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Matt Brighton

29 | The Buy To Let Renovation is Finished! £15K Profit

Published about 2 years ago • 2 min read

Hey everyone! 👋

Finally! The buy to let is finished. It took 3 months from start to finish to get the keys, renovate and have it ready for market. I've learned a tonne of things from it that I'm sharing over on the YouTube channel.

I've broken the rental ceiling for the area, and as of writing this email I've had almost 40 rental enquiries in 48 hours.

With all of this excitement, I also officially launched my property development company 🎉 publically over at nestdproperty.co.uk - this is the company used to purchase, renovate and hold this property and will also be the front for the management side of things. Over time and dependent on the next project I'm going to begin collecting interest from private investors and to work with me and fund bigger, and stronger projects.

I know what you're here for... here's the final numbers

Purchase £106k
Costs £6.5k
Refurb £17k
GDV £147k
Profit £15k
ROCE 30% (If it was a flip / sold today)

Gross Rent pcm £780
Net Rent pcm £500
Gross Yield 8.3%
Net Yield 5.6%

I financed the deal with a standard mortgage and funded the refurb myself, purposely locking it in for 2 years to then refinance after the 2 year fixed deal is up. Why? Well - I had had the option to use a bridging loan and could have turned this into a BRRR deal, but at the time we had an estimated GDV of £130k and the refurb was actually a little less at £10k so it was quite a tight deal. Rather than bridging and refinancing for little profit the decision was made to lock it in, let the asset grow in capital appreciation for 2 years then pull it out.

We could never have anticipated the property market growth this year and that was part of the decision to allow the increase in refurb budget as well. I did have a silly valuation from an estate agent saying they could sell it for £170k which is just insane for the area, so they definitely over-egged it a bit!

However - analysis wise, I think in 2 years it could be worth £170k which means after a refinance, I'd only be leaving £4k into the entire deal and pull the rest of my money out. This means with a net rental profit of £6000 a year, that would be a 150% ROI.

So lets look at this as a 2 year project and how the numbers stack (before taxes).

Remember

  • Right now it's a very hot market up north
  • Rather than viewing this as a flip, I'm including rental profit in the ROI as it'll be reinvested anyway.
  • All this is before any company taxes

Year 1 - 2022
£15k Refurb Profit on day 1 (today)
£10,290 Capital Appreciation (7% est figures from Hometrack)
£6k Rental Profit
= £31k Profit on £50k initially invested = 62% ROCE
(Return on Capital Employed, also known as ROI)

Year 2 - 2023
£6k Rental Profit
£12k Capital Appreciation (7% est figures from Hometrack)
£18k Profit on £50k still invested = 36% ROCE

Year 3
Refinance the property at £170k estimated valuation leaving £4k of my original money in the property.

The rental income alone at £6k a year (not factoring in any rental increase) would then mean the asset is performing at 150% ROCE per year (£6k profit for a £4k investment).

Adding any capital appreciation at this point is a pure bonus.

Hopefully this explains why I decided to get a 2 year fixed and leave the money in to sweat the asset a bit more first before pulling out my money.

🏡 Buy to Let Progress

Here's the final photos

📽️ YouTube This Week

I've uploaded the latest video runthrough of the house, stick around to the end of the video where I explain a few of my thoughts about the project as a whole and what I'll be doing next!

video preview

Matt Brighton

Hey, I'm Matt. I've worked for several years in financial services & banking for one of the UK's largest banks in London and now work as a senior product manager in a global startup. On the side, I'm building a property development group utilising all my leadership, project management and financial experience. I'm helping share my knowledge of working in these roles mixed with the world of property.

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