the demand for en suite rooms in the area?
5. Will you pay 9 Band A Council taxes?
6. Are there any title or planning issues?


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