Want to achieve your financial goals with effective real estate investing in the UK?
But which investment strategy should you follow?
Is it a smart BRRRR investment? Or do you want to stick with traditional property sourcing?
As UK house prices increase 12.6% over the year to October 2022, you must finalise your investment strategy before it’s too late.
But things are more complex, right?
Answering the question, ‘how can you buy a property in the UK?’ can be difficult until and unless you are aware of these strategies.
So, let’s understand the pros, cons, and differences between each strategy so that you can make a sound decision that aligns with your financial goals.
Have a look.
- Understand the difference between BRRRR investing and traditional investing.
- Make an informed decision to choose the best investment strategy for your financial goals.
Difference between BRRRR investment and traditional investment
The main differences between BRRRR investment and traditional investment in real estate are:
1. Initial investment
If you choose the BRRRR investment strategy, you require a large capital sum because you purchase a distressed property and manage the rehab expenses. Sometimes, it can cause losses if you don’t manage your expense and purchase process in a BRRRR investment.
So, you require professional property consultants to manage your BRRRR property investment.
But with traditional property sourcing, you may not require significant repairs or renovations because of its good condition and move-in ready feature. So, it can minimise your investment cost compared to BRRRR investment.
BRRR investment carries a higher risk because of the possibility of unexpected expenses during the rehab process and market fluctuations during the refinance stage.
Even if you go through rigorous due diligence and planning, without a professional’s help, you can encounter unforeseen issues like structural damage, electrical issues, etc., during rehab.
So, gain insights about the risk involved in BRRRR investment before you take a further step with the investment strategy.
In contrast, the traditional investment carries a lower risk since the property is typically in good condition. But you can’t completely ignore property investment risk because of sudden market fluctuations.
So associate with experts who can help you with professional property sourcing in the UK.
3. Time Horizon
BRRR investment has a short-term time horizon, usually six months to two years.
Because the investment strategy involves purchasing a distressed property, rehabilitating it, and then refinancing or selling it to cover your initial investment.
Traditional investment has a long-term time horizon, usually five to ten years or more. The investment strategy often involves purchasing a move-in-ready property and holding it for a long duration so that the property value appreciates.
So, based on your goals and risk tolerance, you can choose the type of investment strategy, as some property investors prefer the potential for a quicker return on investment with BRRRR investment. In contrast, others may prefer the stability and consistency of traditional investment over a longer time.
4. Time Commitment
BRRRR investment requires a higher time commitment because of the rehab and property management processes. As an investor, you must oversee and manage the various contractors and vendors involved in the renovation.
Traditional property sourcing requires a lower time commitment, as a property manager typically rents and manages the property.
Apart from these important differential factors, here’s a brief table to help you analyse the in-depth difference between these two investment strategies.
|Criteria||BRRRR Investment||Traditional Property Sourcing|
|Strategy||Buy, Rehab, Rent, Refinance Repeat||Buy and hold for long-term appreciation or rental income|
|Financing options||Can leverage multiple forms of financing, including hard money loans, private money loans, and traditional bank loans.||Limited to traditional bank loans.|
|Cash flow||Can generate positive cash flow from the rental income after rehab and refinancing.||Can generate positive cash flow from rental income.|
|Exit strategy||Can sell the property after refinancing to cash out the initial investment or hold onto it for passive income and potential appreciation.||Can sell the property after long-term appreciation or hold onto it for passive income.|
|Market conditions considered||Consider market conditions for purchasing, rehabbing, renting, and refinancing the property.||Must consider market conditions for purchasing the property and rental income potential.|
Now that you understand the nitty-gritty aspects of the difference, it’s time to choose one strategy to achieve your desired cash flow.
But before that, you must choose a reliable property-sourcing service provider who can help you bypass the downsides of each strategy.
That’s where you can trust P&A Property Sourcing.
Choose P&A Property Sourcing for Your Investment Decision
The decision to pursue a BRRRR investment or a traditional property sourcing strategy depends on various factors, including the investor’s risk tolerance, financial goals, and time horizon.
Irrespective of your investment strategy, you can choose P&A Property Sourcing to help you find the best deals and ensure you maximise your ROI (return on investment).
As a client-centric, trusted, and Birmingham-based investment company, we have a strong team of experts who can analyse your requirements and help you achieve your desired results.
Based in Birmingham, West Midlands, our property investment company helps clients to explore portfolio investment, and our property investors work hard to give you the best ROI.
So, what’s making you wait?
Contact us now to learn more. You can also read reviews given by our previous clients.
What are the risks of BRRRR investment compared to traditional property sourcing?
The risk involved in BRRRR investment is higher compared to traditional property sourcing. During the rehab process, you might exceed your budget because of unpredictability. You might encounter multiple unexpected expenses, which increases the rehab cost. Also, the investment strategy has a higher market risk because of the short-term nature of the investment.