Why You MUST NOT Use Mortgages with BRR

Buy, Refurbish, Refinance (more commonly known as BRR) is a technique often used by property investors and property entrepreneurs; but why should you avoid financing these opportunities by way of a mortgage? In this video Kevin shares his insight on why mortgages are a bad idea when it comes to BRR deals.
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[@bayomabo3646]

Thanks Kevin I found this video very informative 👍🏽

[@KevinWrightProperty]

you are very welcome

[@msha9231]

Good stuff Kevin ♡☆

[@KevinWrightProperty]

thanks

[@samarshi539]

Very good advice which is often overlooked. Thank you Kevin

[@KevinWrightProperty]

Indeed it is Sam, you are welcome

[@coachgius]

what if you BRR without taking equity out but only consolidating the loans and minimise the monthly repayment? Essentially a one off project without creating an additional mortgage and/or selling the property.

[@KevinWrightProperty]

If you don't take out equity you don't BRR, its simple as that. Think about those 3 words - Buy-Refurb-Refinance - if you don't take out the equity it means you don't BRR at all, you just BR - Buy and Refurb. Nothing wrong whatsoever with getting a mortgage and spending money making the property better.

[@Niracka1]

Great video Kevin! Cleared things up for me

[@KevinWrightProperty]

my pleasure Olly

[@jaynewong2954]

Hi Kevin, what a great message for a newbie! I always learn that property investors are doing BRR but they never tell you about this mortgage lending knowledge. Many thanks. I visited your website for some online courses but there are quite a few choices, can you please recommend me which one I should start with. I have just started my property investment journey without any landlord experience yet, is bridging finance not for a beginner? Thank you.

[@KevinWrightProperty]

possibly the most important message a newbie needs to know Jay. Thank you for visiting my website and your interest in my products. Bridging finance can be for beginners BUT, you need to get knowledgeable on it beforehand. My products will help you with that. I would suggest The bridge bundle product to begin with, it deals with some of the basics of bridging and is a good starting point for you www.recycleyourcash.co.uk/offers/sSz4YDZn/checkout

[@jaynewong2954]

@@KevinWrightProperty Thank you so much for your swift response and I am going to look into the link👍👍.

[@KevinWrightProperty]

@@jaynewong2954 - fantastic

[@tendaijuru3185]

Great tips thank you for sharing 👏👏

[@KevinWrightProperty]

very welcome Tendai

[@ralucauk]

I have never heard a property investor advice to buy a property with a mortgage! In fact, if possible buy a property that you can't get a mortgage on. Once you refurbish it, then you get a mortgage

[@KevinWrightProperty]

you must mix in the right circles then Raluca, because the videos was to warn people who have been advised to do exactly that. Well done for how you view the right thing to do.

[@erudicity1126]

First rate info Kevin 👌

[@KevinWrightProperty]

thank you

[@ixxac9814]

Sir if I take an fha loan and have mortgage debt would that affect me doing a brrr property a year later? I would really appreciate your help thank you! Thank you for the good info as well

[@KevinWrightProperty]

glad you like my content. If you have a persoanl mortgage, that has no impact on being able to finance a BRR project subsequently. Define what yo mean by an 'fha' loan?

[@Meg-db2ij]

Finally, someone not blowing smoke up my arse.

[@KevinWrightProperty]

You'd better believe it Meg - check out my other videos, I give it straight down the line with no BS

[@mackenziedeliveries1927]

Hi Kevin, Another great video. I have a couple question for you, as you seem to mention financing deals with bridging finance companies. You seem more enthusiastic about this approach more than any other property preofessional, as it is mentioned in your videos fairly regularly. Is there a specific company you recommend, and if so, are you involved in this company as a director &/or shareholder?

[@KevinWrightProperty]

I am glad you like the video and you pose a valid question which I am happy to answer. The question here is, as someone with 20+ years brokering experience, why would I adopt an identical approach to any/every other property professional. I bang on about bridging a lot because of the unique opportunities it offers for investors to invest in deals that could only be otherwise be done with a big wad of cash. Enlightening people that is possible to buy properties that mortgage lenders would never lend on seems to be something worth shouting about. No, there is absolutely not any bridging lender I recommend. For the very simple reason that no bridging lender is ever going to be the most competitive for every property. It is very much a 'horses for courses' thing. The bridger should match the deal and that will vary each and every time. However, it is also a fact that bridging finance is not the solution for every situation. I am a shareholder in a property finance brokerage and, whilst that brokerage has brokered hundreds of bridging loans over the past decade making us highly experienced in that genre, the brokerage is far from a one trick pony brokering everything from simple BTL mortgages to multi-million pound development deals.

[@David-gh3qc]

Nice vid! What about getting a mortgage with no early termination fee charges? Would that still blacklist you?

[@KevinWrightProperty]

Glad you like it, that's a very common question and often suggested as a workaround - but it isn't. If you tell those lenders you only intend to keep their mortgage a few months, they will decline to lend just the same. They don't give out mortgages for just a few months, even though there is no penalty to repay it. Those lenders are no different and it is a fallacy to think it is, despite what any broker tells you. Always remember that the person who carries the can for mortgage fraud is the one who name is on the deeds.

[@will4375]

Hi Kevin, thanks for the video. How does this work where you decide to renovate an existing BTL you own? To give a scenario: if a landlord decides to renovate a mortgaged BTL in the void period between tenants, but wishes to remortgage at the end of the renovation to pull some cash out, would this be ok or would lenders frown upon it?

[@KevinWrightProperty]

I don't see a problem with that Will, if you have already owned the property a while i.e. a couple of years or longer, that's ok. It is about intent, in that scenario, the intent wasn't to buy a property and redeem the mortgage soon after.

[@jamster2400]

What if you intended to Buy, Refurbish, Revalue the mortgage based on the new value of the property and then rent it out?

[@KevinWrightProperty]

Do you mean stick with the mortgage lender you used to buy the property and ask them to advance you more money based on the new value?

[@pasto312]

@@KevinWrightProperty Hi Kevin, I know it's a month old but I'm in similar scenario. Disclosed I'm going to do up the property as purchased below market value. Can I get a further advance after 6 months and light refurb? Cheers!

[@KevinWrightProperty]

@@pasto312 these videos have a timeless quality about them Paul. so no worries. Yes that will be fine and wont breach any lenders T&Cs

[@liamrichardson4364]

What about remortgaging about 1 year into a 2-year fixed rate? Will they frown upon you after 1 year even though you’ve paid the early redemption fee?

[@KevinWrightProperty]

think about it Liam. if you told the lender when you are applying for the mortgage, I only want to keep it a year then i am going to redeem it, they are going to kick out your application because they wont approve - so that is still not playing a straight bat with a lender. Thinking the lender is ok because you are paying an early redemption fee is misplaced thinking. It is all about intent, if that was your intention all along then its not ok.

[@daleyjohnson4384]

Hi kevin that again for the great content. So is it possible to get a bridge on a BRR 6-8 bed HMO conversion. With the potential of a cash flow valuation? Without any property experience?

[@KevinWrightProperty]

You are welcome Daley. Lets look at the the first part first - is it possible to get a bridge on a BRR 6-8 bed HMO conversion? It could be but, if this is going to be your first property project, then you are going to have to convince bridgers that you can pull that off and that could be a challenge if you have not done any property projects previously. You always need to pay off a bridge, so now the second part - getting a mortgage on a 6-8 bed HMO to repay the bridging loan. if you already own a property and are a homeowner that is one less hurdle to overcome. If you have yet to own any property at all then that is almost certainly going to be a bridge too far and you need to scale down your aspirations for a first project. If you are a homeowner but with no landlord experience it is still a pretty big ask on several fronts * you cannot operate an HMO larger than 6 beds without getting express planning approval to do so * almost all mortgage lenders for this type of property require you to have some experience as a landlord and possibly of being an HMO landlord. You could possibly overcome this by sitting on bridging long enough to acquire that experience though If I were to guide you, it would be to applaud your aspirations but to temper them and go for a less expansive project to cut your teeth on. You will almost certainly make mistakes on your first project and learn never to repeat them again - much better for these mistakes to be on a smaller scale where there is less chance that they could wipe you out. Property investment is a marathon, not a sprint. You have the time to progress up to a project of this size.

[@daleyjohnson4384]

Yes I thought this maybe the situation I’m in. My original strategy was to rent to SA In oxford as that’s where I’m from and the occupancy rate is high for this strategy. Then in the mean time use the BRR for I single let. Then we had this pandemic so I changed to the HMO conversion strategy with potential to use cash flow valuation as not knowing what the market is going to do. Would I be in the same situation with buying a house thats already been converted to four flats and the potential to build another in loft(I know you suggested a smaller project🙄 but just out of curiosity) Thanks again for your prompt reply. Also if I do find an project suitable would you be happy to work (endure) with me to find the right bridge/mortgage

[@healthiswealth8153]

wouldn't a delayed exchange completion using a commercial mortgage (eg. getting a mortgage after you refurbish not before) get around this?

[@KevinWrightProperty]

your are correct that using a delayed completion strategy where you refurb the property between exchange and completion would negate the need to get a 2nd mortgage to refinance and redeem the first mortgage (which is the problem). Where what you suggest is less effective is that mortgage lenders, commercial or otherwise, base the mortgage on the lower of the purchase price or value when you are buying a property - so doing it this way will still leave all of your deposit and refurb money stuck in the property. You solve the early redemption issue but not the recycling your cash issue. The most efficient way to operate a delayed completion strategy which enables you to recycle your cash more efficiently is to use a Done Up Value bridging loan (See my '5 types of bridging' video) to complete the purchase, as you can borrow against the done up value, not the purchase price. Then refinance onto the mortgage of your choice to repay the bridging loan.

[@ruairigogan6697]

So what length of mortgage is considered OK after the cash buy?

[@KevinWrightProperty]

you missing the point here Ruairi. After you buy for cash and want to refinance it onto a mortgage, you will want to keep the property as you will have refinanced your cash out of it so you can take as long a term as you want to. The video was about mistakenly buying with a mortgage then redeeming it a few months later, that's a problem but buying with cash isnt.

[@ruairigogan6697]

@@KevinWrightProperty Got it, thanks. 👍

[@KevinWrightProperty]

@@ruairigogan6697 welcome Ruairi, thanks for commenting

[@robsweatherchannel]

How can I get 20k plus then many bridgers are like more security or 60 to 70% for min purchase of 50k....nothing for first time buyers at all!

[@KevinWrightProperty]

Do you mean how can you borrow £20k+ on bridging Robert? Very simple answer here - don't! Bridging is not designed for borrowing such small sums, it is is entirely uneconomic to do so. Why? you have valuation fees, lenders legal fees, your legal fees, lenders arrangement fees - that will be like £3,000 - £5,000. Even if it was viable cost wise, hardly any bridger can be bothered to lend sums this small. What makes much more sense is to take out a personal unsecured loan - no fees whatsoever. If I have not fully addressed your question - please elaborate

[@robsweatherchannel]

@@KevinWrightProperty answered to a degree. My other question is what advice could you give someone who has not got the 20k deposit plus refurb costs as many bridgers want to proceed with at least the 30% deposit and get your own funds for refurb? How can you start out in property investment? Also what you mean about personal unsecured loans? This is not designed for properties tho? Or will this help to support the deposit? Maybe thanks

[@KevinWrightProperty]

@@robsweatherchannel - personal unsecured loans are what you get from your bank or from comparison websites - loans are pretty straightforward thigs to understand. You can use them for all different purposes. You can also think about who you could borrow the money from privately. MY advice if you don't have £20k deposit is to work out ways you can a) earn it or b) borrow it. Its learning to ask yourself better questions. You don't need the cost of refurbs, you can use a Refurb Bridge product for that, I explain how in this video - kzbin.info/www/bejne/iKmZh2Wsqbahisk

[@trulyshocking]

Great video, if you pay the mortgage within the fixed period they stand to make a good healthy margin from the penalty. How easy is it to get a bridge loan? Any advice?

[@KevinWrightProperty]

Whether a penalty is applied and paid is irrelevant, if the lender knows you intend to redeem the mortgage within a few months, they would decline to lend in the first place. Furthermore, its not as healthy as the expected profit from several years of the borrower paying the mortgage every month. Almost everyone qualifies for bridging, its far easier to get than mortgages are. Plenty of advice yes, we have brokered hundreds of bridging loans over the past decade.

[@trulyshocking]

@@KevinWrightProperty great feedback so to get a beidgeloan do they need to see how much tax you have paid in order to apply? Or is it the income you earn into your bank thanks

[@KevinWrightProperty]

@@trulyshocking - neither. whether you pay tax or not, whether you have an income or not is irrelevant to being able to get bridging - it is asset based not income based. I suggest you watch more of my videos, because the answers to the questions you are asking are invariably contained in the 80+ videos on my channel.

[@trulyshocking]

@@KevinWrightProperty thanks will do, great content keep it up👍

[@KevinWrightProperty]

@@trulyshocking - thank you - I will

[@matthewbray5024]

Hi Kevin, i really enjoy your channel, lots of informative videos. My last 2 refurbs I've refinanced after the 2 year fix mortgage has come to an end, I then fix for 5 years getting as much cash out as possible, and then go again. They are standard BTL. I'm based in the south east. What do you think of this strategy?

[@KevinWrightProperty]

Thanks Matthew, glad you are enjoying my content. Your strategy work, it is transparent in so far as you are not deceiving any mortgage lender in they way I describe in the video. It is just incredibly slow, at that rate it will take you 10 years to buy 5 properties. If that is the limit of your ambition and there would be nothing wrong if it were, then carry on. If you wanted to accelerate the rate at which you added to your portfolio, you will need to change your strategy. By substituting the BTL mortgage and using a bridging loan as the finance to purchase the property. You can then do your 2nd part, get a 5 years fixed rate BTL mortgage, within a few months, not 2 years - how to do this is at the very core of my teaching.

[@TheEricb601]

Golden!

[@KevinWrightProperty]

thanks

[@mikekabembula7941]

Hi Kevin, Great informative videos as usual. I have a deal to bring to you soon and i hope you can advise before hand. I am in process of joint venturing with a land/plot owner with planning permission to build a two bed property and my part is to get finance to build on this plot and then share the profits. However, i would want to refinance the property at the end and keep it in my Ltd company but be able to pay off my joint venture and repeat the process. Questions: Where do i start? How do i set up this Joint Venture legally do any solicitors deal with this? And how do I get funding for the project if I don't own the plot? Any help would be much appreciated.

[@KevinWrightProperty]

That's quite a common set up Mike, if fact it is one I teach - JV with a landowner. Solicitors - any commercial solicitor could set this up easily. Set up - you would need a brand new Ltd Co because you would want to restrict the landowner to just shares in this company, not any other company of yours that owned separate properties - you give the landowner shares in the new company and in return they loan the land to the new company and receive an interest payment from the company in return lending - as the Ltd Co now has control of the land, development lenders will lend 100% of the build cost exit - when the profits are distributed, it will also include paying the landowner the agreed price for the land. In return for receiving that payment, their shares revert to you, so you end up back with 100% of the shares. When you are ready, we can help you Mike

[@mikekabembula7941]

Thanks Kevin, I will be meeting the plot owner JV tomorrow and will let you know when i am ready to apply for funds. Again, thank you for your advice.

[@unicorntastic6379]

Dear Kevin,when I asked my mortgage broker that I would like a BTL mortgage and I definitely would like capital out before 2 years so what were the options. He said I could choose a tracker mortgage. He said you can exit trackers any time without any penalties. He said they charge a higher fee because of this. So could I choose a tracker mortgage and exit any time after 6 months ideally. Even though you are allowed to exit any time ,does it still affect the future lending and makes me look bad?

[@KevinWrightProperty]

Your mortgage broker is just displaying his ignorance of mortgage lenders rules then (possibly so he can still earn a fee out of giving you the wrong advice?). It is perfectly true that you can exit tracker mortgages at any time without penalty - but what he is not telling you because a) he doesn't know or b) he is choosing not to tell you is that even with these mortgage lenders when you tell them that you only want their mortgage for 6 months or so, they will terminate your application as they do not condone using them for a few months then repaying them. The only way you would get them to lend to you is to deliberately concealing your true intention to redeem the mortgage after a few months This is obtaining a mortgage by deception/fraud, exactly as I say in this video. That your broker is a) ignorant b) devious enough to guide you down this path is shocking.

[@unicorntastic6379]

If there is no fixed term ,for different circumstances say even some people didn't intend to leave early to start with. And if you are allowed to exit would this still be bad for future lending. I might stay longer than 2 years but I might not. S just to have the flexibility to be able leave when I wish would the tracker not be the right choice for this. The same is phone contacts etc .if you don't have a fixed term contract you are allowed to leave when you wish. The lender lends the money already with this flexible terms in mind. I started watching your videos yesterday. And I am very to have found you.very detailed financial advice.will be following definitely.

[@KevinWrightProperty]

@@unicorntastic6379 it is all about intent. No redemption mortgages are designed specifically for people who want flexibility but don't have definitive plans at the outset of the mortgage - and they work very well in that respect. That is very different to the pre-determined intention of using their mortgage for a matters of months, knowing you will be redeeming it shortly. If you use it in the former, but not the latter above, you will be doing nothing wrong. Thanks for finding my channel yesterday and glad you are liking my content and will be following me - make sure you subscribe so as not to miss any future video release :)

[@unicorntastic6379]

Thank you very much for your prompt response. Very much appreciated.

[@KevinWrightProperty]

@@unicorntastic6379 - welcome

[@m77ast]

I don’t agree. At the point of buying there can be issues for example I may not be aware if planning permission will be agreed in time which means - I cannot take a deadly bridging Finance loan for 12 months. I have to take a commercial loan and convert it to a development bridge loan after I get the planning permission - That would be the smart thing to do.

[@KevinWrightProperty]

its your prerogative to disagree but no commercial mortgage lender of the type you mention getting a loan from is going to give it to you when you disclose your intention to redeem their mortgage and get a development bridge loan once you get planning permission. Plus they don't offer development loans so you cannot convert their loan/mortgage to a development loan with the same lender. The smart thing to do actually would to defer the purchase until you got planning permission by means of a conditional exchange of contracts or an option agreement, although that is less legally secure than an exchange. That way you incur no borrowing costs at all.

[@m77ast]

@@KevinWrightProperty I wish I could defer but the guy wants no options he is selling as seen and has severely reduced the price. Tbh if it doesn’t work we will just use it as our head office.

[@KevinWrightProperty]

@@m77ast - not all sellers are movable to do what makes the deal work for you, this looks like one of those people. If you agree that he has reduced the price significantly to make it almost a no-brainer AND you have a plan B that will work even if you don't get that planning approved you could choose to buy it. Bear in mind that if you do it with a commercial mortgage, those lenders are not going to permit you to do the development you propose while they have the 1st charge over the building, you will have to redeem it to get a development loan. Moreover, they are going to be p***ed off with you if you redeem their mortgage within a year or two. Use it as your head office for a couple of years or more, get planning approved during that time, switch over to the development loan in 2-4 years time, give it back to the original mortgage lender to repay the dev loan as a sweetener for redeeming their 1st mortgage.

[@m77ast]

@@KevinWrightProperty interesting - Thats

[@KevinWrightProperty]

@@m77ast - welcome, happy to help you

[@Sammunro94]

Hi kevin i am looking for buy to let properties that are in need of a medium refurbish and then be looking at putting a tenant in and remortgaging to the new property value to use towards my next property, with this video you have posted is there any issues with that. Thanks

[@KevinWrightProperty]

Massive issues with that Sam - for exactly the reasons I state in the video. No mortgage lender is going to give you a mortgage when they know you are going to re-mortgage with a different lender a few months down the line. You can keep with the same lender and ask for a further advance, that's fine. If you intend to change lenders, you cannot buy with a mortgage, you have to buy with cash or bridging finance.

[@Seijuro047]

@@KevinWrightProperty Hi Kevin, thanks for the video. Is there an obvious benefit to going for a briding loan as opposed to a mortgage then extension to get your money out with the same mortgage lender? I feel like I'm definitely missing something but I've only owned my own place just under two years so 0 experience. Thanks!

[@KevinWrightProperty]

@@Seijuro047 good question. To stick with the same mortgage lender, wait 6 months (as they require you to) then ask for a further advance is legitimate as it does not breach lenders T&Cs in the way I warn about in the video. Not all lenders are as generous with their further advances though, so you could end up with more cash stuck in the property than by using a bridger then getting a re-mortgage when the lender has fresh eyes on the property.

[@Seijuro047]

@@KevinWrightProperty Thanks for the response. Really helpful!

[@KevinWrightProperty]

@@Seijuro047 - you are welcome

[@UltraJamZHD]

So bridging loan is the option if u don’t have the full cash

[@KevinWrightProperty]

correct, for the reasons I explain in the video.

[@UltraJamZHD]

@@KevinWrightProperty lol I think your the only youtuber that’s explained this part !!! Clearly understand now ! Good & simple video !!!

[@KevinWrightProperty]

@@UltraJamZHD - I will take that compliment, thank you. I aim for straight forward content with no BS, plus also dealing with the bits that others may gloss over in their eagerness to promote a concept.

[@cartooningforeveryone1486]

If you bought a property with cash and didn't have a mortgage how is it possible to refinance 🙆🏼‍♂️🤔

[@KevinWrightProperty]

I am not sure I understand your question. You have to refinance with a mortgage, you don't 'have' a mortgage you apply for a mortgage. Unless you mean your personal circumstances mean that mortgages lenders wont lend to you?

[@bouwah85]

@@KevinWrightProperty My question maybe the same. I’m looking to buy a property through my ltd company with cash, to refurbish it and to rent it out. Will I able to apply a mortgage on this so that I can pull my most of my money out to reinvest again? Will the lender lend if this is the only property generating income in my ltd co? Great vid btw. Thanks in advance!

[@KevinWrightProperty]

@@bouwah85 - Glad you liked the video. Buying with cash then asking for a mortgage to get your cash back (or most of it) is fine. No issues with this being the only property in your Ltd Co. When you get to that point get in touch, we would love to broker that mortgage for you.

[@tentimetex]

I think BRR is going to get more and more difficult precisely because a lot more people are interested in doing it because of KZbin.

[@KevinWrightProperty]

That is a possible outcome