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BRRR-Yield Vs Capital Uplift

𝘞𝘩𝘒𝘡 π˜₯𝘰 𝘺𝘰𝘢 𝘡𝘩π˜ͺ𝘯𝘬 𝘒𝘣𝘰𝘢𝘡 π˜‰π˜™π˜™π˜™, 𝘠𝘐𝘦𝘭π˜₯ 𝘒𝘯π˜₯ 𝘜𝘱𝘭π˜ͺ𝘧𝘡?β €
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My take:β €
For a long time the key to portfolio building has been the ability to recycle cash. This means adding value and achieving a refinance sufficiently high that once youβ €
refinance onto a new longer term product, as much of your initial deposit, refurb costs and other fees is pulled out for the next purchase. This is now referred to as BRR, BRRR, or even BRRR (depending on how many Rs you want to add). β €
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The key to making this happen therefore is capital uplift rather than yield created. Whilst the Yield – the income from the property, is important, it only needs to be sufficient to drive the loan. It is the capital uplift against the capital employed – the profitability of the project that drive the ability to recycle cash.β €
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My recommendation? Create an arbitrary figure for Yield that works for you. For us it’s 10% Gross Yield – this means we know it will make good cashflow. Our main focus isβ €
on Capital uplift – creating value. This is what allows us to keep moving our money, creates sensible equity, de-risks the project and allows the wonders of leverage andβ €
compound interest to do their work.β €
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The critical number – 25% profit on GDV. If all costs come to 75% of GDV then you can recycle your cash.β €
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If you are interested in working with us then get in touch! on information@targetfive.co.ukβ €

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