Financing a Buy-Refurb-Refinance (BRR) Project

Get your ducks in a row, reduce risk, and refinance with confidence

Buy-Refurb-Refinance (BRR) is a popular strategy for investors who want to recycle capital and scale: buy a property with potential, refurbish it, add more value than all your costs, then refinance onto a term mortgage.

Refurb – Refinance – Rinse – Repeat.

At least, that’s the theory…

Done well, BRR is disciplined and repeatable: buy a property that isn’t mortgageable today, add value through well-planned works, then refinance onto a term mortgage (BTL, HMO, MUFB, holiday let, semi-commercial, or commercial/investment), and pull some (or even all) of your cash back out.

Done badly, BRR becomes Buy – Regret – Repeat: underestimated works, valuation surprises, planning delays, and a refinance that never quite materialises – with a bridging lender breathing down your neck.

The good news is that most BRR risks are predictable – and therefore manageable – if you prepare properly upfront.

Step 1: Start with the exit (because lenders will)

In bridging and development finance, the lender’s primary concern is refreshingly simple:

“How do we get repaid?”

So before you rush out to take the ‘before’ photos, you need to be clear on:

• Exit route: refinance or sale?

• End value (Gross Development Value or GDV): what’s realistic after the works — backed by evidence (comparables), not a hunch?

• Mortgageability at exit: standard BTL, or specialist (HMO/MUFB/commercial)?

• Term-lender appetite: will mainstream/specialist lenders lend on the finished property in that location and configuration?

Your bridge is only as good as your refinance. Bridging lenders will sometimes want to see a Decision in Principle (DIP) for the remortgage. This is rarely needed, but if the deal is tight it can make underwriting much easier and faster.

Step 2: Define your project properly (‘refurb' covers a multitude of sins)

A common mistake is assuming all refurb finance is basically the same. It isn’t.

‘Refurb’ can mean anything from ‘new carpet and a strong cup of tea’ to ‘half the back of the house has moved.’ Lenders price and underwrite those very differently.

Think of product ‘baskets’:

1. Light refurb (cosmetic / non-structural)

• Kitchens, bathrooms, redecorating, flooring, doors, minor electrics/plumbing, maybe windows/boiler, a bit of landscaping.

• Very well suited to refurb bridging, with funds typically advanced in a single tranche and no monitoring.

2. Heavy refurb (significant works, often structural)

• Structural works, extensions, wall removals, major reconfiguration. Even a ‘light refurb’ can be treated as heavy, if the cost of works is high relative to the purchase price (e.g. 50%+).

• Still bridging – but the lender pool narrows, pricing increases, underwriting becomes more forensic, and borrower experience matters more.

3. Conversions and change-of-use style projects

Examples include:

• house to HMO

• commercial to residential

• single dwelling into flats

Some conversions can work on bridging, but others are better suited to development finance, especially where:

• funding needs to be staged,

• the deal is GDV-driven (see below),

• monitoring and multiple drawdowns are required, or

• the works are extensive.

Practical point: choosing the wrong product for the job is one of the fastest ways to turn a clean BRR into a slow-motion world of pain.

Step 3: Planning risk and use class – don’t wing it

If your exit depends on planning, your bridge becomes a different animal.

A common example is converting a single dwellinghouse (C3) into a small HMO (C4, typically 3-6 occupants). This can sometimes be done without planning under permitted development rights (PDR) – unless your local authority has an Article 4 Direction, in which case planning will be required. Once you’re at 7+ residents, it’s typically a large HMO (sui generis), so a change of use usually needs full planning permission.

If the deal only works if planning comes through, you may need a planning bridge – meaning the lender is underwriting timeline and planning risk, not just the bricks and mortar.

Before you commit, confirm:

• Is the property in an Article 4 area?

• Are you stepping into sui generis territory?

• Do you have credible professional support (architect/planning consultant)?

Translation: if planning is mission-critical, treat it as the essential path – because it is.

Step 4: Be realistic about the refinance valuation (especially for HMOs)

BRR lives and dies on the uplift and GDV – but not all uplift is created equal.

Sometimes the numbers only stack up if the valuer and term lender accept:

• a strong investment yield / commercial-style valuation (common with larger HMOs), and/or

• a robust market rent assumption.

These are not guaranteed. They depend on:

• property location, type and layout,

• local demand and licensing standards,

• planning position and restrictions, and

• the lender’s and valuer’s approach (which are frustratingly inconsistent).

So treat your refinance valuation as a range, not a single magic number – and build the deal around the lower end of that range. It’s less exciting, but safer.

Step 5: Funding structure — avoid the ‘Day 1 surprise’

This is where newer bridging borrowers often get caught out.

Typical leverage (rules of thumb);

• Bridging (residential): usually up to 75% of purchase price/value. Commercial LTVs are lower, usually up to 70%, occasionally higher.

• Below Market Value (BMV) purchases: a few lenders will lend against open market value (OMV) rather than purchase price, which means we can sometimes achieve 90-100% of the purchase price.

• 100% finance: possible if you can offer additional security (1^st or 2^nd charge).

• Development finance: commonly constrained by LTGDV (~60–65%), with 90-100% of the costs funded in stages in arrears.

Who pays for the works?

Not all lenders fund works the same way:

• Some fund the purchase only (you fund the works)

• Some fund some/all of the works

• Development finance typically uses staged drawdowns with monitoring surveyor sign-off – more admin, but built for bigger projects.

Interest: serviced vs retained (and why “75% LTV” doesn’t feel like it)

Two main structures:

1. Serviced interest: you pay monthly. Your affordability is assessed. In practice, few clients choose this option.

2. Retained/rolled interest: the lender deducts interest upfront and ‘pays itself’ monthly.

Retained interest is convenient, but it reduces the cash you receive at completion. After interest and fees are deducted, a headline 75% LTV can result in a Net Day 1 Advance that’s closer to 60% or lower. This is why we model the Net Day 1 position carefully, so you don’t hit completion day thinking, “Hang on…where’s the rest of the money?”

Step 6: Your lender pack – the difference between “approved” and “parked”

If you want lenders to move quickly, make it easy for them to say yes.

At a minimum, you should have:

• A believable schedule of works

• Costings plus contingency (usually 5-10%)

• A realistic timeline

• Your team (contractor, architect/planning support, you/partners)

• Evidence for end value and rental where possible

Don’t forget your P.L.E.B.S.

Clear Idea clients will be very familiar with our PLEBS template. It’s not complicated – it’s simply a roadmap that helps you to help us understand your project and present it clearly to lenders.

If anyone would like the PLEBS and Schedule of Works templates, email me and I’ll gladly share them.

Experience matters. If you’ve completed similar projects, great — we highlight that. If not, we build lender confidence through:

• An experienced contractor.

• A credible professional team.

• Conservative numbers.

• A clean, well-evidenced plan.

Bridging is not ‘BTL mortgages with a different hat on.’ It’s an entirely different ecosystem: different lenders, different appetites, and different underwriting logic. 

And do use a broker who is experienced in bridging – a broker’s job isn’t just ‘getting quotes’ – it’s understanding which lenders to approach, structuring and presenting the deal, anticipating lender questions, and matching the case to the right lender first time.

Step 7: Match the product to the real risk (don’t force it)

A BRR can sit anywhere on the spectrum from ‘straightforward light refurb bridge’ to ‘development-style conversion.’

The trick is not to squeeze a deal into the wrong box:

• Light refurb + straightforward exit: bridging can be fast and clean.

• Heavy works + staged funding + GDV-led: development finance may fit better.

• Planning-led project: structure it as a planning facility, not a standard bridge and hope.

As I often tell clients: the right finance doesn’t just fund the deal – it de-risks the project and improves the odds of a clean, on-time exit.

A note on fees (because nobody likes nasty surprises)

Bridging lenders nearly always charge an arrangement fee of around 2%. Some also charge an exit fee (often 1%). In many cases you can avoid exit fees – and where you can’t, it should be a deliberate choice, not an accident.

Broker fees? This is where things can get…lively. I’ve seen brokers charge 2-3%. In my view, that’s eye-watering and outrageous. A good broker should be transparent, fair, and very clear about what you’re paying and when. If someone is vague about fees at the start, it rarely gets better later.

The final word

In bridging, confidence comes from preparation. BRR is a game of known unknowns. You don’t eliminate risk – you identify it, price it, plan for it, and mitigate it.

If you do these things, you’ll be ahead of most investors:

1. Speak to your broker early – I regularly talk to clients before they even make an offer.

2. Start with the exit and model conservative refinance scenarios.

3. Treat planning and valuation assumptions as real risks (because they are).

4. Package the deal like a professional: works, costs, contingency, timeline, team.

That’s how you move from hoping a lender says yes…to proceeding with confidence – and sleeping reasonably well while the builders do what builders do (in between cups of tea).

If you’d like a quick steer on a deal, send me a rough outline: purchase price, works cost, expected GDV, estimated rental, and exit type – and I’ll share my initial thoughts.