The key component of this strategy is you are able to recycle the initial deposit you put into the deal to buy more properties by using leverage to its full capacity. You can also use this strategy alongside other property investment opportunities. This strategy relies on you forcing the appreciation of the property through a refurbishment to add value before you can look to refinance. Your refinance would then be based on the new value of the property after the refurbishment and you will be able to pull out your original deposit, refurb costs and some profit too. There are occasions where the mortgage market is changing or where the property market is going up, downwards or sideways where the ability to refinance all of your deposit and your refurbishment costs may be tricky.

 

The key to the strategy is being able to prove to the mortgage company and surveyor that you have genuinely added value to the property with the refurbishment that you have done. That data is very accessible so they are aware when you now purchased the property. So for instance if you purchased it in January for £90,000 and now in August it is worth £150,000 there needs to be a reason why there is such an increase in price in such a short space of time.  This strategy relies that you are able to add significant value to the property but it also relies on you being able to show the mortgage company before and after pictures of the property, schedule of works to illustrate how much the property has changed so they can genuinely understand there has been an increase in value. This will then allow you to refinance to its new value and take out the original investment which consequently allows you to repeat the cycle on the next deal by rolling your deposit over and using it for the next deal.

 

One of the key components to consider is where the moneys sits within this strategy. As with standard BTLs you will still make your money on the rental income and equity long term. However with this strategy the idea is that you can increase your return on investment to an almost infinite return by recycling your deposit and using it for other deals. The reason for this infinite return on investment is because you are just using one investment pot for your initial property purchase, you add value and refinance and pull out your initial funds and then use it to buy your next property. However you need to consider that your risk- reward element is also amplified because the more properties you have the more risk you will encounter. The greater rewards tends to accustom greater risk so you have to consider this therefore always weigh up the pros and cons.

This particular strategy is recommended for people who are cash rich and time poor investors. This strategy requires a similar deposit to what you would require with a standard BTL purchase. As you are going to need the deposit, the purchasing costs then the refurb costs and it is also wise to have a contingency budget in place so if you do not get the revaluation on a deal that you are looking for and you do end up with some money left in the deal it would not be a complete disaster as you had the contingency. Remember you need to ascertain what your goals and objectives are and if this is your primary strategy ensure you have sufficient funds in place and always remember to have a contingency budget with each project as that will allow you to minimise your risk.

Best of Luck!